Saturday, April 24, 2021

Federal Reserve Induced Inflation Has Resulted in Collapsed US Births...Twice

Total US births are collapsing and likely to continue falling significantly further over the coming decade(s). However, this isn't our first total births collapsed during the 1960's 'til early '80's...almost inexplicably against a fast growing childbearing population. And now, since 2007 (and not just a C-virus one off), total births have again collapsed against a growing childbearing population. I will make the case that much of this comes back to the Federal Reserve's policies to foment stagflation/inflation which have created the birth dearth(s). Young adults (potential parents), like the canary in the coalmine, are among the most economically vulnerable to the Fed fueled asset inflation (with lagging pay increases and little to no assets riding the bubble, at least partially offsetting the rising costs of living). Their determination to delay marriage and children is the ultimate barometer of the US economic wellbeing.

The chart below (1950 through 2040) shows annual US births (blue columns...regardless parents legal/illegal status plus Census '00/'08 birth projections through 2040), actual births (blue dashed line...including my projection from 2020 through 2040), 20 to 35 year old female childbearing population (pink line...representing roughly 80% of births among 15 to 45 year old total female childbearing population), and soaring 45+ year old post-childbearing female population (yellow line).

Looking at the US childbearing female population, there is no growth anticipated through 2040, while fertility rates continue tanking due to a slew of economic / pandemic / environmental / overpopulation concerns. The Census continued projections for rising fertility rates and total births is poorly founded.

Viewing the year-over-year change in 20 to 35 year-old childbearing females (pink columns), annual births (dashed blue line), and Federal Reserve set Fed Funds rate % (black line). We are looking at two periods of collapsed births in the US since 1950...both in conjunction with significantly increasing female childbearing populations (which of and by itself, should have resulted in flat to rising births). Instead, upon the initiation and continuation of major stagflationary/inflationary interest rate policy changes, fertility rates and total births fell precipitously. 

Below, take a gander at US fertility rate (children per females) vs. Federal Funds Rate %. While other segments of the population fared far better thanks to offsetting asset inflation, young adults were not so lucky and chose to delay/refrain from marriage, family formation, and having children.

The age of first marriage for both males and females has soared by almost a decade (chart below), while the 30 year'ish window of fertility has not really changed. Females of most species can give birth during 80%+/- of their lifespans. Our species is capable of childbearing during only about 40% of the lifespan (females typically reach menopause by age 50). At age 30, 75% will be pregnant within one year of attempting to do so. By age 40, the odds drop to 40%. Also, risks of adverse outcomes for the child/mother rise dramatically as the mothers age increases. At age 20, 1 in 1,441 births will result in Down age 45, 1 in 32. Simply put, women are more fertile and births are less challenging on mother and child while women are in their prime childbearing years from 20 to 30...but the current economic system simply doesn't support this option.

Due to economic / financial pressure, dual-income households have become the norm. The percentage of childbearing age females in the labor force now is nearly double the post WWII situation. Since 2000, females have fluctuated between 65% to 70% labor force participation...well above the 40% seen in 1960 (white line below is raw female 15 to 54 year old employed / population ratio).

In order to achieve financial strength / independence, the number of women getting secondary educations has soared. As of 2019, a greater percentage of females (36.6%) have four-year or greater college degrees than males (35.4%) that to the pre-war situation of 1940, with 3.8% & 5.5%, respectively. Obviously, the 4+ years of education plus the associated soaring student loan debt has pushed marriage, homeownership, and children to the latest on record.

The average age that a female first marries has soared from 20 in the 1950's to somewhere beyond 28 years old in 2021. Consider...
-The average age of a mother at first childbirth is now over 26 years old
-The average age of a married mother at first childbirth is now over 29 years old...versus unmarried mothers closer to 24.
-Women with a college education (heavily impacting financial capability of supporting a family) are now approaching 31 years of age before first childbirth versus 24 w/out a college degree.

It's also important to note that the decline in births is not due to abortion. Total abortions and abortions to live-birth ratio continue to decline from the 1980's, early 90's peak. Total abortions are down 50% since peak, and abortion to live-birth ratio is at record low levels since Roe v. Wade in 1973. Still, as of 2018, abortion to live-birth ratio was 189 abortions per 1000 live births...still significant (& massively contentious), but my point is it is a decelerating impact on total births.

