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Demographics Thread : People, the Key to the Future


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#21 Newbear

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Posted 11 July 2007 - 12:03 PM

Interesting article in today's Telegraph suggesting China may have big problems in a few years because of the demographic ticking time bomb.

---------------
Japan leads world in demographic decline
By Ambrose Evans-Pritchard in Tokyo
Last Updated: 12:12am BST 01/06/2007

Japan is slowly shrinking. Last year it became the first nation in modern history to tip over into outright demographic contraction, pioneering a path that will soon be followed by Italy, Germany, Spain, and most of Eastern Europe, with China close behind.

The population peaked at 128m in 2005 and is expected to fall below 100m by the middle of the century, when 36pc will be 65 or older. The dynamics of decline are already contaminating every aspect of the economy. The trend rate of growth has dropped to 1.5pc. The blistering 10pc pace of the early 1970s seems like a distant dream.

Wages have fallen for the last five months in a row, vastly complicating efforts to stave off deflation. Officials at the Bank of Japan blame the subtle effects of ageing. A bulge of baby-boomers is retiring at the top of the pay scale, to be replaced by younger workers - many on part-time contracts, at half the rate. Salaries have fallen 8pc over the past decade.

It will be much worse for China, where the workforce peaks in just eight years before plunging into the fastest downward spiral ever seen in peacetime. The one-child policy of 1980s and 1990s has already baked a population crunch into the pie, whatever is done now.

Dr Kwan Chi Hung, a fellow at the Nomura Institute and a top China expert, said the long-term prospects for China were "horrible".

advertisement"When Japan hit this problem it was already an advanced economy. China will still be poor. It only has 10 more years of strong economic growth and that is not enough," he said.

Mr Kwan estimates that China's development is 40 years behind Japan on most indicators, and its return on investment (incremental capital output ratio) is a dismal 4.4, far worse than those of Japan (3.2), South Korea (3.2), and Taiwan (2.7) during their growth spurts. "China is extremely inefficient because of the large state-owned sector," he said.

When the crunch comes around 2015, China's per capita income will be a sixth of Japanese and western levels. The society will turn grey before it escapes poverty.

This is small comfort for Japan, where a sense of foreboding about the demographic crisis colours all political discourse.

Prof Mariko Bando, the former chief of Japan's gender equality bureau, said the fertility rate had crashed to 1.26 from a stable level near 2 in the 1980s, far below the minimum reproduction rate. She said the plunge has been more extreme than in Europe (though Latvia and Estonia are comparable) because Japan had been so slow to embrace feminism.

"They never listened to the voice of women before, but the shock is now forcing Japan to respond," she said.

Women are silently protesting through refusal to have children under the existing social contract. "The ancien regime makes it very hard to have both a career and a family so women are putting off marriage. They are no longer willing to accept a double shift where they come home from work and have to do all the household chores," she said. Over 17pc in their 40s remain single.

"It's not so bad in the civil service, but business remains the last stand culturally for the Japanese man," she said.

The country faces a sort of fertility paralysis as men cling to the Confucian tradition that wives must serve their husbands, while women rebel. Parts of the ruling LDP (all male) party is having great difficulty coming to terms with this.

"Women have their proper place: they should be womanly," said LDP policy chairman Syoichi Nakagawa, right-hand man to premier Shinzo Abe.

"They have their own abilities and these should be fully exercised, for example in flower arranging, sewing, or cooking. It's not a matter of good or bad, but we need to accept reality that men and women are genetically different, " he said over breakfast in Tokyo.

Other parts of the Japanese government take a starkly different view, believing that the only way to prevent economic atrophy is to unlock female talent.

The cabinet office has pushed though affirmative action quotas designed to raise the number of women in public sector management jobs from 10pc to 30pc by 2020.

Maternity (or paternity) pay has been lifted from 25pc to 50pc of income, and leave has been extended from one year to 18 months. The waiting list for nurseries is being slashed.

The number of immigrants is creeping up too as the authorities quietly waive restrictions. Some 300,000 Brazilians of mixed Japanese ancestry have come, mostly to work in the Toyota factories of Nagoya. Phillipino migrants now tend the rice paddies and orchards, supposedly as student "trainees".

But they are not enough. "We need three million," said Fukunari Kimura, a professor at Keio University.

