Simultaneous Elderly Overpopulation, Youth Depopulation And The Impact On Economic Growth

Strangely, the world is suffering from two seemingly opposite actions... overpopulation and depopulation in concert. The overpopulation is due to the increased longevity of elderly lifespans versus depopulation of young populations due to collapsing birthrates.

So, the old are living decades longer than a generation ago, but their adult children are having far fewer children. The economics of this is a complete game changer and is unlike any time previously in the history of mankind.

In a short, yet economically valid manner, every person is a unit of consumption. The greater the number of people and the greater the purchasing power, the greater the growth in consumption.

The chart below is total annual population growth broken down by OECD nations


The chart below shows global annual population growth by GDP per capita.


Below, 0-64 year/old annual global population growth versus 0-64 year/old population growth among combined OECD, China, Brazil, and Russia versus global debt growth.


A look at annual global populations, young versus old (below). The 0-5 year/old population has stalled, but nowhere near so for the 75+ year/old population.


Conclusion
An economic and financial system premised on perpetual growth was bound to run into trouble (what do you do when you have taken a wrong turn? Apparently, just keep going!). The inevitable deceleration of population growth was the trigger that turned central bankers into pushers offering ever cheaper credit to drive rates of consumption higher, instead of more consumers maintaining consumption. What happens as population growth turns to population decline is honestly and literally a complete and total game changer. Currencies (what will constitute "money"), "free-markets", and perhaps the basis of civilization hang in the balance of the transition from high population growth to potential outright depopulation.

http://seekingalpha.com/article/3967636-simultaneous-elderly-overpopulation-yout...
===================================
Agreed, there are certainly issues, relating to Demographics, which are influencing Local & Global Economics!
This has been set up & actually set in concrete, for decades and the early onset can be seen in Japan.
Japan's Population Problem
Low fertility rates and longer life spans are leading to an older and smaller population.
Japan's population is aging and declining. Two main forces are responsible: declining fertility rates and lengthening life spans.
A Low fertility rate and an aging population, imply that the ratio of workers to non-workers will fall.
The consequences are enormous.

These are but some of what we are already experiencing & what await the world, over the next 20-30 years.
The basics being -
1) Demographics, which have been the backstop of Economic Growth, during the modern era and Demographic trends are usually reflected in the Economy some 50 years later.
So, 2006 reflected the Baby Boomer Peak of 1956 & 2014 is now reflecting the end of the Baby Boomer era in 1964, which means Demand will Decline further, as all Boomers now enter their "spendthrift" Retirement years & fewer replacements are following them, as Fertility rates continue to fall in most countries.
2) Peak Energy has arrived, with all Energy commodities having risen thru the roof initially, as Supply was threatened, but Energy Pricing has since gone into serious Decline, caused by Declining Demand, driven largely by Demographics.
The Energy Supply & Demand mix, will continue to ebb & flow!
3) Global Debt is already at historic highs and moves must be made to start the long haul back! This will also add to Demand Decline, not increase Demand!
4) Climate Change, irrespective of whether it is natural or man made, is causing many problems. It is driving up costs, it is set to deliver a Decline in Agricultural Production & in many areas a lack of rainfall will put restrictions on Population increases.
All of which will put a further Decline into Demand!

So, whilst Politicians, Central Bankers & TPTB won't admit it or even talk about it, the Real Global basics will make the Growth "aim" impossible! Our "friendly Pollies", from all Political Party's, say they will "aim" for higher Growth.
But the Reality is, based on Real Facts, they have as much chance of success in achieving their higher Growth "aim", as does a Pig in trying to Fly.
Sorry, to be so blunt, But facts are facts and nothing any Polly will say, is going to make these facts go away!

Thus Taxes must increase, Tax loopholes must be closed & Expenditures must Decrease, in order to start down the path of trying our best to make our future, just a little better than it currently looks.

In order to achieve this aim, ALL SECTIONS OF SOCIETY, INCLUDING BUSINESS, UNIONS & THE TOP 10%, MUST MAKE CHANGES!

This Is The Bubble That No One Is Talking About

Summary
There has been an inexplicable divergence between the performance of the stock market and market fundamentals.

