Thursday, May 21, 2015

Reality Check - What Happens when a Ponzi Runs Out of New "Investors"

When you have demographics against you, interest rates at zero, record debt to GDP, and you are likely beginning a recession while in the midst of the greatest asset bubble of all time...some things to consider while Wall St. and the Fed tell you all is well!?!

Below, average annual population growth (red) vs. full time jobs growth.  Rarely has a year come since 1980 when adequate jobs were created to keep up with the growth in population.  Since 2007, the trend has gotten particularly rough.  And this is likely the top of the cycle...
Demographic trends are horrible.  The 25-54yr/old population has peaked and is in contraction since '07 while the 65+ segment is surging.

A look at the 25-64 yr/old annual change in employees vs. the annual change in the 65+ population.  65+ population growth will continue its surge for another decade while 25-64 employment is likely peaking...particularly if we are entering a new recession.

Chart below highlights the change over periods in 25/64 yr/old employees vs. the 65+ population.  Clearly, the most recent period is like nothing we have seen.
Full-time job growth has been slowing for decades while rates cuts and debt accumulation have been substituted in lieu of growth.

There is no joy in showing these data sets but the data is what it if we stop pretending all's well.