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Monday, November 23, 2015

Post Script - Credit, Population, and Wage Growth...plus Gold???

I won't likely be writing and posting any longer but realized I had some research which was ready to go...so, thought I'd put it out there for posterity.


As far as global consumption (aka, growth), I see three basic sources of growth and all three are turning bad - credit growth, population growth, wage growth.
  • Population growth (quantity and quality) is decelerating from richer to poorer nations...all net young growth among poor nations vs. growth of old in wealthier nations.
  • Credit growth is the only substitute...but it too is problematic as private sources are flat lining while government credit growth is the becoming the global last line of "growth".
  • Wage growth likewise is decelerating...developed to developing, nation by nation. However, this is pretty well known among developed nations...and how China unsustainably achieved wage growth is precisely why it won't continue there or in most other developing nations.
CREDIT GROWTH

US created 1/3 of all global credit until 2007...since then China and the US have swapped roles.
 
And here's the breakdown by %...
 And broken down by $'s...

Here's the US federal government debt vs. the Fed's federal funds rate.



The article below outlines the collapse of both quantity and quality of population growth.


POPULATION GROWTH

1988 was the peak growth in global population...and according to OECD estimations, will only continue to slow.

But more significantly, below are population changes by 0-64yr/olds vs. 65+yr/olds.  Population growth is transitioning from growth of young to extension of life in the 65+ older population. 

Just in case the cessation of population growth isn't clear...just compare/contrast the youngest segment essentially not growing from 1990 through 2030 vs. the swelling ranks of the 65+yr/old population. 


Below, the 0-64yr/old population among the OECD nations plus China, Brazil, and Russia is about to turn negative...and all foreseeable population growth is among the young of the poorest nations and old of the advanced nations. Those without little to no income, unable or unwilling to utilize credit...this is a horrible combo for higher consumption and economic growth.


WAGE GROWTH
Wage growth has ceased in developed economies for a hundred reasons (innovation, automation, outsourcing, technology, strong currencies, etc. etc.) but I can see wage growth is in big trouble for developing nations. To show this, let's look at China.


China's wage and GDP growth was premised on cheap labor and a dollar peg plus two engines which are nearly entirely flamed out...population growth and housing fueled credit growth (chart below). Unfortunately, China's exports / imports are tanking due to slowing global economic activity, China's core population as of 2016 is outright shrinking and will continue to shrink for decades, and China's housing driven bubble has popped.

 


Just in case you aren't swayed, feel free to read more about why China's collapse is likely well under way...



WHAT ABOUT GOLD?

Sure looks fishy...the below chart shows the total value of all gold (so, rising total quantity every year multiplied by the price).  Compare gold's total value to total global debt and throw in the basis for pricing gold...the Comex leverage ratio (the ratio of contracts vs. physical gold backing those contracts).  What's so interesting is the Comex contracts remain unchanged over the past 4yrs but the quantity of gold available for delivery at these prices has collapsed.
 

Below, another look at gold...price, global debt, rising global quantity of gold, and Comex leverage.  Actually, just plain silly that a fractionalized gold exchange and entirely lacking any credibility for pricing physical gold.

I'm no expert on much of anything but I'd suggest those not holding some percentage of physical gold as an insurance policy for a near certain imminent accident do so at their own peril...but those holding too much of their assets in gold likewise do so at their own peril. When those in positions of power go to such lengths to manipulate an asset down and others up...I'm generally of a sense they are "all in" and not likely to let go without one heck of a fight.

 

6 comments:

  1. Truly great work. The use of paper gold exploded in 2013, that was when the price started to go into free fall. It would be interesting to see the gold charts with the performance of USD and Yen laid on top, to see their relationship with paper gold. Yen seems to be the funding currency that offers the control. As a holder of *physical* gold, these charts make me *physically* sick.

    ReplyDelete
    Replies
    1. Hey Jones -

      I wrote an article on Charles Biderman's blog last year on the Yen and gold...."Is the Printing of the Japanese Yen the Poison Pill for Gold??? The More Yen Japan Prints, the Lower the Price of Gold…Until??? -

      Not sure anything has changed since.

      Cheers
      Chris

      http://charlesbiderman.com/2014/11/05/chris-hamilton-is-the-printing-of-the-japanese-yen-the-poison-pill-for-gold-the-more-yen-japan-prints-the-lower-the-price-of-gold-until/

      Delete
  2. The world of today does not need paper money and gold anymore. The electronic money is the energy itself.

    ReplyDelete
    Replies
    1. Problem with cryptos is that you can't take out a loan in bitcoin...you'd be nuts in a deflating currency. A currency needs to inflate to meet credit needs. The cryptos are a solution looking for a problem. I say use it to stop naked shorting. use it to replace CUSIPs.

      Delete
  3. ''The world of today does not need paper money and gold anymore. The electronic money is the energy itself.''

    Indeed. When there is trust. I can't remember a time when there was so little trust in the world.

    ReplyDelete
  4. Many thanks for all your good work!

    Your fourth chart looks at debt and interest rates. Back in September of 2012 I wrote an article reflecting on how the economy of today had been greatly shaped by the actions that took place starting around 1979. Interest rates, inflation, and debt do matter and are more significant than most people realize. Rewarding savers and placing a value on the allocation of financial assets is important.

    The path has again become unsustainable and many people will be shocked when the reality hits, this is not the way it has always been. The day of reckoning may soon be upon us, how it arrives is the question. Many of us see it coming, but the one thing we can bank on is that after it arrives many people will be caught totally off guard. The piece below explores how we reached this point.

    http://brucewilds.blogspot.com/2015/04/interest-rates-inflation-and-debt-matter.html

    ReplyDelete

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