Below are the Census projections for births, going back to '00, '08, '12, '14, and 2017. As can be seen, births continue to massively undershoot the Census projections. Much of the miss can be attributed to bad assumptions regarding Latino immigration rates and fertility rates...which have both been far lower than projected by the Census. The Latino population has normalized to the much lower fertility rates and economic situation than the Census could conceive.
From 2009 through 2020, there were 6.6 million fewer births (-12.5%) in the US (regardless legal/illegal status of the parents) than the Census projected there would be, in both it's 2000 and 2008 projections. Given the flat childbearing female population, soaring average age at first marriage, and collapsing fertility rates, I'm projecting nearly 15 million fewer births (-30%) over the next decade than the '00/'08 Census projections.

So What? Ultimately, the most inflationary thing in an economy is population growth and family formation. But the Fed's policies, although advocating inflation via substituting currency dilution, interest rate mismanagement, quantitative easing, etc., is actually the basis of long term deflation. The merits of a financial system requiring infinite growth against an economic system meant to supply the finite needs of a population (with little to no population growth) should have been debated long ago. Now the economic system is being poked and prodded with stimulus, ZIRP, QE, untold leverage, etc. to synthetically produce growth for a financial system that can be called nothing more than a Ponzi scheme. The faster the substitution of these synthetic proxies (and their asset inflation impacts), the faster the decline in births will be. All of the trends in place to push births lower are accelerating. Whether this is intentional or de facto, I can't say...but the outcome of collapsing US (and worldwide) births is clear.

Thursday, April 15, 2021

Ever Fewer People Need Ever More Money...Said Nobody, Ever (Except the Federal Reserve)

15 to 64 year old US working age population versus Federal Funds Rate & US currency in circulation. Honestly, no words are necessary.

Year over year changes in 15 to 64 year old US working age population versus currency in circulation.
Ever fewer people need ever more "money"...BRRR.

Just for fun, observing America through it's 15 to 54 year old population (blue line) and those employed among them (green line).
Now adding in the Federal Funds rate and the impact of "free money" on US federal marketable debt.
Add in the Fed's balance sheet (yellow line) plus the Wilshire 5000 (blue line...all publicly traded US equity).
Lastly, the 15 to 54 year old raw employment/population ratio. Asset owners rejoice, the Fed has a long way to go to fulfill it's "full employment" mandate...assets will soar until full employment is achieved.
And what is the impact on America's young adults...soaring age at first marriage...collapsing births.
Out of necessity of paying the soaring costs of living...females fully brought into the labor market and seemingly unable to step away for the luxury of having a family.
Widest possible view on childbearing females...and births.
And here is America by 15 to 40 year olds (yellow line), 40+ year olds (red line), and annual births (blue columns) plus my best estimate through 2040 (blue dashed line).
Soaring debt, asset prices, fueled by ZIRP are enriching asset holders (America's past) at the expense of young adults (America's future). Whether this is policy error or intentional is open for debate...but no debate about the destruction of the future of the US to safeguard it's past.

Friday, March 5, 2021

The Narrative of Inflation Amid Depopulation

Next to language, money is the most important medium through which modern society communicates. The Federal Reserve is responsible for signaling how fast this money should be created or destroyed via its federal funds interest rate. When demand is high and capacity/supply low, the Fed should ideally make rates low to support growth of loans to boost capacity/supply. When demand is low and capacity/supply high...the opposite. Instead, the Fed is doing the inverse...trying to focus on getting consumers to use more credit/debt (think record low mortgage rates) to create more demand and necessitate higher capacity (think homebuilders).

In a ridiculously difficult chart to decipher below (so I'm told), I highlight the year over year change in working age population (yellow shaded area), year over year change in employees among them (grey shaded area), housing permits (blue line), and the 30 year mortgage rate (white line...driven by the Federal Reserve's federal funds rate and MBS purchasing). The current situation of soaring permits against declining working age population and tanking employees among them...overridden by the speculative fervor created by record low mortgage rates is a case in point.

