Tuesday, June 20, 2017

Decades of Depopulation Already Baked In the Cake

Our present economic issues began decades ago.  To understand what is happening economically, simply check the headwaters of (de)population (excluding Africa) under way since 1990...the chart below shows the 0-5yr/old population (excluding Africa) vs. the 0-5yr/old population of Africa.  Population growth is responsible for the majority of GDP growth...so a downturn in population growth matters...particularly when population growth shifts from wealthy or developing nations to the poorest.  I'm not describing something that may happen in the future...I'm describing what has already happened that is continuing to send progressively larger tsunamis swamping the world economy and has the central bankers doing everything and anything to try to sustain the unsustainable.  For those curious why I offer the view of the world economy "Excluding Africa" vs. Africa...HERE.

Anyway, world 0-5yr/old population change (excluding Africa):
  • 1950-->1990 + 234m
  • 1990-->2015 <-47m>
  • 2015-->2050 <-67m> (UN med. est.)
Africa 0-5yr/old population change:
  • 1950-->1990 + 71m
  • 1990-->2015 +75m
  • 2015-->2050 +95m (UN med. est.)
Why???  The chart below shows the child bearing 0-40yr/old world population (x-Africa) has essentially peaked and will be declining from here forward...but the total births of this population have been declining since 1990.

The above 0-40yr/old declining child bearing population combined with declining birth rates among them means a continued decline in births is pretty much assured.

Worldwide depopulation from the bottom up (x-Africa) has been underway for decades and looks set to gain momentum to the downside as the child bearing population begins outright declining.  A simple view of the impact of the changing population growth vs. actual and estimated oil consumption...HERE.

For those curious how the US compares...the US 0-5yr/old population has never regained the Boomer peak seen in 1961 and is currently trending down.  However, the ever optimistic Census still expects a sudden and significant reversal (red columns) taking the population of young (and ultimately, the total population) to new heights (as it has been wrongly predicting every year since 2008).  The far more likely reality is zero growth or a marginally declining population among America's young (red dashed arrow).

But even the current projection above (which is still non-sense) is far more realistic than that made in 2008.  The 0-24yr/old Census Bureau projected US population made prior to the 2010 Census...and the updated projection as of 2014 are radically different with future growth downgraded among the young by more than 3/4's!!!
Why this is so strange is if one again looks at the 15-40yr/old child bearing US population (red line, chart below) vs. annual US births (blue columns), the US child bearing population has been stagnant for nearly 3 decades...and that child bearing population continues to wait longer and have fewer children...a double whammy.

However, if you'd prefer believe BS about the millennials powering the US economy to new highs, be my guest...but based on simple realities, the chart below outlines the present and Census estimate vs. the far more likely (non-"goal seeked") reality (my red arrow) based on continuing declining birth rates and continued slowing of illegal immigration.
In the short term, policies and activities are in place due to the increasingly decelerating and declining population growth and these are providing investors nirvana in asset classes otherwise fundamentally unsupported.  The painful truth is this will eventually all fall apart and there will be some awful pain...but until that moment there is terrible pain being underinvested.  Invest accordingly.