One Finite Planet

Economic Cost Of Peak Population: Market Crash in Japan, China, The World.

First Published:

The world has reached peak child, and is headed towards peak population. Many economic metrics collapse between peak child and peak population, resulting in bear stock markets and even collapses, all if the real economy and outside their investment portfolios, most people are relatively unaffected.

  • Economic Ponzi Scheme Metrics.
    • Peak Child and National Economies.
    • Market Indexes.
    • Real Estate.
  • Japan And Peak Population.
  • China: The Looming Crash?
  • Other countries: Germany, Korea, USA, Canada.
  • GFC: The Global Round.

Economic Ponzi Scheme Metrics.

Global vs National ‘Peak’ Child or Population.

While birth rates globally with very few exception such as Niger and Afghanistan would be expected to be at or near peak child, most many countries will continue to see population growth for many decades, and this will result in ‘boosts’ to economic indicators. The impact beyond boosting indicators will be wealth gains for the richest 1% or 2%, and erosion of wealth for the majority of the population. (I will explore this in more detail in another page soon.) The key point of this page is the impact on approaching ‘peak population’ on indicators which gain a Ponzi scheme driven boost from population growth, not on the well being of the people, and these are not closely connected.

There three groups countries:

  1. Countries where reaching people population will have or has had significant impact on global financial markets.
  2. Countries that appear decades away from peak population.
  3. Select countries that have have quietly already reached peak population.

Japan and China are in category 1, which is where the Ponzi schemes are coming to an end.

Market Indexes.

I have written previously on how indicators can be misleading, and market indexes focus only on the big end of town, and even in detail how stock market indexes in countries with rising populations can create an illusion of growth, even in the absence of per capita growth. The result of the Ponzi scheme nature of stock market indexes within any country, is that many shares gain a boost in value while the working age population is increasing, which collapses as the population peaks. This triggers a downturn in company results which can trigger a collapse in share values.

Real Estate.

The same Ponzi scheme effect that boost share prices, also ensures escalating growth in property prices. Since the same trigger removes the driver for inflated real estate prices and inflated share values, both real estate and shares, particularly in real estate development and finance, collapse at the same time, compounding the effect.

Japan And Peak Population Market Crash.

Japan in 1989 experienced an 80% market crash in the 1990s, and three decades later, the market has still not fully recovered to pre-crash levels. Perhaps perplexingly, if you visited Japan anytime in the past 20 years, there is no evidence of a society in decline, or a population living in a new poverty. Reality is, Japan for the average citizen feels as prosperous as ever.

So what has happened in terms of population numbers:

  • In 1985, pre-crash, peak child in Japan has already been reached, but the working population is still growing as the largest age band had not yet reached 40.
  • In the crash, peak child now covers all children, and the working population has past the peak, with the largest band about to turn 50, and the shadow band, the peak bands children, in their 20s.
  • 2020 and the population is now starting to fall, and now the shadow band is about to turn 50.

China: The Looming Crash.

Now consider China. The gap between graphs can vary, partly because ideal dates would not be exactly in 5 year intervals, but data is, and partly because years between generations differ between the two countries as well as over time. But the pattern is very close, and very different from what you see in countries such as the USA.

  • In 2005, pre-crash, peak child in China has already been reached, but the working population is still growing as the largest age band had not yet reached 40.
  • Set up for the crash, peak child now covers all children, and the working population has past the peak, with the largest band turning 50, and the shadow band, the peak bands children, in their 30s.
  • 2035 and the population is now starting to fall, and now the shadow band is about to turn 50.

Of course, while this pattern led to an 80% market crash in Japan, it may not lead to the same market crash in China. However, when I search to find either corroborating or contradictory opinions, I found some people had other, completely unrelated reasons to reach the same collusion impending collapse in China, similar to what happened in Japan.