But in an economy, the production and consumption of goods and services are used to fulfill the wants and needs of those living within it. Very basically, the major driver of economic growth is the growth of that population of consumers, their income, savings, and access to credit. If that population is growing at 1.5% annually then you can add an additional 1.5%+ growth for maintaining &/or building out greater production, supply chain, housing, infrastructure, etc to support that larger consumer base.  This essentially gets us to a 3% growth in GDP. 

So what is happening when there is little, no, or negative population (consumer) growth but GDP growth is still being targeted at 1.5% or 3% or (as in China's case) 6%? What the Fed is trying to do is get a zero population growth (trending to declining population) economy to "grow" via cheaper debt, more debt, and serial bubble blowing. If I was a PhD at the Fed, I'm pretty sure I'd make it sound more complicated and mysterious...but I'm not and it isn't.

Anyway, couple of interesting factoids I thought I'd put out today that may be tangentially of interest. If Brookings Institute (and many others) are correct in their research that 2021 births are likely to decline somewhere between 300k-500k due to the pandemic...2021 births will essentially be back at the same total number of births as 1921...exactly 100 years ago, in the wake of the influenza pandemic (chart below).

Putting this round trip in births into perspective, over those same 100 years, the total US population has more than tripled (below).
Narrowing in from 1950 to should be clear the growing total population is not seeing likewise growth of births (below). Why?
The answer is humankind is different than almost every other species on planet earth, and the female of our species has a relatively truncated period of fertility comprising only about 30% of their lifecycle. Most other species females period of fertility are nearer 75%+ of their lifespan  This means that the significantly larger human population means little for childbearing, and only by narrowing in on the 15 to 40 year-olds can we see what is really going on. The yellow line below is the US childbearing population which has been flat since the mid 1980's...while the 40+yr/old population has been living decades longer than their predecessors. Couple the flat childbearing population with a falling fertility rate, and the US is looking at a secular collapse in births and subsequent decline in young amid a soaring elderly population.
Below, since ZIRP was initiated, encouraging soaring marketable federal debt, the opposite reaction has been observed among young adults with tanking marriages and collapsing births (thanks to soaring asset driven costs of living vs. relatively flat real wages/declining benefits/etc.).
Putting that soaring debt into view on a per birth ratio, (below). We are looking at ever fewer children (future adults) responsible for repaying/servicing/inflating ever more debt on a radically rising basis.
So, when I show the year over year change (qtrly basis) of the total population versus GDP since 1960, it should be clear why we need the economy to grow ever less in order to serve us...because there is ever less growth to be served by the economy (below)! 2020 growth was 1/7th that seen in 1960 (yes, on a % basis).
And when I include the year over year change in the working age population (15-64yr/ line below), well, we now have outright declining annual demand from the segment of the population that drives the flat'ish GDP should about be adequate to take care of flattish demand? But the Fed would  call that recession and provide more interest rate cuts, more QE, more acronyms yet to be invented to goose activity to suit the needs of the financial system.
So, the Federal Reserve is targeting 2%+ GDP growth (really, significantly higher) against minimal population growth (minimal rising demand) because the economy is no longer about serving our is now we and the distorted/manipulated economy that is serving the needs of the federalized financial Ponzi scheme. As the chart below highlights, as the Federal Reserve has pushed rates ever lower, this ever cheaper/greater debt has not served the people or GDP...instead it has rewarded the minority asset holders for being asset holders...simultaneously punished the majority non-asset holders for not holding assets.
It's usually at this point people start to ask what's it all about...what is the end game? Since the Fed is privately owned by the largest banks in the world (and they are owned by the 1% of the 1%)...why do these people need more money? I think the simple answer is they don't need more money. This isn't about turning their hundreds of millions into billions or billions into tens of billions. I detail the US domestic demographic, economic, financial picture HERE...but no, there seems a different point to all this than making the fabulously wealthy wealthier...suggested HERE.

Summary - 
The US (and world, at large) is looking at an unexpected and increasingly large decline in births, young, and working age adults. The declining child bearing populations coupled with increasingly negative fertility rates are resulting in an inverted pyramid of continued growth among elderly propagating the collapsing population of young. The result is we appear to be at a tipping point that will result in a realignment of nearly the entire demographic, social, political, economic, and financial systems we've come to know and expect. This realignment is likely to be like a magnetic field realignment built around de-growth, managed decline.

