Census results and prospects for inflation

[Mr._Graybeard]

Preliminary census reports indicate that the US population is growing at the slowest rate since the Great Depression. Most importantly, the population is aging, which reduces prospects for economic growth. Japan shows us the results of that kind of demographic curve.

I'm a boomer. Inflation jumped broadly when my generation was in its acquisitive phase, buying cars, furniture and appliances. Political upheaval in oil-producing regions contributed to that spiral, of course.

Now that my huge pig-in-a-python demographic group is in or approaching senior status, we see inflation in areas where older folks put money -- in stock and bond investments, real estate. health care. But those sectors are fairly narrow relative to the spending we did in our younger years.

My conclusion is that inflation will remain tame until more young people enter the economic stream with money to spend.

Any comments out there among our macroeconomists? I read that China is seeing a similar population shift. Of course, China already has 1 billion plus.

 

[OldShooter]

The Economist recently had an article on world population and demographics. It's here but, sorry to say, mostly behind their paywall:https://www.economist.com/graphic-d...e-worlds-population-will-peak-at-97bn-in-2064 The charts are visible anyway.

Punch line is that as people prosper they have fewer children. I think most of the OECD plus China is below the replacement rate of 2.1 children/woman. Growth in young people is occurring in poorer countries, esp Sub-Saharan Africa. Said another way, population growth is occurring in places where they already have problems finding employment for everyone. Demographic trends are about the only easy type of economic forecasts, but forecasting the consequences is another matter entirely.

 

[Golden sunsets]

We need to increase the number of young people in our country. Traditionally, there are only 2 ways to accomplish this. 1) Increase procreation to more than 2 children per family unit, or 2) Increase immigration.

The obvious solution is number 2.

 

[Music Lover]

There are more than enough people on the planet...we don't need any more and we especially don't need to increase the population.

 

[OldShooter]

There are more than enough people on the planet...we don't need any more and we especially don't need to increase the population.

Well, we actually do need more people in the US, since the working age population would otherwise be in decline. Not good for the economy, not good for SS, and not good for those of us who will need skilled care, as well as not being good for the US's continued technological competitiveness. Time for Porky, I suppose.

 

[Winemaker]

A Forbes article from about 2005 highlighted the demographics back then that the 2,3 kids was going to seriously affect the real estate market as supply would outstrip demand. While correct on the dwindling population figures, real estate is popping right now, but perhaps because of location, location, location.

 

[Mr._Graybeard]

Well, it's only one census, but it does attest to how secure people of child-bearing age have felt over the last decade -- despite a lengthy period with low unemployment and soaring stock and real estate markets.

 

[Oz investor]

Preliminary census reports indicate that the US population is growing at the slowest rate since the Great Depression. Most importantly, the population is aging, which reduces prospects for economic growth. Japan shows us the results of that kind of demographic curve.

I'm a boomer. Inflation jumped broadly when my generation was in its acquisitive phase, buying cars, furniture and appliances. Political upheaval in oil-producing regions contributed to that spiral, of course.

Now that my huge pig-in-a-python demographic group is in or approaching senior status, we see inflation in areas where older folks put money -- in stock and bond investments, real estate. health care. But those sectors are fairly narrow relative to the spending we did in our younger years.

My conclusion is that inflation will remain tame until more young people enter the economic stream with money to spend.

Any comments out there among our macroeconomists? I read that China is seeing a similar population shift. Of course, China already has 1 billion plus.

Australia has been relying on immigration to keep population growth ( and productivity growth ) over the past several years ( maybe a decade now )

now we have had the virus disruptions , i see that immigration stalling in the near-term and possibly even in the mid-term

i took a small position in a funeral home consortium , since our aged care accommodation is riddled with issues .

i disagree on inflation ( i see inflation as the erosion of spending power ) i see 'bang for the buck ' becoming more like a modest pop

BTW i see a Japanese like scenario as possible in Australia as well if we over-regulate our mining and resource industries , we aren't there yet , but that exit on the highway is open ( especially if we reduce immigration )

 

[gcgang]

Inflation is happening in my world, besides financial assets.

Our golf course is experiencing HUGE increases in the cost of even simple things like fencing (from an estimate of $44/ft to $130!!!), to food costs, to just about any labor oriented repair stuff, if you can find the labor to get it done.

While I don’t actively follow, I’ve heard many commodity prices have been spiking up.

While I try to be optimistic, it’s hard to believe all the money printing is going to end well. An increase in borrowing costs seems likely to put us back into a stagflation, or worse, scenario.