I believe that it is the growth in the monetary base, through excess bank reserves, that has created this divergence.

The correlation between the performance of the stock market and the ebb and flow of the monetary base continues to strengthen.

This correlation creates a conundrum for Fed policy.

It is the bubble that no one is talking about.

Why did the stock market cascade during the first six weeks of the year? I initially thought that the market was finally discounting fundamentals that had been deteriorating for months, but the swift recovery we have seen to date, absent any improvement in the fundamentals, invalidates that theory. I then surmised, along with the consensus, that the drop in the broad market was a reaction to the increase in short-term interest rates, but this event had been telegraphed repeatedly well in advance. Lastly, I concluded that the steep slide in stocks was the result of the temporary suspension of corporate stock buybacks that occur during every earnings season, but this loss of demand has had only a negligible effect during the month of April.

The bottom line is that the fundamentals don't seem to matter, and they haven't mattered for a very long time.
Instead, I think that there is a more powerful force at work, which is dictating the short- to intermediate-term moves in the broad market, and bringing new meaning to the phrase, "don't fight the Fed." I was under the impression that the central bank's influence over the stock market had waned significantly when it concluded its bond-buying programs, otherwise known as quantitative easing, or QE. Now I realize that I was wrong.

Bank reserves are deposits that are not being lent out to a bank's customers. Instead, they are either held with the central bank to meet minimum reserve requirements or held as excess reserves over and above these requirements. Excess reserves in the banking system have increased from what was a mere $1.9 billion in August 2008 to approximately $2.4 trillion today. This accounts for the majority of the unprecedented increase in the monetary base, which now totals a staggering $3.9 trillion, over the past seven years.


The Federal Reserve can increase or decrease the size of the monetary base by buying or selling government bonds through a select list of the largest banks that serve as primary dealers.

The Conundrum
In order to tighten monetary policy, the Federal Reserve must drain the banking system of the excess reserves it has created, but it doesn't want to sell any of the bonds that it has purchased. It continues to reinvest the proceeds of maturing securities. As can be seen below, it holds approximately $4.5 trillion in assets, a number which has remained constant over the past 18 months.

Therefore, in order to drain reserves, thereby reducing the size of the monetary base, the Fed has been lending out its bonds on a temporary basis in exchange for the reserves that the bond purchases created. These transactions are called reverse repurchase agreements. This is how the Fed has been reducing the monetary base, while still holding all of its assets, as can be seen below.


The conundrum the Fed faces is that if the rate of inflation rises above its target of 2%, forcing it to further drain excess bank reserves and increase short-term interest rates, it is likely to significantly deflate the value of financial assets, based on the correlation that I have shown. This will have dire consequences both for consumer spending and sentiment, and for what is already a stall-speed rate of economic growth.

The Bubble
If you have been wondering, as I have, why the stock market has been able to thumb its nose at an ongoing recession in corporate profits and revenues that started more than a year ago, I think you will find the answer in $2.4 trillion of excess reserves in the banking system. It is this abundance of liquidity, for which the real economy has no use, that is decoupling the stock market from economic fundamentals. The Fed has distorted the natural pricing mechanism of a free market, and at some point in the future, we will all learn that this distortion has a great cost.

The great irony of this bubble is that it is the achievement of the Fed's objectives, for which the bubble was created, that will ultimately lead it to its bursting. How and when this bubble will be pricked remains a question mark, but what is certain is that the current level of excess reserves in the banking system that appear to be supporting financial markets cannot exist in perpetuity.

http://www.ozpolitic.com/forum/YaBB.pl?action=post;num=1277536490;virboard=;titl...
===================================
The Ultimate Conundrum, is "HOW MUCH CAN A LACKY BAND STRETCH, BEFORE IT BREAKS"???
Even the FedRes has limits, EVERYTHING HAS LIMITS!!!

Bank Of Japan: The Limits Of Monetary Tinkering

Given the BoJ's bizarre plan to push consumer price inflation to a 2% annualized rate within [enter movable goal post here] years, Mr. Kuroda cannot be overly happy about that. In fact, lately it seemingly doesn't matter what he decides to do or not to do - the yen is going up anyway.