Extra Credit for those curious on market valuations...never have investors paid more for less potential growth among consumers (and never, ever have investors paid anything for a declining base of FUBAR...but that is where the Fed has led us, so what else you gonna do?). Below, Wilshire 5000 (green line, representing all publicly traded US equities), market value of federal debt (red line, as per Dallas Fed), and year over year change in working age population (yellow line).

Friday, February 19, 2021

Just Charts of Demographics...with Multiple Variables (or hot topics for your next cocktail party)

Some folks want to make economics seem complicated. It ain't. Any who, some charts depicting the US economy...through demographics.

First, 15 to 54 year old US population (blue line) and those employed among that population (green line). You may note the end of population growth among them in '07 and not only the end but a significant decline in employment among them since '07. This is the population segment that undertakes most of the credit (creating the new $'s via undertaking debt...vs. elderly who destroy $'s via deleveraging/paying off their loans), buys most the homes, spends the most, earns the most. The lack of growth among them is paramount in understanding what took place in '08 as potential new home buyers ceased to exist and banks gave credit to anyone to keep the party going...'08 (and what has come since) was an entirely predictable demographic caused crisis.

Same as above but plus Federal Reserve set Federal Funds Rate % (black dashed line) and it's relationship to marketable federal debt (red shaded area). When working age population growth ceased, the Federal Reserve implemented ZIRP (free money to the largest banks) and likewise free money to Congress. The explosion in debt since is entirely due to the Federal Reserve's encouragement via their interest rate policy.
Same as above but inclusive of Federal Reserve balance sheet (aka, QE...yellow line) and Wilshire 5000 (representing all publicly traded US equities...light blue line). Since the end of working age population and employment growth, virtually free money has been passed to the largest and best connected US institutions / individuals. This, alongside the Federal Reserve purchasing Treasury bonds (to artificially lower the cost of federal government borrowing and boost the supply of dollars chasing the remaining assets) and mortgage backed securities (to artificially lower mortgage rates) has resulted in an asset explosion. This explosion has rewarded asset holders with vast riches and punished young adults, the poor, those on fixed incomes. These folks in the latter group get none of the asset wealth effect but instead get the fast rising costs of living due to the asset appreciation. When the Federal Reserve continually suggests they aren't responsible for the exploding US is a bald faced lie.
Same as above, but focusing on the 15 to 54 year old employment to population ratio (not the silly unemployment numbers the BLS puts out...just dividing the population by those employed among them...white line). The Federal Reserve has two Congressionally mandated jobs..."promote effectively the goals of maximum employment, stable prices, and moderate long term interest rates." You can forget stable prices (as the Fed has, via a system of discounting inflation) and just focus on full employment. As you'll note, the US has achieved "full employment" four times since the inclusion of females into the workforce...'89, '00, '07, '19...each time with employment around 75% of the available population. But note the declining rates, resulting in greater debt, resulting in soaring asset bubbles (and once those failed) notice the soaring QE and zero interest rate policy...resulting in the greatest rise in asset appreciation in US history. Asset holders made rich (for being asset holders)...those with little or no assets made poor (for not being asset holders). Simple stuff.
Below, again 15 to 54 year old horizontally moving population plus falling employed among them, ever lower Federal Funds Rate, and ludicrously vertical Wilshire 5000. In case you are wondering, this asset explosion is not a naturally occurring phenomenon against over a decade of zero working age population growth and seven million fewer employed among them. Nah, this looks like a currency collapse in progress...and once it goes vertical (Wilshire, Bitcoin, etc.) know you haven't got much longer to go (although we likely have significantly further to go in the vertical explosion...before the whatever it is that follows). Second and third charts below throws Bitcoin into the mix, putting it's meteoric rise into context against demographics and the Federal Reserve's demographically driven Treasuries buying spree (and the concurrent hard stop of foreign buying of Treasuries).