The once vast trade surplus has shrunk to 1.9pc of GDP as the economy matures. It will soon turn to deficit. For the next 30 years, Japan will slowly draw down its $1,800bn (£909bn) of net foreign assets, mankind's greatest stash of offshore wealth.

Decline may be unavoidable, but at least it will be graceful.


Here are the latest UN world population forecasts:

http://www.un.org/es...006/wpp2006.htm

The interesting thing for me is that Asia (mostly, Japan is different) and Latin America are both now into the economically benign phase of th third demographic transition. But the time window is relatively short. By 2040 they are estimated to start the process of an ageing population.
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#22 DrBubb

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Posted 22 July 2007 - 06:32 PM

The 2008-and-after DEMOGRAPHIC/CREDIT MELTDOWN from interview with:
"Demons of Our Own Design" author

Here's an interesting argument about a possible meltdown from a FS interview:
http://www.netcastda...2007-0721-2.asx

Posted Image
(go to 56 minutes into the broadcast):

"If the market is at the same level 15-20 years later... that's like a meltdown."
And it may happen in Property

Jim Puplava asked Richard Bookstabber if we coudl see a repeat of 1929 or 1987.
RB said a repeat was unlikely. Hedge Funds are set up to play the financial markets
aggressively. But most individuals have a different portfolio (with a property emphasis.)

But a different and equally dangerous scenario may play out:

+ Failure in the mortgage markets, with out in the credit markets
+ Daggers are pointing to the financial institutions, and those who use them

The CRISIS is most likely after 2008-2010, when the baby-boomers reach retirement:

+ Too many people are "putting too much stock" in their properties, as a principal pension-type asset
+ If housing prices start to drop, so they can no longer be used as a nest-egg,
+ Then, the crisis will spread to the equity markets, as people sell those assets too
+ Could be a slowburn, because the baby-boomers gradually liquidate their assets, to fund their retirement
+ But fewer buyers are about, because of the demographic situation (the post 1960's "baby bust").
+ So the properties get sold at lower-than-expected prices, especially after considering inflation
The market is "bipolar", swinging back and forth from a focus on Inflation to Deflation. Bet on swings; and stay flexible. What are bipolar markets? See: http://tinyurl.com/GEI-Manix

#23 DrBubb

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Posted 28 July 2007 - 07:37 AM

(from Chuck Coppes)

As I have mentioned elsewhere on my business Web site, Nikolai Kondratieff (1892-1938) demonstrated that Western capitalist societies experience long-term cycles of boom followed by bust. These grand supercycles generally run about sixty years and the present supercycle began in 1949. This period from 2007 to 2009 is a very critical period for economic and geopolitical tensions that are beginning to rise to the surface. Starting in January of 2008 the first cohort of baby-boomers will begin to retire and this will only expose the nearly $66 trillion in unfunded liabilities for eighty million aging Americans. In 2008 we will also have new elections and political leadership in the U.S. Someone once said that politicians and diapers need to be changed often – and for the same reason. It is unlikely, however, that either political party, the Fed, or anyone else will be able to reverse our nation’s path towards economic Armageddon. Contrarian investors need to watch their investments closely this year and hedge themselves in hard assets, tangibles, foreign currency and other defensive strategies.

@: http://www.chuckcopp...t_for_2007.html
The market is "bipolar", swinging back and forth from a focus on Inflation to Deflation. Bet on swings; and stay flexible. What are bipolar markets? See: http://tinyurl.com/GEI-Manix

#24 DrBubb

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Posted 18 February 2008 - 07:30 AM

(this was posted on GEI by Member100):

### From an interview with Prof. Piet Eichholtz ###

* Just now for Eichholz, the arrow (property cycle) is pointing down

* "I'm really concerned for housing markets wherethe demographics look bad", he says.
"Then prices can fall a long way."

* What has made the Herengracht index stand out: "it has always been prime property"

* The index corrects for rising consumer prices, but not wages

- The canalside index doubled in ist first 50 years, as imiigrants flocked to the booming hub of a rich trading empire
- Wars sent the index gyrating over the next century
- 150 Herengracht sold at 5,100 guilders in 1755 (to Abraham Mylius), and then:
- The price tag was the same over a century later when shopkeeper John Dreckmeijer bought it
- Same property was bought by dentist Erik Schotman for 310,000 guilders in 1993

* Long periods where prices go up or down- but no uptrend or downtrend over the centuries.
Real prices in the early 1970's were little changed from 1650. Since 1979 oil crisis, they have doubled

* A price fall of 30 - 40 percent is common, and cannot be ruled out for the US or Britain.
In fact, Eichholtz believes that prices could halve.