Last Thursday he reportedly "disappointed" markets by not expanding the BoJ's madcap asset purchase program even further. We are not quite sure what people believe could possibly be achieved by making the parabola shown below even more parabolic.



Moreover, since the US economy is clearly weaker than anyone thought possible a few months ago and Ms. Yellen is a dove by inclination anyway, the market is "pricing out" the US rate hike cycle it had previously priced in.

Inflation Targeting Fail

We soon plan to discuss the 2% price inflation target pursued by central banks in more detail - for now we want to stay focused on Japan and the BoJ. As we have mentioned in the past, it appears particularly absurd to try to make consumer prices rise in Japan, given the country's ever-growing army of fixed income-dependent retirees (many of Japan's seniors are reportedly already unable to cope, which has inter alia led to an elderly citizen crime wave (sign-in required)).

Interestingly, the BoJ's attempts to achieve its price inflation target continue to end in failure with unwavering regularity. While the central bank's astonishing ineptness in this respect is a blessing for Japan's citizens (at least for the moment, their cost of living doesn't increase further), it harbors the danger that even crazier monetary experiments will eventually be tried.


While threatening additional easing measures at his press conference (such as driving negative deposit rates further into negative territory) Mr. Kuroda seems to have explicitly ruled out the adoption of "helicopter money" by the BoJ. This is quite funny, since it seems extremely unlikely that the BoJ will ever be able to extricate itself from its balance sheet expansion (which de facto amounts to an "unannounced" case of helicopter money provision)

Conclusion
The BoJ's inaction on Thursday is probably bound to be a strictly temporary affair. This thought is actually quite worrisome considering what it is already doing (for a detailed list of its existing programs, see the policy statement it published last week).

Until then, the yen seems likely to continue to rise, although it is beginning to look a bit overbought in the short term after last week's big jump.

http://seekingalpha.com/article/3970435-bank-japan-limits-monetary-tinkering?ifp...
==================================
This sort of action/s  have been going on, since around 1990, when the Japanese Economy started to head South, arising from its Demographic Aging issues, which got underway earlier than the rest of the world!

BUT, no matter what has been tried, Japan has still not escaped its Basic Demographic problems.

And it won't, But the rest of the world is now in the process of joining Japan!

Just a note on Currency movement

The OZ$ did briefly reach 77c, against the US$, earlier this week, before going into Decline and it is now trading just under 74c @ 73.95c.
https://au.finance.yahoo.com/echarts?s=AUDUSD%3DX#symbol=AUDUSD=X;range=

Conversely & the major reason for the OZ$ fluctuation is that the US$index started the week at around 93c, it then Declined to 92c, before being DRIVEN HIGHER, to currently be trading just under 94c, @ 93.77c.
http://www.marketwatch.com/investing/index/dxy 

'Slow Growth Forever' Keeps Dropping Hints

If you've been reading me the past couple years, you know I believe that the slow growth in the global economy is essentially a permanent circumstance. The short thesis is that aging demographics and massive accumulated global debt simply cannot be overcome with easy money. The best we can hope for is slow growth, a smoothing of market forces and a preservation of standard of living. The worst we can expect is the type of depression, social unrest and war that many doom and gloom sellers rant on about.

Today's U.S. employment numbers demonstrate that growth, even on island America, is not likely to accelerate anytime soon past the 1-2% we've been seeing lately.

U.S. employment numbers were not the only thing to look sluggish this week. Nations around the world reported slower growth than wished for.

I'm not going to go on and on about the problems around the world, but I encourage you to Google "slow growth economy" and click the news tab. You'll see dozens of headlines including one from the IMF which outlines well what is going on around the globe.

We clearly have to worry about China's slowing growth and the very real possibility of more disruptions in Europe this summer. It is not far fetched that we see both Brexit and Brexit this year. If either happen, expect major market dislocations.

Someday Japan is going to fall out of bed and emerging markets are struggling with aging demographics already. Many of the nations that once relied on oil exports are also in trouble.

Right now, the markets are operating within a narrow range again. That means we will likely soon see a breakout or a breakdown.

