Wednesday, July 29, 2015

Federal Reserves "Therapy" Has Nothing To Do With What Ails America

WWII to 2015...70 years of economic trials and tribulations.  However, the one factor that drove and crashed the US economy and finance more than any other was...(drum roll), the size, growth, and make-up of the population.  As the chart below shows clearly, the post WWII boom lead to a rapidly enlarging pie from which so many shared.  But as population growth of the young slowed, debt (and leverage) were the answer to maintain "growth".

As can be seen below, the breakdown of 25-54yr old population growth was mirrored by the upturn in Federal debt.  Not rocket science...

Maybe the Federal Government and Federal Reserves policies would make sense if there were another baby boom coming down the pipe...but there isn't.  Slow to no population growth is the new norm...and the Fed's policies are only causing greater harm and really have no possibility to lead to a true recovery.  In fact, as the chart below shows, every time the 25-54yr/old population growth slows, recession is imminent. 

And those touting the "echo boom" or American population growth as the savior...are very mistaken.  US fertility rates are below the 2.1 births per female considered the neutral line.
And no, large scale immigration will only continue to slow as the US creates perpetually fewer low skill, low education positions that can and will be replaced by automation, computerization, robotization, etc. 

If the Federal Government (both parties) and Federal Reserve had the nations best interests at heart, they would undertake the massive restructuring and bankruptcy proceedings based on the new reality of a flat and eventually shrinking population.  The process of peak population, like a tsunami, will play out state by state and nation by nation...but eventually population growth will least for a generation.  And an economic and financial system based on perpetual growth is entirely ill suited to our new reality.  Every day of this ongoing "malpractice" puts the nation ever further from a true cure and only encourages ever greater harm.