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Tuesday, August 11, 2015

The Chinese Mirage no Different than OECD Nation Fiction...Organic Growth is Dead and More Debt No Cure

Chinese birth rates have been negative since 1993...and permanent immigration into China isn't exactly a thing.

So, according to the OECD, Chinese total population is 15 years from peaking...and round tripping to today's levels by 2050 (remind me again, who's going to buy those 100 million vacant apartments in those Chinese ghost cities?).

But one look at the below chart, and you should get a very good idea why the Chinese consumer and credit driven economy is crashing NOW!!!  The number of young (40yrs/old and under) has already peaked and is in steady decline...while the peak number of old (40+ yr/olds) Chinese will not occur until 2038.  The crossover point for China when more are "old" than "young" will occur in about a decade, 2026. 

However, all these projections are based on happy GDP and global growth taking place incenting family creation...but the current Chinese and global economic performance will almost surely further inhibit birth rates and further reduce the numbers of young exacerbating the economic future of East and West alike.

Of course central bankers believe they can create more credit to make up for the declining growth or outright contraction of consumers and overall demand...but fewer young more highly indebted with more elderly to care for is not the recipe for inducing growth.  Chinese credit has mushroomed by 14x's since '00 from $2 trillion to $28 trillion trying to pull demand from the distant future to hide that which was centrally determined to be lacking now...but now it's all falling apart. 

But China isn't highlighted recently, the chart below of demographic and population changes for the entire OECD shows the collapse of the "young" across the developed economies is endemic.  And like a broken record, this is declining numbers of young who are working, consuming, tax paying and all net population growth is in the "old"...moving into retirement while reducing spending, slowing consumption, deleveraging, and offering minimal taxable income while taking maximum state benefits.

And for those not familiar with the 34 OECD nations demographic make-up (Organization for Economic Co-Operation and Development)'s the opposite of growth (aka, decline).

Or nations represented...
  • Australia
  • Austria
  • Belgium
  • Canada
  • Chile
  • Czech Republic
  • Denmark
  • Estonia
  • Finland
  • France
  • Germany
  • Greece
  • Hungary
  • Iceland
  • Ireland
  • Israel
  • Italy
  • Japan
  • South Korea
  • Luxembourg
  • Mexico
  • The Netherlands
  • Norway
  • New Zealand
  • Poland
  • Portugal
  • Slovakia
  • Slovenia
  • Spain
  • Sweden
  • Switzerland
  • Turkey
  • United Kingdom
  • United States


  1. Declining population in itself = not necessarily a bad thing, after all everybody says there are simply too many people on the planet. What is meant, of course, is "people of color." The population control fans are all for having more little pink blue-eyed babies, of course.
    The real issue is, who's going to pay for my social security? It ain't going to be the manufacturing bots - they don't pay any payroll taxes at all.
    I suppose when the time comes I will have to try to find a plot of land to grow my own veggies on and maybe I can eat the neighbors when nobody is looking. Gotta have some protein.

  2. Tom - How old are you? You're still counting in SS? Tells me you're likely 45+, because I don't know many under 35 or 40 that even consider it as part of the future.

    Chris - Any thoughts on how China's devaluation will alter the UST and USD markets? You're article last month on the UST market and China especially was timely and could have made you a nifty sum of $$.

    Thanks for the good analysis and insight.


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