Love this interview…this 8-minute clip from Jordan Peterson and Russ Roberts succinctly show the power of story and why classical literature connects so deeply with our emotions.

 

My twelve arguments on the Decline of America. Demographics is destiny Japan style.

According to the UN’s most recent projections, the share of the Japanese population that was age 65 and older in 2015 was 26 percent. That compares to 14.6 percent in the U.S., 18.9 percent in France, 21.1 percent in Germany, and 22.4 percent in Italy. Further, Japan had a total fertility rate (TFR) — a measure of births per women of child-bearing age — of 1.41 from 2010 to 2015. Over that same period, the TFR was 1.88 for the U.S., 1.98 for France, 1.43 for Germany, and 1.43 for Italy. Japan’s TFR fell quickly in the post-war period, to 2.17 for the years 1955 to 1960, which was down from the TFR of 2.96 that the country experienced from 1950 to 1955. Most other advanced economies experienced much larger and longer “baby booms” after the war.

Japan has now experienced four straight decades of birth rates below the population replacement TFR of 2.1. Low rates of birth, and limited immigration, lead inexorably to a contracting workforce, which is debilitating for a pay-as-you-go pension system. Japan’s working age population — those age 20 to 64 — peaked nearly two decades ago. In 2000, there were 79.4 million people in Japan who were in this age group. By 2015, the number had dropped to just 72.1 million people. The UN’s median projection scenario forecasts Japan will have just 50.8 million people age 20 to 64 in 2050 — a remarkable 36 percent contraction over a half century.

Japan’s steady improvement in lifespans and its declining workforce has created tremendous financial pressure within the nation’s social security program. Japan’s system shares similarities with U.S. Social Security. It combines social welfare goals, which are met with income transfers, with an earnings-related benefit, and the system is financed mostly with payroll taxes imposed on current workers. Japan differs from the U.S. in that it chose to divide up its program into two tiers. The first is a flat-rate benefit, called the National Pension (NP), which gets half of its funding from a government subsidy financed outside of the payroll tax; the second is the earnings-related benefit, or Employees’ Pension Insurance (EPI).

….The reality is that Japan has no good options. When people live longer and have fewer children, the inevitable consequence is a shrinking pie from which to draw retirement benefits. The pie can be expanded by having workers stay employed longer, and the portion going to retirees can be reduced by having workers retire later in life. But these shifts won’t be enough to offset the effects of a rapid contraction of the workforce.

I’m a John Mauldin reader. His analysis is always deep, grounded in facts/data and he’s been in the financial world long enough to add a historical perspective to modern events. His series on the Great Reset (link below) is long but worth a read.

His recent article in Forbes explains where I think we are as a world economy. Since 2008 there has been a massive run-up in all sorts of debt. We never really took our medicine after the housing crash and instead inflated our way to a bigger potential issue.

The series of blog posts paint a picture of where we are as a State/County/City (pensions), Country ($21t in debt) and Globe (global debt to gdp is at 318%). There are ramifications for all the monetary policy. We can only speculate on the outcomes.

 

Forbes – Earlier this year, I wrote a series of articles (synopsis and links here) predicting a debt “train wreck” and eventual liquidation. I dubbed it “The Great Reset.” I estimated we have another year or two before the crisis becomes evident.

Now I’m having second thoughts. Recent events tell me the reckoning could be closer than I thought just a few months ago….

And

Here’s a note from Economic Cycle Research Institute’s Lakshman Achuthan:

Notably, the combined debt of the US, Eurozone, Japan, and China has increased more than ten times as much as their combined GDP [growth] over the past year.

Yes, you read that right. In the last year, the world’s largest economies are generating debt 10X faster than economic growth. Adding debt at that pace, if it continues, will boost the debt-to-GDP ratio at an alarming rate….

Mauldin’s conclusion;

This Won’t End Well

I am trying to imagine a scenario where this ends in something less than chaos and crisis. The best I can conceive is a decade-long (and possibly more) stagnation while the debt gets liquidated.

But realistically, that won’t happen because debtors won’t let it. And they outnumber lenders. For this reason, something like “the Great Reset” will happen first.

The rational course would be to delay the inevitable as long as possible. Yet in the U.S. we’re rushing it.

I’m also reading a book, The Day After The Dollar Crashes, by Damon Vickers and although the run up and political theories that are nothing new took 3/4th of the book to get to the ‘what happens when that happens’ part, Vickers hypothesis is an either we go back to a money backed by a gold standard or we move to one currency.  He does mention that we need to be very careful about a potential wag the dog war to deflect from the pain.

The Great Reset: How Should We Then Invest?

BY JOHN MAULDIN

MAY 22, 2017

End Of The Road – How Money Became Worthless

 

97% Owned – Economic Truth – How Money is Created

The Nature Of Money

 

The Flow

The Big Short – 2015

 

https://youtu.be/SY2hUWaXqfE