While nobody can say whether immigration will return to high levels, fertility rates and births are scraping record lows...and simply gauging the feeder population that is the 15 to 24 year olds (chart below of population / employed among them), you should have a fairly good idea of why a return to a growing working age US population isn't likely.

Finally, here's how this plays out regarding the most fundamental of human needs...shelter or I'll stretch out to the 15-64yr/old population and employed among them versus annual housing starts and the Federal Funds Rate (%). The Federal Reserve purchasing of MBS / QE has artificially pushed mortgage rates to record lows to induce an artificial housing frenzy amid a secular turn to outright declining potential buyers and soaring quantity of potential sellers (elderly who already own homes). If I didn't know better, I'd think the Fed hates young adults and is setting them up to be the bag holder of an awful oversupply of very expensive housing when the bottom invariably falls out...again.
Some say these are the seeds of the second American revolution as a class of unelected, undemocratic central bankers enrich a tiny majority at the expense of the majority...but I just like making colorful charts.

Extra Credit - 15 to 74 year old population / employees
For those curious how this looks on the widest possible cross section of population/potential employees, the following are the same charts but showing the 15 to 74 year old population and employees among them.

Last chart is pretty important, because it really highlights the declining participation of the aging population...suggesting that "full employment" will be significantly lower than '06 and '19 at much greater expense and require significantly greater QE to enable it all.
Invest (wtf) accordingly.

Sunday, February 14, 2021

Global Depopulation - Two paths, One Destination

Play along with me while we consider the ultimate barometers of economic wellbeing that are fertility rates and births across the developed world, China, and the RoW (rest of the world).  How fertility rates have freefallen to predominantly negative rates. How the developed nations fertility rates turned negative first, then China, then most the RoW (& soon nearly the entire world).

A quick perusal of the chart of global fertility rates, by income groups below, shows a sharp and sustained drop in global fertility since 1970. It is well understood how (and why) China did this...less well understood how (and why) the developed world got there first and has sustained it for decades. My supposition is that declining fertility rates worldwide are primarily due to central bank set interest rate policies which have consistently encouraged debt and asset inflation well ahead of real income inflation. These rising costs of living have particularly punished those with little or no offsetting assets...chief among these, young adults among the childbearing population. The decades long squeeze has slowed marriages to a crawl and sent births tumbling. Given family formation and childbirth are a choice now with widely available contraception...the choice is increasingly, no.

Data below is from UN World Population Prospects 2019...future fertility and birth estimates are a more realistic average between UN median and low estimates.

Below, annual births per income groupings (plus average group gross national incomes per capita are called out). Births only continue to rise among the very poorest and least able to consume. Births among all other income groups are in secular decline. From a consumption standpoint, it takes nearly 50 more poor consumers to replace the consumptive decline of every one high income consumer, nearly 12 more poor to replace the loss of every one upper middle income consumer, 10 more poor to replace the consumptive loss of every 1 Chinese consumer. The math on the ongoing declines among high, middle-upper, Chinese, and now even lower middle income consumers being replaced by the poorest, lowest consumers comes nowhere near penciling.
Perhaps it's time to consider what role the Federal Reserve and developed nation central banks have had in this collapse...particularly versus the Chinese population control approach of a one child policy?  The developed nations, via interest rate policy, appear to have achieved consistently lower birth rates than China's autocratic approach. Given the stated central bank focus of environmentalism, clearly the most important component in controlling emissions, resource depletion, etc. is controlling the quantity of consumers (particularly among those that have high rates of consumption). It has been five decades in the turning of this ship...but now organic demand (quantity of 0 to 65 year old consumers w/ capability to consume) is set to fall indefinitely. Absent the population/consumer growth of the consumer nations, there is no transmission mechanism for lower middle and low income nations to export there way to higher gross national incomes, per capita. In fact, the lower middle and low income nations are likely to see their portion of the pie begin falling dramatically as developed demand for their goods and labor consistently wanes.