* "To have a long term bust, you need to have more than one bad thing".
Previous busts were triggered by events like:

- Wars,
- A major economic crisis,
- A major demographic crisis

Eichholtz sees that the US (and Europe?) are entering a 20-year demographic crisis


/see: #14: http://www.greenener...p?showtopic=699
The market is "bipolar", swinging back and forth from a focus on Inflation to Deflation. Bet on swings; and stay flexible. What are bipolar markets? See: http://tinyurl.com/GEI-Manix

#25 Steve Cook

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Posted 05 March 2008 - 10:43 AM

(Methinks that is very dangerous thinking.
What if the children do not honor that "moral claim"??)


Ahh well.....you make sure that the resources they stand to inherit from you are linked to how well they look after you in your old age....This is how it has worked throughout history..

Homus economicus don't you know... :(

#26 julius

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Posted 05 March 2008 - 11:03 PM

I find the idea of Kondratieff cycles interesting, but I'm a bit skeptical - what's the best reference on this?

I recently read The Coming Generational Storm by Kotlioff and Burns, and while it is focuses on the fiscal issues that will specifically hit the US due to demographic change, it touches on the general aging trend through the developed world. It seems to me that Europe is more vulnerable since if you don't feel like paying German taxes, you can leave, but it's not that easy for the US.

(As an aside, the book really drove home why government-financed retirement provision is pernicious and socially destructive - at least in my opinion.)

#27 Methinkshe

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Posted 08 June 2008 - 06:18 AM

QUOTE (HollandPark @ Feb 14 2007, 07:05 AM) <{POST_SNAPBACK}>
the other side of the demographics problem - it ruins property-in-the-pension-plan...

Drop in housing demand predicted

Citywire: Equity release faces demographic challenge

Tom McPhail, head of pensions research, at Bristol-based adviser Hargreaves Lansdown is saying that an expected drop in the population over the next couple of decades would reduce housing demand. Meanwhile, he says, older people will be trying to trade down or release equity in lieu of a pension.
. .
"Tom McPhail, head of pensions research, said an expected drop in the population would mean there would be fewer family age adults around to buy houses. At the same time, there will be more older people trying to release value from their houses."

@: http://www.citywire....e...&NewsPage=1


I think that the current retirement preference to downsize and release equity will not be a problem in future.

High living costs will force us to change our habits and do as Asian families do. Sons will marry and bring their wives into the family home; Grandma will look after the childre, overheads will be kept low, and there will be a massive shortage of 4+ bedroom houses, and a huge oversupply of 1 and 2 bed flats and rabbit-hutch houses.

There are huge savings to be made through extended family living and although it has become unpopular in so-called advanced economies over the past fifty years, necessity will force us to return to former times when such practice was the norm.

Also, it makes much more economic sense for adult children to throw in their lot with ageing parents and preserve their inheritance than to watch it being swallowed up in nursing home fees.

I predict a real shortage of large family houses suitable for extended family living. Not the least because so many have been converted into flats.


#28 id5

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Posted 08 June 2008 - 08:12 AM

QUOTE (DrBubb @ Jan 10 2007, 05:21 AM) <{POST_SNAPBACK}>
Demographics are going to be a huge issue for our Globe-
too many people want to retire, and leave the labor force in the next 10-15 years.
Who is going to keep the economy growing, as these people stop working.


Why must everything grow, decline is a natural part of the same cycle. Economies sometimes fail, ideology changes, demographics change, bubbles burst and people die!

Economic migrants will leave countries when they experience a downturn and so will welfare migrants when the rate paid to those that do not work falls as governments reduce spending. As welfare drops in value so more of the indigenous population that was on welfare will have to work in the lower paid jobs that were held by the economic migrants, inflation will only make this happen sooner.

