I thought this was pretty interesting. Why is the birth rate in Europe and Japan so low?
GLOBAL DEMOGRAPHIC CHANGES
We quote a few facts from John Mauldin?s unpublished book with written permission of Mr. Mauldin.
November 01, 2003, Demography is Destiny:
"Now, let's look away from the US, and focus our eyes on the rest of the world. If we think the retirement problems facing the US are severe, then the facts suggest the rest of the developed world is facing a major crisis. Over the next few decades, we are going to see a shift in economic and political power that is simply staggering in its implications. Let's look at facts first, and then draw conclusions.
The population of the "developed countries" will drop rapidly over the next 50 years, while those of undeveloped countries, especially Islamic countries, will rise dramatically. Germany will experience no population growth and will remain at 80 million people, while Yemen grows from 18 million to over 84 million.
Russia will drop from 145 million to slightly over 100 million. Iran grows from 66 million to 105 million. Japan drops to 109 million, while Iraq and Saudi Arabia grow to 110 million. Italy declines from 57 million to 45 million, while Afghanistan grows from 21 to 70 million.
This underscores the 100-page CIA report released in July 2001, entitled Long-Term Global Demographic Trends: Reshaping the Geopolitical Landscape. The following are some quotes from that report:"
"Dramatic population declines have created power vacuums that new ethnic groups exploit. Differential population growth rates between neighbors have historically altered conventional balances of power....Our allies in the industrialized world will face an unprecedented challenge of aging. Both Europe and Japan stand to lose global power and influence... The failure to adequately integrate large youth populations in the Middle East and Sub-Saharan Africa is likely to perpetuate the cycle of political instability, ethnic wars, revolutions and anti-regime activities that already affect many of these countries. Unemployed youth provide exceptional fodder for radical movements and terrorist organizations, particularly in the Middle East."
The welfare state will be under threat. It will be difficult to maintain the current level of public sector services and transfer payments as fiscal strains rise. It is almost inevitable that the retirement age will rise in most advanced economies and real benefits may be cut. Meanwhile, aging populations will put immense pressure on state-funded health care facilities. New medical technologies could even exacerbate the problems by creating expensive new treatments and boosting life expectancy rates.
It may be difficult to keep the euro area intact. Europe's grim fiscal outlook raises a big question mark about the sustainability of the euro zone. The Stability and Growth pact will eventually have to be scrapped, and different fiscal positions across countries will create enormous strains, given a common monetary policy and currency. Meanwhile, expanding the European Union eastwards will not alleviate Europe's demographic problems as all the new prospective members (Turkey excepted) have even weaker population dynamics than existing EU members.
China will face many of the same problems as the West. The Chinese economy currently is booming, but it too faces demographic challenges down the road. The fertility rate is below replacement level and the working-age population is projected to peak in around 2025. This will make it easier to employ those workers flowing from rural areas to cities, but, as in other countries, the aging population will create a large fiscal problem, albeit later than in the West. Other important issues discussed in the CIA report include the implications of increased urbanization in a number of unstable countries, the global spread of infectious diseases, and the adverse environmental consequence of rapid population growth in the developing world.
The long-run picture for Europe and Japan looks bleak in that a deteriorating fiscal picture will be bearish for bonds while weak aggregate demand is bearish for stocks. Those two trends would be consistent if the eventual outcome is a stagflationary environment, which could occur in the context of labor shortages and attempts to inflate out of a government debt trap.
RBG comment: These demographic changes may be worse abroad, but the United States is in such terrible financial shape, it would be foolish to count on any retirement income other than one produced by a maxed-out individual savings plan. That is the main purpose of this essay - to encourage all young readers of the urgent need to start saving wisely right now.
GLOBAL DEMOGRAPHIC CHANGES
We quote a few facts from John Mauldin?s unpublished book with written permission of Mr. Mauldin.
November 01, 2003, Demography is Destiny:
"Now, let's look away from the US, and focus our eyes on the rest of the world. If we think the retirement problems facing the US are severe, then the facts suggest the rest of the developed world is facing a major crisis. Over the next few decades, we are going to see a shift in economic and political power that is simply staggering in its implications. Let's look at facts first, and then draw conclusions.
The population of the "developed countries" will drop rapidly over the next 50 years, while those of undeveloped countries, especially Islamic countries, will rise dramatically. Germany will experience no population growth and will remain at 80 million people, while Yemen grows from 18 million to over 84 million.
Russia will drop from 145 million to slightly over 100 million. Iran grows from 66 million to 105 million. Japan drops to 109 million, while Iraq and Saudi Arabia grow to 110 million. Italy declines from 57 million to 45 million, while Afghanistan grows from 21 to 70 million.
This underscores the 100-page CIA report released in July 2001, entitled Long-Term Global Demographic Trends: Reshaping the Geopolitical Landscape. The following are some quotes from that report:"
"Dramatic population declines have created power vacuums that new ethnic groups exploit. Differential population growth rates between neighbors have historically altered conventional balances of power....Our allies in the industrialized world will face an unprecedented challenge of aging. Both Europe and Japan stand to lose global power and influence... The failure to adequately integrate large youth populations in the Middle East and Sub-Saharan Africa is likely to perpetuate the cycle of political instability, ethnic wars, revolutions and anti-regime activities that already affect many of these countries. Unemployed youth provide exceptional fodder for radical movements and terrorist organizations, particularly in the Middle East."
The welfare state will be under threat. It will be difficult to maintain the current level of public sector services and transfer payments as fiscal strains rise. It is almost inevitable that the retirement age will rise in most advanced economies and real benefits may be cut. Meanwhile, aging populations will put immense pressure on state-funded health care facilities. New medical technologies could even exacerbate the problems by creating expensive new treatments and boosting life expectancy rates.
It may be difficult to keep the euro area intact. Europe's grim fiscal outlook raises a big question mark about the sustainability of the euro zone. The Stability and Growth pact will eventually have to be scrapped, and different fiscal positions across countries will create enormous strains, given a common monetary policy and currency. Meanwhile, expanding the European Union eastwards will not alleviate Europe's demographic problems as all the new prospective members (Turkey excepted) have even weaker population dynamics than existing EU members.
China will face many of the same problems as the West. The Chinese economy currently is booming, but it too faces demographic challenges down the road. The fertility rate is below replacement level and the working-age population is projected to peak in around 2025. This will make it easier to employ those workers flowing from rural areas to cities, but, as in other countries, the aging population will create a large fiscal problem, albeit later than in the West. Other important issues discussed in the CIA report include the implications of increased urbanization in a number of unstable countries, the global spread of infectious diseases, and the adverse environmental consequence of rapid population growth in the developing world.
The long-run picture for Europe and Japan looks bleak in that a deteriorating fiscal picture will be bearish for bonds while weak aggregate demand is bearish for stocks. Those two trends would be consistent if the eventual outcome is a stagflationary environment, which could occur in the context of labor shortages and attempts to inflate out of a government debt trap.
RBG comment: These demographic changes may be worse abroad, but the United States is in such terrible financial shape, it would be foolish to count on any retirement income other than one produced by a maxed-out individual savings plan. That is the main purpose of this essay - to encourage all young readers of the urgent need to start saving wisely right now.
