Why The Next Recession Will Morph Into A Decades Long Depressionary Event… Or Worse

Authored by Chris Hamilton via Econimica blog,

Economists spend inordinate time gauging the business cycle that they believe drives the US economy.  However, the real engine running in the background (and nearly entirely forgotten) is the population cycle.  The positive population cycle is such a long running macro trend thousands of years in the offing that it’s taken for granted.  It is wrongly assumed that upon every business cycle downturn, accommodative monetary and fiscal policies will ultimately spur greater demand and restart the business cycle once the excess capacity and inventories are drawn down.  However, I contend that the population cycle has been the primary factor in ending each recession…and this most macro of cycles is now rolling over.  Without this, America (nor the world) will truly emerge from the next recession…instead it will morph into an unending downward cycle of partial recoveries…contrary to all contemporary human experience.

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The evidence for my contention begins with the 25-54yr/old US population, which peaked in December 2007 and remains below that peak ever since (this population is presently about 400k fewer than Dec of ’07).  However, total US full time employment is now 3.6 million above the previous peak in 2007.  This 25-54 to FT employment relationship is now 1:1…just as it was in 1980 and 1970.

Annual change in 25-54yr/old US population vs. annual change in total full time US employees (below).  The macro population cycle provided millions of new adults (consumers) and their increased demand restarted the more frequent gyrations of the micro business cycles…until 2008 and again now in 2017.  Some may take note that the Federal Reserve cost of money (the Federal Funds Rate in blue) generally followed the population cycle, only making some deviations for the business cycle along the way.

But the change per 8 year periods of the 25-54yr/old population and total US full time employment turns out to be not so dissimilar.  In fact, it’s a pretty nice correlation.

And so, since population growth means so much…two differing views on where this population is headed.  In red, the Census and in black, an unbiased view of growth based on the child bearing population, birth rates, and current and future immigration trends.

Why would I feel such confidence in a lowered estimate of growth?  Check the ’08 Census projection for the 0-24yr/old US population through 2050 (blue line, chart below) and the massive downgrade of growth by the 2014 projection update (red line).  And it is still far too optimistic and the upcoming projection update will only further downgrade upcoming population growth, based on the ongoing declining birth rates combined with huge declines in illegal immigration since ’09.

But if we widen out to the 15-64yr/old population vs. US full time employees…the chart below details both sets.

Taking a look at the annual 15-64 population growth should be pretty telling.  2008 wasn’t a debt crisis…it was an end of an atypical period of abnormally high growth which so many had assumed was in fact “normal”.

The chart below taking the 8 year changes in the wider 15-64yr/old US population vs. full time employment.

Charting the change in the core population of the US vs. full time employment.  During each downturn in full time employment, the growth in the core population continued and eventually pulled the business cycle to a fresh start.  However, as the population cycle slowed the downturns were deeper and recoveries slower due to minimal growth in demand from the population cycle.

Below, focusing from the turn of the century ’til now, the downtrend of core population growth is very plain and the negative impact on the business cycle should also be easily understood.  The expected Federal Reserve response is of course interest rate cuts to incent record quantities of new debt…to maintain the unsustainable present.  The next economic downturn will see no buoying impact of the core population growth to exit the downturn.

Anyway, the chart above makes it plain that the population cycle of the broad core of the US (and in fact, that of the 0-64yr/old population) is now on the precipice of turning Japanese…also known as depopulating (see chart below).

The next business cycle recession will be unending and is very likely to run years into decades and perhaps a century or more.  A declining population already indebted with record debt and zero interest rates will consume less…meaning overcapacity and excess inventories will never be fully cleared before the next downturn…and on and on and on.

But the absence of a growing consumer base isn’t just a US issue…this is a global problem.  The annual growth of the 0-64yr/old population of the combined OECD nations (most the EU, US, Canada, Mexico, Chile, Japan, S. Korea, Australia / New Zealand) plus China, Brazil, and Russia show the growth that has driven nearly all economic growth has come to an end…and begins declining from here on.  And when importers are shrinking, exporters have no one to export to…and on and on and on.  A recent article helps to detail the depopulation we are now facing…not simply a demographic issue that so many believe, HERE.

The end of growth is the start of the SHTF scenario in which we now find ourselves.  While this situation offers short term nirvana to investors, the economic repercussions are ultimately disastrous.

 

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TampaRed
TampaRed

More happy news-the Chicago Police Pension Fund is projected to go bust in 3 years.
By the end of 2020,they’re projected to have around $150 million in assets vs over $900 million in benefits owed.

https://www.armstrongeconomics.com/world-news/pension-crisis/chicago-police-pension-goes-bust/

Anonymous
Anonymous

Government workers at all levels are blood sucking parasites. I hope they all experience poverty.

Anonymous
Anonymous

Hopefully that won’t come till after they’ve fixed the potholes in the roads and bridges and such.