The poorest countries are in a demographic crisis already. Richer, successful countries limit the number of welfare immigrants and limit the amount paid out to welfare for immigrants. Economic migrants are also limited and indigenous people are hired before those migrants. They build up sovereign wealth funds when times are good to support the indigenous population during downturns, the more economically intelligent of the population save. There is only a demographic crisis in a downturn when there is not enough money saved, the economically weakest will experience hardship.

Poorly lead governments like immigrants because they can obscure financial failings in the increasing numbers of incoming migrants, more tax take, more schools, services, roads, waste, etc, and greater assumed growth. The increased tax take is used to prop up the state economically, trying their hardest to project those ‘good time’ numbers forward showing that the cost of free health services, social commitments, etc, can be met in the future. It is a fallacy because they never save for the lean times.

When the economy moves into a downturn the indigenous population can only see the welfare migrants taking the services and handouts from the taxes that they have to pay. Nationalist political parties grow and social unrest begins, the deeper and harder the economic downfall the greater the unrest. Rather than reducing services governments borrow causing inflation that accelerates the downturn. If the downturn continues then those that do pay taxes and are not a drain on the economy but whose parents or grandparents, great-grandparents were immigrants also become the target for nationalists. This is where the UK is heading as it has very little economic reserves even though it seems to be successful. People can either stay and protect themselves financially or become welfare or economic migrants to other countries.

The market can stay irrational longer than you can stay solvent. - John Maynard Keynes

I must remember that investing is a marathon and not a sprint!

#29 Compounded

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Posted 08 August 2008 - 02:33 AM

BUMP

This is an important thread, the coming demographic crisis has to be material to all investment my thoughts are;

The boomer generation exists in most western countries including the US and UK it includes those born in the period 1946-1964; these people represent a huge demographic bulge, which has to some extent dominated society e.g. youth culture was important in the 1960’s. They are now saving for retirement and are buying assets, which they intend to sell during or at retirement. The result is high demand now and low demand in later years for those assets favoured by these people to save for retirement (equities, bonds and property). The result will be high prices now and lower prices later when demand drops – conclusion; if you are a baby boomer these assets are not a good way to save for retirement.

Gold makes sense as an investment because among other reasons it is not a favoured by western boomers, can anyone think of anything else?
We ARE going back to normal right now. Normal being honest money (gold) rather than debt-based fiat currencies which are not money. Cgnao
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#30 DrBubb

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Posted 16 August 2008 - 01:16 AM

Has this been posted previously? - it belongs here


source: http://forum.globalh...showtopic=32400
The market is "bipolar", swinging back and forth from a focus on Inflation to Deflation. Bet on swings; and stay flexible. What are bipolar markets? See: http://tinyurl.com/GEI-Manix

#31 G0ldfinger

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Posted 16 August 2008 - 07:52 PM

QUOTE (DrBubb @ Aug 16 2008, 02:16 AM) <{POST_SNAPBACK}>
Has this been posted previously? - it belongs here...

There is also a St Louis Fed research paper on demography and house prices, and why Japan is doing so badly.

I know why my prediction for house prices is so bearish (see chart below smile.gif ).
You can't tax deflation.
“Currency Induced Cost-Push Hyperinflation” vs “Demand-Pull (non-hyper) Inflation.”
The "no income --> no inflation"-thesis is as wrong as the "price control --> inflation control"-thesis.
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Gold, silver, property, currencies, commodities charts.

#32 DrBubb

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Posted 16 October 2008 - 07:29 AM

LONGER TERM - IF SPX-777 GOES...

look at Japan, for the importance of demographics

and then to the US


Chris Puplava's article:
http://www.financial.../2008/1015.html
The market is "bipolar", swinging back and forth from a focus on Inflation to Deflation. Bet on swings; and stay flexible. What are bipolar markets? See: http://tinyurl.com/GEI-Manix

#33 365

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Posted 17 November 2009 - 05:08 PM

A pont worth noting here, is, as it is true that the developed countries populations are changing - in favour of more oldies. It is also true that the world's population generally is growing at an alarming rate. This will lead inevitably to more migration. Even though immigration is shunned by the natives of most developed countries, who try their best to accommodate social, or economic travellers, it brings an underlying discomfort.

