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End of Growth Among “Haves” Dooms Growth Among “Haves” & “Have Nots” Alike

September 12, 2018

End of Growth Among “Haves” Dooms Growth Among “Haves” & “Have Nots” Alike

The global economic system is premised on growth, not just any growth, but growth where it matters (economically).  However, population growth (the foundation of economic growth) among the high and upper middle income nations of the world is rapidly winding down.  As I have outlined previously, total births have been declining among the combined high/upper middle income nations since 1988 and now births are declining everywhere but among the low income nations of the world (HERE).  Without growth among the importers of the world with the income, savings, and/or access to credit…there is no growth for exporters.
The high and upper middle income nations represent 49% of the worlds population but 91% of global GNI (gross national income) and 89% of total global energy consumption (as well as gross commodity consumption).  The decades, or more properly, centuries of growth among these wealthier under 65 year old populations (that drove economic activity) will cease around 2022.  All subsequent population growth will be among the 65+ year olds of the wealthier nations, particularly among the 75+yr/old population and the masses of the poor nations.  The end of population growth and subsequent reversals in these wealthier nations is ushering in an era of economic and consumptive decline unlike the contemporary world has ever seen.

FYR – The national income groupings are based on the World Bank Atlas method (detailed HERE) and listed in full at the articles end.  High income nations have per capita incomes over $12k/yr (and as high as $80k/yr) and upper middle nations have income per capita ranging from $12k/yr to $4k/yr.  This is compared with lower middle income nations with per capita income ranging from $4k/yr to $1k/yr and low income nations below $1k/yr.  All population data is based on UN data and medium variant forward looking estimates.

…click on the above link to read the rest of the article…

Global Economy On Precipice of Secular Decline…Detailed via Shifting Population, Demographics, Income, and Consumption

August 22, 2018

Global Economy On Precipice of Secular Decline…Detailed via Shifting Population, Demographics, Income, and Consumption

Many look at global population growth as a given to greater consumption…and looking at the chart below of total global population set to hit 7.8 billion by 2020, one might be forgiven for this viewpoint.  However, the reality, when one looks into the numbers, is that growth in global consumption has ended, as I recently detailed, Investing for the “Long Run”? You May Want to Consider This.  This article explains why this population growth will no longer equate to economic or consumptive growth.

0 to 64 year old Global Population
The 0 to 64 year old global population is about 7 billion persons, as of 2018.  The chart below shows the distribution and changing size of that population from 1950 through 2050 by high income (black line…$12,000+ income per capita including the US/Canada, most of Europe, Japan, Aus/NZ, etc.), upper middle (yellow line…$12,000 to $4,000 per capita income including China, Russia, Brazil, Turkey, Mexico, Thailand, Columbia, etc.), lower middle (red line…$4,000 to $1,000 per capita income including India, Indonesia, Pakistan, Bangladesh, Ukraine, Philippines, Egypt, etc.), and low income nations (blue line…less than $1,000 in per capita income including most of sub-Saharan Africa, Afghanistan, Haiti, etc.).  The simple takeaway should be that the 0 to 64 year old populations among the high and upper middle income countries have ceased growing and will now be shrinking, indefinitely.  All 0-64 year old population growth from now forward will be among the lower middle and low income nations of the world.  So what?

Income by Age of Head of Household
Why the focus on 0 to 64 year old populations?  Average income and expenditures vary greatly by the age of the head of household.