Below, the female childbearing populations of the differing income groupings. The long declining female childbearing populations of the developed (despite immigration) coupled with severely negative fertility rates versus the decelerating childbearing growth and decelerating fertility rates of the lower middle (India, etc.) and low income groupings. Like most things, there is likely a tipping point at which the lack of organic population/consumer growth can no longer be hidden by debt and population growth among the poor and elderly. We are likely there.
Seventy years of Federal Reserve interest rate policy managing the dollar as the global reserve currency...with two distinct periods. Thirty years of interest rate hikes, followed by 40 years of interest rates cuts. Below, federal funds rate against the basis of global demand represented by the high and low income global child bearing populations, and resultant debt that declining rates have fostered.
Looking at the same groupings, but on a year over year change basis. It appears that changing global demand (inflation) and the annual change in the global childbearing consumer population have moved in sync decades. This doesn't seem to be a coincidence. Essentially, rates were hiked while demand growth was rapidly rising, suffocating commensurate capacity growth...pushing inflation and turning a growing population away from further population growth. Then as demand growth was decelerating, rates were dropped encouraging oversupply of new capacity...and deflation.  Almost simultaneous to the onset of the declining childbearing population, ZIRP was initiated. ZIRP has ushered in asset hyper-inflation (enriching primarily institutional and elderly asset holders) amid stagflation and population decline among the consumer childbearing population...and decelerating growth among the low consumer nations childbearing population.
Looking at the wider consumer vs. low-consumer under 65 year old populations, FFR%, and resultant debt. The consumer supertanker, that is the consumer under 65 year old population, has turned downward...even inclusive of immigration (factored into the chart below). The decades of interest rate cuts until arriving at ZIRP and the resultant inverse relationship of debt growth are fairly easy to see...and only when viewing their impact on population growth can their true purpose be seen.
Looking at the same as above, except on a year over year annual change basis. ZIRP, exploding debt (resulting in asset hyper-inflation), and global consumer depopulation are no coincidence.
Lastly, where the majority of global population growth is happening among the elderly...essentially an echo of where the world was almost seven decades ago except this population is living decades longer than the generations that came before them. But growth among this population is massively deflationary as elderly are credit averse and tend to pay down/off their debts...essentially destroying currency faster than the young population can create money via new debt.
It would appear that the seven decades of global reserve currency management coinciding with the unprecedented downturn in fertility, births, and population growth are highly correlated. The power to artificially determine interest rates, rather than trust in a free market, has reverberations throughout business, finance, and economics. But interest rate policy also seems to have guided birth rates and ultimately the population of this planet. Like most things, I doubt the Federal Reserve would even dignify this with a comment or discussion...but the data suggesting the Federal Reserve (BoJ, ECB, BoE, etc.) has, is, and will likely continue to be guiding depopulation (in like goal to China...but differing in method), while simultaneously choosing winners/losers for decades to come, seems fairly compelling.

In case there are still those that wonder at the transmission of declining interest rates/ debt asset appreciation...absent resultant GDP growth...please study the charts below charts of the Wilshire 5000 (representing all US equity) which has now doubled GDP. And finally the impact of shifting wealth to the few on the births among the many.
Focus on the Wilshire 5000 (representing soaring US asset inflation).
Finally, who is winning/losing based on asset inflation...chart below shows surging net worth of the top 10% of Americans (now owning over 70% of total wealth) versus declining portion among those with little to no assets (bottom 90% of Americans now holding less than 30% of the pie).
Portion of net worth by top 10% / bottom 90% versus annual US births.
Below, Census US birth estimates from 2000, '08, '12, '14, and '17 (estimating births through 2050) based on economic models and Fed's accommodative lending rates...and the reality seen on the ground. When inputs result in an entirely unexpected (?) output...perhaps a model adjustment is called for? Nah. Just do more of what didn't work.
Gauging US annual births (regardless parents status as legal/illegal) versus Federal Funds Rate, US marketable debt, Federal Reserve's balance sheet (below).
And dividing the future responsible for paying/servicing that debt (annual births) vs. the sins of the past that will be their lifelong yoke. Looking more like Bitcoin or what gold/silver would look like if their paper versions weren't being rehypothecated even faster than currency dilution. At some point, young will refuse to carry that weight any longer (and the $ will likely suddenly, violently become worthless in terms of fixed quantities of things like physical gold/silver).
Invest accordingly!!!...even if it may be the foundation of the second American civil war (dancing in an immoral system as long as the music plays)!?!