Authored by Chris Hamilton via Econimica blog,
The world economy is premised on a ludicrous idea - that Asia, then India, and then Africa will continue to drive economic growth.
So as not to turn this article into a book, lets consider this idea focusing on East Asia consisting of China, Japan, North and South Korea, Taiwan, and minor others. This region consists of 1.6 billion persons or about 22% of earths inhabitants. However, since 2008, it is this region that is responsible for nearly 100% of the global increase in demand for oil (best proxy available for true economic growth) and having primarily driven global economic growth. My point in this article is that the growth in this region is entirely a credit driven supernova against collapsing populations which will never be able to fill the 100+ million newly added apartments or pay back the debt incurred to achieve the "growth". Contrarily, from an investor standpoint, this weakness is the green light to "invest" as aggressively as possible because as long as central banks exist, they have your back.
Consider, since 2000, China"s debt outstanding has risen something like 14x"s to 17x"s or from about $2 trillion to something between $30 to $35 trillion presently. As for Japan, who knows Japan"s true debt as Japan"s central bank is buying much or most of the debt and essentially throwing it in a black hole, never to be seen again(...monetization with a capital "M").
Why the massive debt creation and central bank monetization? Depopulation with a capital "D". First off, consider the collapse in fertility rates for these nations (chart below). To maintain a constant, zero growth population, the childbearing population needs to produce 2.1 children in order to replace themselves (dashed line, below). However, as the chart below shows, E. Asian nations have seen negative fertility rates for decades (Japan turning negative in "74, S. Korea in "83, China in "92, and N. Korea in "96).
Looking at the fertility rates from 2000 (chart below), some minor rises in fertility rates have been noticed in China since "00 and since "05 in Japan and S. Korea. However, despite the minor upticks, all nations remain solidly negative and well below the 2.1 zero decline threshold.
For those expecting East Asia to continue driving global economic growth, I have a very big problem for you. East Asia is in the midst of a population collapse. The East Asian childbearing population, after rising by 366 million or +125% from 1950 until peaking in 2005, is now collapsing nearly as fast. By 2030, those of childbearing age will have fallen by 180 million or a 27% decline (chart below). By 2050, a clean halving of the childbearing population is likely.
So, the size of the childbearing population is back where it was in 1980 and by 2050 will be almost back to its 1960 size...but hypercritically, that population in 1960 was having approximately 5 children per family versus the 2020 or 2050 versions having somewhere around 1.6. It is unlikely anything can be done to stop the depopulation daisy chain in East Asia and the economic collapse is already assured. The collapse in demand against record quantities of assets is a mismatch for the ages...but of course central banks will continue to step in and monetize as long as possible.
As for the rest of the population, the growth among the heart of the regions economy, the 20 to 65 year olds, peaked in 1990 and has now indefinitely turned negative (falling something like 12 million from 2015 to 2020...and hundreds of millions fewer consumers, home buyers, tax payers by 2050). Even the growth among the 65+ year old cadre will peak about 2035 before beginning to rapidly decelerate (change per five year periods, chart below).
Lastly, even growth among the old will be shifting to the very oldest as the bulk (and then the entirety) of the growth will be among the 75+ year olds (change per five year periods, chart below).
As for investors, this is your last and greatest chance. The depopulation issue is not confined within East Asia. The chart below shows the diving global fertility rate falling by more than 50% since peak fertility in the mid 1960"s.
It is a global phenomenon exhibited nearly everywhere but Sub-Saharan Africa. The chart below shows global fertility rates are universally collapsing and it is nearly solely Africa that continues the global population increases...at least for now.
Even India and/or the Middle East / North Africa (MENA) are likewise seeing collapsing fertility rates. India"s fertility rate is almost sure to be negative by 2020. There truly are no green shoots from a population growth perspective.
Central bankers will continue to "fake it" until they "make it". Obviously, they never will "make it" but a select few will get absolutely rich beyond belief from central banker "efforts" as they continue to "fake it" as long as possible. So, invest accordingly.
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