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Thursday, July 09, 2009


american ten-year demographics

david goldman's outline of the demographics of the united states have been mentioned here before and again just this week. today goldman offers another worthwhile bit in comparing the inevitable and irreversible demographic change that will be visited on the united states in the next ten years with the infamous 1990s baby bust of japan.

Back during Japan’s lost decade of 1990-2000 (the first lost decade, that is), Japan’s population had just began to age dramatically. In 1990 the elderly dependency ratio stood at 17%, but it had risen to 25% by 2000. As the Japanese aged their appetite for savings grew, and as their stock portfolios and home values crashed, they saved more and more. The more they saved, the worse the economy did. Interest rates of 0.25% or less and spectacular government deficits couldn’t make a dent in the vast shift towards a propensity to save. The result was deflation: falling asset values and a strong yen.

Fast forward to America in 2010, with an elderly dependency ratio of 19%, right around where Japan was in 1990. By 2020, it will rise to 25%, almost as fast as Japan’s.

this was also a topic from a book i recently revisited, bill bonner's 2004 "financial reckoning day", wherein bonner clearly charts japan as the forerunner of a demographic collapse soon to afflict virtually every western nation. there's much more to say, but little to be done -- except to make immigration into the united states from the third world as easy as possible for the next decade in an attempt to soften the blow. that has of course been the opposite of implemented policy.

bonner is also founder of and regular contributor to the daily reckoning.

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At a time when emerging markets are showing significant growth, an increasing number of them are staying behind. Earlier this decade, I was told by my grad school advisor of a big drop in grad school applicants from Asian countries. Many of the elite students there find sufficiently remunerative job opportunities after completing their undergraduate programs that the attraction of coming to the U.S. is diminished.

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I agree with the poster above. Expecting to solve this with immigration is wishful thinking.

Japan has already shown us what our our immediate demographic future will be like.

But what can japan do next - they need a new way forward now their exports are collapsing. I think they'll have to try mankiw/buiter's ideas vis a vis -ve nominal interest rates.

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except to make immigration into the united states from the third world as easy as possible for the next decade in an attempt to soften the blow.

Lou Dobbs is gonna be pissed off at you gm.

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true enough, rb, scep -- i'm looking more for mitigation than solution.

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then i'm certainly doing something right, ccd. :)

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going with what RB said, has there been any attempt to study/consider a situation where emmigration negates any positive effect from loosening the borders? If lucrative jobs are identified in emerging markets and perception of the US immigration policy leans toward the US cynically attracting workers in an effort to simply prop up a failing social safety net for its residents, where would that lead?

Unlikely I suppose.

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Somewhat older data here.

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