…click on the above link to read the rest of the article…

America’s Greatest Crisis Upon Us…Debt to GDP Makes It Clear

June 18, 2018

America’s Greatest Crisis Upon Us…Debt to GDP Makes It Clear

America in the midst of its greatest crisis in its 242 years of existence.  I say this based upon the US federal debt to GDP (gross domestic product) ratio.  In the history of the US, at the onset of every war or crisis, a period of federal deficit spending ensued (red bars in graph below) to overcome the challenge but at the “challenges” end, a period of federal austerity ensued.  Until now.  No doubt the current financial crisis ended by 2013 (based on employment, asset values, etc.) but federal spending continues to significantly outpace tax revenues…resulting in a continually rising debt to GDP ratio.  We are well past the point where we have typically began repairing the nation’s balance sheet and maintaining the credibility of the currency.  However, all indications from the CBO and current administration make it clear that debt to GDP will continue to rise.  If the American economy were as strong as claimed, this is the time that federal deficit spending would cease alongside the Fed’s interest rate hikes.  Instead, surging deficit spending is taking place alongside interest rate hikes, another first for America.
The chart below takes America from 1790 to present.  From 1776 to 2001, every period of deficit spending was followed by a period of “austerity” where-upon federal spending was constrained and economic activity flourished, repairing the damage done to the debt to GDP ratio and the credibility of the US currency.  But since 2001, according to debt to GDP, the US has been in the longest ongoing crisis in the nations history.

But what is this crisis?  The chart points out the debt to GDP surges in order to resolve the Revolutionary war, the Civil War, WWI, and WWII. But the debt to GDP surges since 1980 seem less clear cut.  But simply put, America (and the world) grew up and matured, but the central banks and federal government could not accept this change.

…click on the above link to read the rest of the article…

The Faster America “Grows”, The Faster America Goes Bust 

March 2, 2018

The Faster America “Grows”, The Faster America Goes Bust 

As of October 1st of 2007 (the start of the 2008 Federal Government fiscal year), federal debt stood at $9 trillion and 70 billion.  In the subsequent ten years and five months, the US federal debt has grown $11 trillion and 805 billion and now stands at $20 trillion and 875 billion (chart below).  Over the same period, US GDP grew $5 trillion and 169 billion.  Simply put, for every $1 of new federal debt undertaken, the US achieved $0.44 cents of economic activity or “growth”.

However, as the chart below shows, the huge increase in federal debt (red line) was accompanied by a minimal increase in interest payable on all that debt (blue line).  The boxes detail the total debt incurred during each period against the annual increase in interest payments on that additional debt.  The Federal Reserve is primarily to thank for the cheapening of debt and encouragement to undertake all that debt, but many fear the same Fed is set to hike those interest payments with its ongoing rate hikes.
In five months of fiscal year 2018 (through Feb 28), the Treasury has already issued $630 billion in new debt.  The Treasury is on pace to issue $1.2+ trillion in new debt (2017 was a mere $672 billion increase).  But let’s be conservative and assume the Treasury reins it in and “only” issues another $370 billion over the next seven months…for a nice round $1 trillion in new debt.  Big numbers are hard to comprehend, so I’ll show just the added responsibility from the debt undertaken in 2018, per every full time employee in the US (there are 127 million FT US employees):

+$31 per work day
+$157 week
+$658 month
+$7.9 thousand annually
…click on the above link to read the rest of the article…

The Tale of Two America’s…Urban Rise, Rural Demise, Rationale to Hyper-Monetize

October 9, 2017

The Tale of Two America’s…Urban Rise, Rural Demise, Rationale to Hyper-Monetize

 (The following was written as an outline for a potential book.  To this point no publisher has shown interest and time and funds have run out.)

America is in the midst of an ongoing and accelerating shift in demographics and population growth.  These trends, long in place, are at a tipping point that are simultaneously driving urban economic growth (plus associated asset bubbles) and rural economic declines (plus associated asset collapses).  The spin up and spin down are mutually interconnected, the result of movement in a zero sum game.  But for select regions (and rural America in general), there is a surging quantity of sellers and a dwindling quantity and quality of buyers that will result in the primary asset of most Americans, their home, transitioning from an asset to an outright liability.

Many will point to record stock market valuations as an indicator of positive economic and/or business activity to refute my claims.  Instead, I argue it is the Federal Reserve and federal government policies, in place as a quasi “life support” for the negatively affected regions and rural America at large, that are driving the asset valuation explosions of equities (chart below, representing all stocks publicly traded in the US) and urban housing.  I will outline why the situation in the affected regions will only get worse and thus the Fed believes its hands are tied.  Why any amount of normalization will only induce localized collapses across much of the nation.  The total market capitalization ($ value) of the Wilshire has nearly doubled the acknowledged “bubbles” of 2000 and 2008 and is likely to continue rising further, precisely due to the worsening issues I detail below.

…click on the above link to read the rest of the article…

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