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Monday, October 17, 2016

The Greatest Bubble Ever...& The Federal Reserve Can't See It?!?

We are in the midst of the collapse of the greatest bubble in human history.  However, it's not the bond, real estate, or equity bubble.  It's the bursting of the population growth bubble.


The annual rate of population growth was pretty stable for thousands of years somewhere between 0.2% to 0.5% annual global population growth.  However, as the chart below highlights, the 20th century was a complete anomaly.  Population growth leapt up to a peak of 2.2% growth by 1970...but has since been heading right back toward it's old trend growth of somewhere between 0.2% and 0.5%...and perhaps no growth soon after 2050.  That hundred year anomaly was the basis of the greatest bubble in human history and now central banks and governments are simply masking the onset of the greatest crash.

The chart below breaks this global population growth down to annual growth from 1950 through 2050.  Annual population growth peaked in 1988 and is now trending down.  Further broken down in the chart are the sources of the population growth; the wealthy 35 OECD nations, aspiring BRICS (Brazil, Russia, India, China, South Africa), and the Rest of the World.  The bulk of population growth is shifting to the poorest nations and away from the relatively wealthier.
Next, the annual growth of the under 45yr/old global population broken down by OECD, BRICS, and the RoW.  The collapse of the growth among the <45 population is very clear (a 60% annual reduction from 1988's peak growth), particularly the population growth among the <45 OECD and BRICS has ceased and is turning deeply negative (depopulating from the youngest population segments).  The <45 contraction among the OECD and BRICS will essentially bring population growth among the <45yr/old global population to a standstill by the mid 2030's.  And as for that bounce from 2035 onward, that is all premised on an anticipated spike in births alongside a strengthening global economy...almost surely pure optimistic fantasy.
And if we multiply the quantity of new population by the quality of income (GDP per capita).  We see that during the peak years in the late 1980's, a trillion dollars a year worth of consumption were added to the global pie.  As of 2016, the consumptive growth in $'s has decelerated by 80%.  By 2033, the global consumptive pie will be net shrinking.
The chart below shows total annual population growth (black line), the collapsing portion which is the <45yr/old annual population growth (blue line) and the chart is further broken down to show <45yr/old OECD & the BRICS are now contracting leaving only the poor RoW <45yr/old population still growing.  Given the OECD and BRICS consume 70% of all oil and are an even larger driver of general consumption...the collapse of growth here is reverberating everywhere.

What people struggle to understand is that our present system is all about growth and it is the population growth of .05% or 1% which drives economic activity magnitudes larger. This relatively small population growth % drives huge spending on infrastructure, home building, factories, supply chains, etc.  The differing impact of 2% vs. 1% and now heading for 0% population growth is felt far beyond a 1% or .1% economic growth...more like 10x's that impact.

I show all this to help people understand the true basis of our economic and financial problems...and why these problems cannot be solved by "growing our way out" or "deleveraging" or a hundred other simple minded lies.  Nothing short of a reset and restart of the nations and global economy is necessary to deal with the legacy of horrible central bank and government decisions that have led us here.  Clearly, those institutions and individuals that have misled us to this point need to be held accountable and new stewards appointed to lead us through this global bankruptcy and reorganization.  It will be painful and millions or billions will realize they hold "assets" truly worth pennies on  the dollar and the elderly will realize that "unfunded liabilities" really means unpayable liabilities or again paid pennies on the dollar.

The resources must be directed to the future, the young, to overcome the complete rejection the millennial and younger generation show toward the corrupt and fraudulent system presently robbing them of any hope.  Without re-engaging the young, our society is truly lost.  I suppose the greatest question of all is whether a democracy of the people will willingly vote to do the hard things and ignore those who falsely claim to offer an easy way out.  Or if democracy was only ever possible during the good times of growth and plenty...not the hard, long contraction we face with little to no population growth or further interest rate cuts (see chart below)?
And regarding the young in America...the chart below highlights that during no sustained period has America ever had as many children (births) as it did over 1953 to 1964 despite a total population which has now doubled...the birthrate in the US (and globally) will continue to decelerate until the system is reset and a balance is found.