Given the market structure of boomers withdrawing money reducing the demand for stocks and buybacks being the only real source of new demand for stocks, it is becoming increasingly likely we see a correction.
The possibility of another flash crash is very real as once traders sell and shorts pile on, there is nothing to catch the market for hundreds of points to the downside on the S&P 500.

I am remaining cautious and have a small short as a hedge. I know what I want to own coming out of a correction, i.e. our "Very Short List" and ETF list available to subscribers.

I am waiting patiently for an S&P 500 in the 1600s, I think it is extremely likely to happen this year.

http://seekingalpha.com/article/3972542-slow-growth-forever-keeps-dropping-hints...
===================================

Technology, Demography, And The Future Of Economic Growth

Demographic shifts and technological advancements - what effects will these factors have on the global economy?

Two wildly different ones, but together they will exert a massive influence on economic growth and the outlook for the world economy for generations, according to economist and author Dambisa Moyo.

Setting a bearish tone, Moyo said that the world economy will never again experience the rapid growth rates seen prior to the financial crisis of 2007-2008. She found this to be "incredibly damning."

In order to put a significant dent in world poverty, Moyo continued, there must be a global growth rate of around 7% a year. At best, she said, we are expanding at 2.5% annually. Indeed, Brazil is in the midst of a recession.

As for the headwinds behind this stubborn decline in economic growth, Moyo pointed to technology and demographics.

Over the next 20 years, 47% of all jobs in the United States will be eroded or disrupted by technology, Moyo said. At the outset of the last century, Moyo observed, much of the US workforce was involved in agriculture. Today, less than 2% of the US workforce is. This transition is largely a function of technological advancements, and Moyo anticipates similar transformations in the years ahead.

Most of the heavier automation is taking place where much of the world population works, in the unskilled or low-skilled positions of the manufacturing sector.And while automation is not yet a force in the service sector, Moyo believes it is only a matter of time until it is.

In sharp contrast to the decline in jobs and human productivity, global demographics are exploding. Currently, 7.5 billion people live on the planet. To put this into context, there were three billion in 1960, and it took 125 years to expand from two to three billion, Moyo said.
In a poll taken before Moyo's presentation, however, a plurality of conference participants said demographic forces will have a positive influence on global growth over the next year. The speed at which the world's population has increased is unprecedented and is unlikely to be repeated once the 2100 plateau is reached.

One of the attendant risks is increasing longevity and the accompanying costs of aging. According to Moyo, the expectation is that by 2020, more than 30% of the populations of 50 countries will be over the age of 65. For the most part, these cohorts will not be working, creating an increase in the dependency ratio. So not only will we have longer life spans, we will have skyrocketing healthcare, welfare and pension costs, all of which have a huge effect on quality of life.

Social concerns are going to scale to the top of the public policy agenda faster and more urgently than governments are capable of handling them, she said, noting that under-investment in education alone is so extreme that many predict it could put the United States in a state of permanent recession by 2050.

"Public policy is quite impotent to handle these very real risks," Moyo concluded. There is no "toolkit" available, as policy makers continue to put forward fiscal and monetary policies that have been largely ineffective.

http://seekingalpha.com/article/3974370-technology-demography-future-economic-gr...
=====================================

In fact, there are some 1.6 Billion Baby Boomers, who have already started their "Retirement March" and that is a LARGE reason for the currently Global Economic Demise, which started Globally around 2007, But actually can be evidenced first in Japan going back to around 1990!

This Baby Boomer generation will continue to Retire or be Forced out of Employment and they will then commence to  die off, in numbers never before seen.
This process is actually already underway & with Fertility rates already in serious Decline, the actual Population Growth may well cease at around 7.5-8.0 Billion, by around 2050 & then proceed to actual Decline, reaching around 3 Billion by the end of 2100.

This process will have massive Consequences for the Demand driven Economy!!!

Sprintcyclist wrote on May 14^th, 2016 at 9:22pm:


Well Sprinty, there's Optimism and then, there's facing Reality!

For all the Optimists, I suggest a long look at interest rates, Share Market returns, Business Profitability, Rising Debt and Declining Demand!