The force of reality

Rod sent in an article from the Asia Times that puts everything into perspective.  We are all concerned with outcomes and tangential factors.  In the end, the economics of population moots just about all the plans of mice and men; a good reason to keep to a Constitution and our rights as things change.  This article should be the basis of our government actions, but that requires politicians who read and think.

You and I will be long dead when the world turns upside down.  No, today we are merely being knocked around and kicked. The real crunch comes when Keynesian economics is mathematically impossible even to leftists, when few people are left to pay taxes, when the nature of our consumer society will not apply. Do not minimalize the force.  All argument about taxes funding medical care or retirement will cease in the face of the numbers.

I have no answers or projections other than to say everything will change and we really cannot understand how.  All directions lead to finding a safe and secure (stocked) place that your family owns before all else.  The third world will become a popular destination, soon.

A teaser:

The bubble that popped in 2008 (see Waking from Lever-Lever Land, December 25, 2008) was the collective delusion of the industrial nations that they could generate high returns from investments despite the imminent decline of the number of people there to produce those returns. 

Why we will be poorer By Spengler No man is an island, especially in the markets. Our consumption basket includes the efforts of hundreds of millions of people around the world, and our right to consume depends on our ability to sell to hundreds of millions of people around the world. During the present century the number of adults in affluent and productive countries will shrink by about a third. All of us will be poorer. There will be a third fewer people earnings profits for businesses, paying taxes to governments, buying homes or cars, or taking vacations. Starting around 2015 the adult population will start to decline at about 2% a year. Productivity in the industrial nations (output per worker) has grown at slightly more than 2% since 2000, according to The Conference Board, [1] so a 2% decline in working-age population suggests that output will remain more or   less flat indefinitely in the developed countries. Population aged 15 to 59, more developed regions Source: UN Population Prospects, Constant-Fertility Scenario Growth in the industrial world will come to a halt, and government revenues will stagnate, just when governments need revenue the most. In 2010, 24% of the people of the developed countries were elderly dependents. By 2030, that figure will rise to 30%, and by 2040 it will rise to 42%. The demands on public pension and health systems will be enormous, especially in rapidly-aging Europe and Japan. Taxes will rise drastically to support the retirees, which means that after-tax income will fall. America is the grand exception to the global trend. Adult population by region (2010=100) Source: UN Population Prospects, Constant-Fertility Scenario America's higher fertility, though, may be a mixed blessing, and it may not persist, for it depends on very high fertility among Hispanic immigrants. By 2050, Americans of European ancestry will comprise just half of the population. Hispanic immigrants are drawn disproportionately from the poorest and least-educated strata of Mexican and Central American society and may not integrate into America as well as previous immigrants. But there are other sources of American demographic strength. Evangelical Christians, who comprise about a quarter of Americans, have a fertility rate of 2.6, far above replacement. America, Canada and Australia are the lepers with the most fingers. They are the only industrial nations worth investing in for the long term, but demographic decline in the rest of the developed world will affect them as well. There will be fewer people to buy American exports, and fewer suppliers of new products from overseas. What about the developing world? China's adult population will fall from 915 million in 2010 to only 682 million in 2050, by more than a third. India's adult population will grow by a third, but it remains to be seen how many of them will be integrated into the country's pocket of modernity and how many will remain trapped in poverty. Africa, Latin America and the Arab world never have contributed much besides raw materials to the world economy, and the productivity of their people simply is not a factor over any pertinent horizon. The bubble that popped in 2008 (see Waking from Lever-Lever Land, December 25, 2008) was the collective delusion of the industrial nations that they could generate high returns from investments despite the imminent decline of the number of people there to produce those returns. Now that the delusion is dead, the citizens of the industrial nations have no choice but to accept lower returns on investment, reduced government largesse, and a poorer existence generally. From the Wisconsin State House to the Palazzo Montecitorio in Rome, the only question is how fast governments will cut spending and for whom. The crisis came in 2008, when leverage collapsed. Today's euro zone debt drama is not a crisis, but a negotiation. There is an instructive comparison between the municipal debt crisis in the US and the sovereign debt crisis in Europe. The most corrupt city in the US is a refuge of angels compared to any political venue in southern Europe. The voters who also are the taxpayers have given a mandate to politicians to ruthlessly cut expenses. In Wisconsin and Minnesota, where Republican governors confront public-sector unions, it has come to open confrontation. In fits and starts, the system is working, because states and cities must raise money from their residents, and taxpayers vote directly for those responsible for taxes and spending. State and local government employment is falling sharply, with 21,000 layoffs in June alone. During the past year, US cities have shed 124,000 education jobs. Borrowing by US states and cities has fallen by half this year, and municipal debt performed better than any other fixed-income asset class. In Europe, where national governments and the bureaucrats in Brussels control spending by localities, and voters have little to do with local government budgets, there is no such responsiveness. The result is a battle between Greek recipients of government largesse and German taxpayers. There is no incentive for local constituencies to throw the bums out, for it is not the tax money of the Athenians that pays municipal salaries in Athens. Europe's laggards must look deeply into the abyss before doing what US states and cities have done proactively. That's where the similarity ends. America has enough taxpayers to fund its obligations at all levels of government. The euro zone will lose 30% to 40% of its potential taxpayers by mid-century. And at some point, today's Italian and Spanish government bonds will have about as much value as obligations signed by Emperor Romulus Augustus in the year 475 CE. Note 1. 2011 Productivity Brief – Key Findings, The Conference Board, 2011. Spengler is channeled by David P Goldman. Comment on this article in Spengler's Expat Bar forum. (Copyright 2011 Asia Times Online (Holdings) Ltd. All rights reserved. Please contact us about sales, syndication and republishing.) 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