Economic Doom Loop Well Underway

Monday, March 4, 2019
By Paul Martin

by Chris Hamilton via Econimica blog,
Mon, 03/04/2019

From 2007 through 2018, births in the US have declined by 470 thousand on an annual basis, or an 11% decline. The US fertility rate has likewise cracked lower, from 2.12 births to 1.72, an 18% decline (2.1 births over a females childbearing years is considered zero growth). This has resulted in 4.5 million fewer net births in the US since 2007 than the Census had estimated in 2000 and again in 2008. This is over an entire years worth of births that never took place. The sharp decline in births, against an anticipated rise, and a deceleration from anticipated immigration has resulted in the Census downgrading US population growth through 2050 by over 50 million persons (detailed HERE). This decelerating growth and outright declines are happening across the globe among the “wealthy nations”, leaving little growth opportunity for the “poor nations” (detailed HERE).

The decline in US births has been particularly steep among those with the lowest incomes and assets. From 2007 through 2016, Native American fertility rates have collapsed from 1.62 to 1.23. Hispanic birthrates have fallen from 2.85 to just 2.1. Black birthrates have turned lower from 2.15 to about 1.9 and white birthrates from 1.95 to 1.72. Again, these birthrates are only through 2016 and the declines in 2017 and 2018 are significant and accelerating downward.

The reason for fast declining birthrates since 2007 in the US and among most nations globally seems to be the current ZIRP and low interest rates and Quantitative Easing programs which have the effect of inflating asset prices. The majority of assets are held by large institutions and post-child-bearing age populations. The flow through of these policies are asset prices rising significantly faster than incomes. For example, non-discretionary items like homes, rent, education, healthcare, insurance, childcare, etc. are skyrocketing versus wages.

For young adults, this means a far greater reliance on debt to educate themselves and a far greater portion of their subsequent income to service that debt. Greater reliance for young adults on debt to purchase a home or a greater portion of their income to pay their rent, provide healthcare, insure themselves, or provide childcare (as both parents are more typically working full time). The net result of these federal government and central bank policies to boost the stock market, home prices, and collapse interest paid on savings are collapsing birthrates and collapsing total births. This is diminishing present and future demand and quality of life for the young, poor, primarily non-white in perhaps the greatest transfer of wealth mankind has seen.

This is creating an economic doom loop whereas fast rising asset valuations push up the costs of living far faster than wage growth, pushing birthrates (and present and future demand) lower. The lower birthrates fall, the greater the reliance on asset boosting policies, and the majority of young, poor, and minorities with little or no assets are most harmed…wash, rinse, and repeat.

The American Fertility Rate
The chart below shows the US fertility rate since 1970 plus the Census estimates for fertility rates from January, 2008 and January, 2017. The ’08 and ’17 estimates show an expected fertility rate plus an extreme high and low fertility potential. Looking back at the 2008 Census fertility projection, the worst case scenario that the Census could envision in 2008 has come true. Birth rates have collapsed over the last decade, hitting, 1.72 per female of childbearing population in 2018.

Strangely, now with a decades very clear trends in hand, the most recent Census projection made available in January of 2017 couldn’t even conceive of our current reality, let alone something like the fertility rates the US and so many other nations are experiencing. The base case is a laughable accelerating fertility rate through the middle of the decade while the US is currently significantly below the lowest possible fertility rate the Census could put to paper in 2017…and fertility rates are still falling fast. The shortfall economically and from unfunded liabilities (like Social Security with their own assumptions built off the failing Census estimates), is of radical (and worsening) proportions. This means Social Securities 2032 projected demise is far too optimistic…and a significantly sooner failure is imminent.

The Rest…HERE

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