Whether it is uncomfortable or not, it is a fact of life that western civilisations 'need' immigrants to fill the void made by the childless natives. These extra people will pay the taxes to support the pensions, and provide the market to buy up all the houses that the baby boomers will be selling as they retire. The housing market will stabalise, and may even keep growing, as investors buy property to rent out to the immigrants, and so on.

The world will keep turning, and everyone will live happily ever after. Well, until the food, and water shortages anyway - which will be caused by too many people on the planet. That's a long way off though. wink.gif

#34 lupercal

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Posted 17 November 2009 - 06:40 PM

I don't follow this line of argument. The people in the old USSR have had their pensions wiped out by inflation since the countries went capitalist. Their populations are falling more quickly then those in the UK. So how will importing villages of people from say Sudan or Iraq change the amount they get to live off. Surely the new immigrants will compete with the native people for limited resources and the ruling class will take whatever benefits arise from immigration.

Many families are waiting to have children because house prices are very high and wages are still low. I believe that given affordable housing the native populations will increase. This argument about countries needing immigration to make up numbers ignores the possibility that the natives will start having children if conditions are right.

If immigration is needed to make up the pensions of the old people it should be put to a referendum.
QUOTE
The thing is the future isn't something that's rammed down our throats. The future is a choice. The human race is six or seven billion odd people each of which is making choices every day. You add up all those choices and that's the direction of humanity. Each of us has fairly small voices, but you add up a lot of small voices and you get big voices.
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#35 365

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Posted 17 November 2009 - 07:34 PM

QUOTE (lupercal @ Nov 17 2009, 06:40 PM) <{POST_SNAPBACK}>
I don't follow this line of argument. The people in the old USSR have had their pensions wiped out by inflation since the countries went capitalist. Their populations are falling more quickly then those in the UK. So how will importing villages of people from say Sudan or Iraq change the amount they get to live off. Surely the new immigrants will compete with the native people for limited resources and the ruling class will take whatever benefits arise from immigration.

Many families are waiting to have children because house prices are very high and wages are still low. I believe that given affordable housing the native populations will increase. This argument about countries needing immigration to make up numbers ignores the possibility that the natives will start having children if conditions are right.

If immigration is needed to make up the pensions of the old people it should be put to a referendum.


The USSR model of socialism didn't work, and has been a struggle for some to adapt into the capitalist brave new world. Eventually, they will be better off.

Obviously, if natives have more children, then they will not need immigrants.

I don't think you will get a politician to admit that the UK needs immigrants, they will always state that the issue is under control, but behind the scenes they are actively encouraging it.






#36 lupercal

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Posted 17 November 2009 - 09:41 PM

QUOTE (365 @ Nov 17 2009, 08:34 PM) <{POST_SNAPBACK}>
The USSR model of socialism didn't work, and has been a struggle for some to adapt into the capitalist brave new world. Eventually, they will be better off.

Obviously, if natives have more children, then they will not need immigrants.

I don't think you will get a politician to admit that the UK needs immigrants, they will always state that the issue is under control, but behind the scenes they are actively encouraging it.


I'm sorry I still don't understand this properly. I was not refering to the UK but Slovakia and Czech Republic. An argument was presented that the UK needs immigration to prevent some kind of economic disaster/collapse of state related to pensions. I believe a similar disaster has already occurred in the old USSR, the collapse of the old state meant that people who depended on this state for income, suffered greatly if they were not self sufficient. Rather than increase immigration the people made sure older family and friends were well fed and happy, they grew their own food , looked after old relatives, fixed their own cars and worked togther to overcome the problems.The solution you suggest , ie import people from somewhere else, would I think work against this kind of community action. To work together people need trust and good relationships and these take time to form. You cant put them on a balance sheet either.
QUOTE
The thing is the future isn't something that's rammed down our throats. The future is a choice. The human race is six or seven billion odd people each of which is making choices every day. You add up all those choices and that's the direction of humanity. Each of us has fairly small voices, but you add up a lot of small voices and you get big voices.
James Gosling Coder.

#37 Jake

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Posted 27 December 2009 - 01:34 AM

I dont see the truth in that Puplava posted graph, unless I am misunderstanding something. Many in mid age have no kids, either. And that trend is growing. The graph needs updating anyway as the nikkei has swung lower, social mood too. I just cant see the nikkei rising like that projection any time soon.

Have alook at official numbers here.

http://www.ipss.go.jp/index-e.html


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