Davebee
Davebee

Great analysis!
Show this article to that smart ass Financial Planner with his/her old line or shtick of…”Hang in there, you are in for the long haul’ Or, ” There’s never been a better time to be in equities” They will keep on with this terminal optimism even if there was an Everest sized meteor screaming into main street in the next 10 minutes.
Ultimately followed up with my own personal Financial Planner quote, “But NOBODY could see it coming” Then a big shrug of the shoulders and…”Its the market, what could I do?”
Do 21st century retirees or pensioners STILL put their life savings with these bloody con-men and financial witch doctors?
YIKES!

Mario8282
Mario8282

“Economists spend inordinate time gauging the business cycle that they believe drives the US economy.” – and they will NEVER figure out what is going on… Minsky moments? Give me a break!

“However, the real engine running in the background (and nearly entirely forgotten) is the population cycle.” WRONG WRONG WRONG !!!

No matter how many charts and correlations the author uses, this article is a disinformation effort (conscious or unconscious).

Here is an example of WHY CONFORMIST ECONOMISTS NEVER PREDICT A “CRISIS”:
An example of WHY CONFORMIST ECONOMISTS NEVER PREDICT A “CRISIS”
…by the way, there is an ongoing financial crisis from the day the actual money system started.

Middle-aged Mad Gnome
Middle-aged Mad Gnome

What if the PTB agree with the author? What if, from their perspective, growing the population is, in fact, the only way to continue developing Western Civilization? What if the this is the real reason Western leaders insist on immigration? What if, in their minds, the most efficient way to accomplish this is to take population from undeveloped countries and transfer them to the developed countries? What if these “overseers” agree among themselves that this is the only way our civilization survives? This might well be an idea that mirrors the “global warming” idea. If true, we deplorables would be well advised to reconsider our ideas on how to content with the elites.

Capn Mike
Capn Mike

Exactly what I was thinking. But they (and the author) seem to be Keynesian crackpots. It’s PRODUCTION that creates wealth, NOT “consumerism”.

Purplefrog
Purplefrog

Here is a little demographic side note.

Several years ago I read a post that dealt with the Boomers and their retirement funds. Since the majority of their “savings” was in equities the author wondered how they would be able to cash in their investments; that is, who was going to buy those equities at some acceptable price, given that the Boomers were the largest holders of equities (at that time). Now we have the answer. The central banks will buy those stocks and thus support their retirement. Is that just a side affect of the Fed actions or is it part of the reason they are doing this?

Anonymous
Anonymous

I’m thinking just comparing economic and demographic charts from the past to the present doesn’t give an accurate picture of the future because the world political, economic, cultural, ethnic and migrations are not being figured in that way and they will significantly alter the outcomes as they take effect.

Anon
Anon

This is an easy one. The short answer is, yes, it will be a slow cruel deflation. Simply because we are now at a point where the credit money based system can no longer be “fudged” to cover up the excesses of everything. The PTB know this BTW. It is why you see an increasing effort to keep all levels of scams going, and with each iteration of the “fix” it becomes more absurd, and more forceful. They know damn good and well, that if you can’t get people to buy or use a product or service voluntarily, you must force them to use it, by A: guns, (color of law) B: Limit the number of producers so everyone only has one or two “controlled” sources.
Look around you, has this not been the overall progression of everything from television stations to healthcare for close to 25 years? It is simply the end game in a big math problem that is coming to its logical conclusion. At this point, the amount of energy (government / private coercion) is so high, with little “bump” in actual production or actual wealth, you can actually visualize the pushing on a a imaginary ceiling that simply cannot be moved no matter how much force is applied. The truest sense of an immovable object meeting a seemingly unstoppable force. I suspect we are about a year (possibly less) from the “unstoppable force” reversing, and then moving the other way. Then the slow, progressive downturn will begin.

Anonymous
Anonymous

I don’t disagree with you overall, but I think it may be lightning fast instead of slow.

But I’m thinking of it in Hegelian terms with the coming reset being a planned and calculated move to bring about an entirely different and all inclusive system, on a worldwide basis, than the one we have now.

Anonymous
Anonymous

I acty think Japan will do quit well. Robots replacing humans and more available living space. It will make it cheaper for the Japanese to live and thus a lower wage will make them globally competitive.

anotherdoug
anotherdoug

You don’t suppose the increasing cost of health care is an effort to increase the rate of demise of boomers do you? Make room for younger workforce that can then buy more stuff. Won’t work, but it explains a few oddities happening now, along with immigration of younger people to fill those consumer slots.

Bob
Bob

Based on everything I have learned and come to believe, total collapse is a LONG way off — way over the horizon, and not even on the long-term agenda yet. And, potentially avoidable, in part! We just have to get used to the gradually fading light of a fifth wave expansion, and hope for the best in the futures of our grandchildren’s grandchildren…

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