PS - Somehow this has all come as a real shock to the Census Bureau.  Consider, as of 2008, the US Census Bureau estimated the total US population would be 439m by 2050...as of 2014, the US Census Bureau has downgraded US population growth by <-41m> to 398m by 2050.



The bulk of the downgrade is among the 0-24yr/old population growth. Census Bureau now estimates 0-24yr/old growth through 2050 to be 28 million less than in their '08 est., (2050 0-24yr/old total population was est. to be 141m and is now est. to be 113m).

The remainder of the downgrade came among the 25-44yr/old population...there was a was a sight increase among the 45+yr/old population segment.



Due to birthrates remaining below Census Bureau estimates, further downgrades are almost a sure thing and nearly all the downgrades will again be among the population of young.  All "growth" should more correctly called be called "longevity" as the old are living decades longer than previous generations. The Census still estimates the 0-24yr/old population to grow by 8 million by 2050...however, I would not be surprised to see this cut in half by the next estimate update.  How the CBO and OMB and like groups haven't downgraded future growth based on the decrease in population growth...well, I guess we shouldn't be surprised.

7 comments:

  1. Great charts. I'm surprised to see no hiccups caused by WW I and WW II.

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  2. I think you have a Valid Point...especially considering the Massive LOSS of Lives during the World-wide Influenza Pandemic after WWI...? thanks for reading,aloha

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  3. Chris, I find your writing fascinating. Would I be correct to assume, all things equal, this macro trend is very bullish the U.S. dollar? Thanks

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  4. This trend points to deflation. If the population is dropping, then there won't be enough people to buy all the available houses, also there won't be enough people to keep the stock market at it's current level. The world is going into deflation first, and then the US dollar collapse, and then a new currency, all before 2020. The Fed is our of options.

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  5. Here's the likely outcome over the next 4 years.... America (and the world)is going into recession. People will not be spending their money because of fear and uncertainty of the future, thus they will hold on (save) their money. That's the psychology side of the near term future. What this will produce is lower spending, and lower credit, lower spending and lower credit effect the velocity of money. The economy will slow down, the FED in their idiot wisdom, will do another helicopter money drop. Even though this will increase the base currency supply in the economy, in the hopes of driving up inflation. This won't work because of the fear of the future and the fear of the baby boomers not having enough money to retire on (75 million of them). The FED knows that at some point, if they give away enough money, people will finally feel they have enough money to retire on, and have less fear of the future and start spending again. So, the FED will have to release the bombers this time, because the helicopter drop was not enough, and give away trillions and trillions and trillions of dollars to individuals this time, to change their psychology outlook of the future. Once the Fed does this, then people will start buying goods and services again, but this is the end of the dollar, the sudden flood of saved money into the economy will spark a rapid rise in prices for everything, and the FED won't be able to stop it. America will experience the same hyper inflation that destroyed Germany in 1933, and un-leashed Hitler on the world. Since the beginning of time, there has been over 6,000 fiat currencies in the world, everyone of them have failed. Our Founding Fathers knew this, as they themselves experienced hyper-inflation after the Revolution, because they printed fiat currency. That's why they put "Gold and Silver are the only forms of money" in the US Constitution. But these current Keynesian idiot economists running the FED and most of the other Central Banks in the world, think they know better than 6,000 other fiat currency failures. The only way you are going to be able to financially survive this 3rd and final financial collapse, is to have gold and silver. Here's some history also... The first financial collapse was the dot com bubble, it only effected the dot com stocks, the 2nd financial collapse was in 2008, it effected the stock market and housing, and this last and final financial collapse coming will include stocks, housing and bonds. Strike 1, Strike 2, and Strike 3. Game Over. Have a nice day.

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  6. I agree with you about the inadequacy of fiat currencies throughout history. However, I do not see a return to the gold and silver standard. It's simply not practical in this day and age. Precious metals will always have industrial usage value. But the next form of economic value storage/money/currency will be a function of energy generation, storage and distribution. Think smart grid, kWh, calories and joules.

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    1. Some very smart folks have outlined this idea but what I don't understand is how something that doesn't lend itself to be a store or stored can be a place to effectively park savings? Energy seems to naturally degrade...not ideal. Plus if I'm right we are turning the demand curve down while ZIRP has created significant oversupply... what happens to a currency when there is a period with too much?

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