The next question becomes will it also happen elsewhere? While Japan and China are not quite unique, they are unusual, in that both had an economic boom without immigration that very often is drawn to an economic boom. Are there other candidates for the same outcome? First, while all the preconditions are present, and the crash will happen without some rabbit being pulled out of a hat, it is hard to see what is inside that hat. If China does, crash then yes, South Korea will likely follow.

Other countries: Germany, USA, Canada, India.

An important factor is that from an economic perspective, traditional “1st world” developed nation have not had the same population growth as Japan or China experienced. There is a difference between “economic population” and “population”. Until nations transition from “developing” nations, a large part of the population may not significantly participate in economic activity, and as people make this transition, the population participating in economic metrics grows, producing the same growth effect a rapid population growth.

Countries can be broken into categories:

  1. Old world countries, who have mostly transitioned without a collapse into “peak population”.
  2. New world countries, with population growth continuing through immigration.
  3. Developing nations, with economic population growth even the absence of actual population growth.

In these lists, Germany would be category 1, and its problem with the car industry transitioning to electric vehicles is a far greater hurdle for the German economy than any factor related to population. The US and Canada are category 2 “New World” countries with continued population growth, and India fits category 3, so even as as the population reaches a plateaux, the economic population will grow for decades past that point. In summary, there is no obvious repeat of circumstance with the possible exception of South Korea, and although population will also have an impact on other economies in future, the situation with China is the standout likely to impact the world over the next few years by replicating what happened with Japan in the 1990s.

GFC: Global “Peak Population” Round 1.

to be continued.

Comment?

Table of Contents

Categories

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Throughout history, although no other species on Earth has experienced such long term overall population growth, even before the recent population explosion, the human population kept slowly growing.

Yes, we recently had an unprecedented population explosion, driven by is hidden by by the near elimination of previously tragic infant mortality, but against the background of long term growth, many of us never didn’t even realise their was an explosion.

But what drove population growth even before the explosion? What will now happen as the explosion ends?

Read More »

Fragile Democracy: Was Scott ‘Scomo’ Morrison autocrat of Australia?

Democracy collapses when a leader, who is able to bypass the checks and balances, uses their position to retain power.

Steps by recent leaders Scott Morrison and Australia and Donald Trump in the USA, raise questions as to whether current reliance on conventions and constitutions reliably protects democracy.

China, Russia and even North Korea are all technically democracies, and all proof of how technically being a democracy does not necessarily deliver real democracy.

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Ukraine: Putin and China, method or madness?

What if Russia and China both intended that the invasion of Ukraine would trigger global inflation and food shortages, and a potentially new financial crisis?

That Putin sees himself in the image of Peter the Great and restoring the Russian empire is no secret, and is generally portrayed as evidence that Putin has completely lost the plot. But what if there is a bigger plan involving both Russia and China that starts with triggering a global financial crisis? A dangerous game by two desperate leaders needing to bring others with them as their own economies collapse.

Read More »

Ghost cities and ghost homes: housing finance crisis?

Anyone who believes in indefinite growth in anything physical, on a physically finite planet, is either mad or an economist.”

Attributed to Kenneth Boulding in: United States. Congress. House (1973) 

This applies to not just to population growth, but just maybe also to the growth in value of housing.

This page is a look at ‘ghost cities’ and ‘ghost homes’, and the window they provide into how distorted investment can become in the pursuit of growth.

The end result of the distortions can be overvalued assets funded by highly leveraged ordinary citizens. If that is the case, not just with ghost cities but beyond, the correction will clearly present a financial crisis.

Read More »

Can Peter Dutton repair the democracy ‘loyal opposition’.

Democracy is under threat, and a significant part of the problem stems for the distortion of the current model of ‘opposition’. While the politics of division and polarisation of the USA Trump republicans vs Biden democrats attracts most attention on the world stage right now, what happens in Australia following the recent election which saw democracy strike back (page coming soon), has the potential to provide the world with an alternate blueprint for the role of the opposition party, which could reinvigorate democracy and spread to the US and elsewhere.

Is there an alternative to the current Republicans vs Democrats style, where ‘opposition’ is about each party demonising the other?

Read More »