 

[Oz investor]

Inflation is happening in my world, besides financial assets.

Our golf course is experiencing HUGE increases in the cost of even simple things like fencing (from an estimate of $44/ft to $130!!!), to food costs, to just about any labor oriented repair stuff, if you can find the labor to get it done.

While I don’t actively follow, I’ve heard many commodity prices have been spiking up.

While I try to be optimistic, it’s hard to believe all the money printing is going to end well. An increase in borrowing costs seems likely to put us back into a stagflation, or worse, scenario.

although i am virtually on the other side of the world , i see similar here , add to that and certain tax components ( on fuel , alcohol and tobacco products to name some ) automatically jump in line with CPI each year

and those tiny automatic fuel price increases trickle through the whole economy

BTW i am actually an optimistic , i see the lesson of a life-time coming

( much like the one my parents ingrained into with their growing up in the Great Depression and WW2 )

 

[Jeffman52]

Inflation in the US is coming with all the new spending that is coming from Washington. Pumping this much money into the economy, I just cant see how that wont happen. It will be important to keep money in growth stocks to replace the amount of dollar lost due to inflation.

As far as the population of the US. In the 70's the US was being encouraged to have smaller families to get closer to Zero population growth. Since then the population of the US has almost doubled. But had it not been for immigration, it would have been much less. Natural population growth has been decreasing since about 2008. Is that a cause for concern? I don't think we are there yet however you cant allow your population to continue to decline or sooner or later you don't have enough people to fuel your economy.

 

[pb4uski]

We need to increase the number of young people in our country. Traditionally, there are only 2 ways to accomplish this. 1) Increase procreation to more than 2 children per family unit, or 2) Increase immigration.

The obvious solution is number 2.

+1 I was surprised to learn that legal immigtation to the US is only about 1 million people annually... that's 0.3% of the total US population. We need immigrants to fill jobs and provide services given our birth rate is so low and our population is graying.

I pine for the old days when my grandmother immigrated to the US ~1910 at the age of 4. In order to immigrate you had to have a sponsor and emploment lined up so you would not be a burden on society. Her dad had already been here and established roots and the rest of the family followed later. You were expected to learn english but were welcome to speak your native tongue at home. I have a friend my age whose parents immigrated from Quebec and they spoke french at home and he knew very little english when he started school. I believe that after you stayed for so long you were expected to make a decision as to whether to become a US citizen and become naturalized (my Gram did). And of course, pay your taxes, be law-abiding, etc.

Teddy Roosevelt:

In the first place, we should insist that if the immigrant who comes here in good faith becomes an American and assimilates himself to us, he shall be treated on an exact equality with everyone else, for it is an outrage to discriminate against any such man because of creed, or birthplace, or origin. But this is predicated upon the person's becoming in every facet an American, and nothing but an American...There can be no divided allegiance here. Any man who says he is an American, but something else also, isn't an American at all. We have room for but one flag, the American flag... We have room for but one language here, and that is the English language... and we have room for but one sole loyalty and that is a loyalty to the American people.

But at the same time back then you were expected to knock on the front door and enter once invited to rather than climb in an open window.

We can and should do better.

 

[OldShooter]

We can and should do better.

+100

 

[Markola]

The economy is way too complex to predict. For every factor, there’s a potentially offsetting factor. I was just listening to a Goldman Sachs economist yesterday on their podcast, obviously as bright as they come. She said, “We’ve updated our models from two years ago from a deflationary outlook to a modestly inflationary outlook.”

I wanted to say, “In other words, you’re supposed to be the best there is and your forecast was completely wrong about the fundamentals.”

I’m an economics major and have been consistently humbled since college. Even the most respected forecasters are frequently, utterly, exactly wrong. The Fed has the best data in existence yet is still blind to and surprised by virtually every recession.

I’ve decided to stop playing the forecast game. I bought a sliver of the planet’s economy through domestic and international index funds balanced at 50/50 stocks and bonds and will just see what happens.

 

[OldShooter]

... Even the most respected forecasters are frequently, utterly, exactly wrong. ... will just see what happens. ...

Yup. For those interested, Nate Silver's book "The Signal and the Noise" has an excellent chapter on the consistent failures of economic forecasting.

The problem is, we want to know the unknowable. There is a long true story, the punch line of which is: "The commanding general is well aware that the [weather] forecasts are no good. However, he needs them for planning purposes."

Another favorite from my bin of quotations: "The only function of economic forecasting is to make astrology look respectable.” Often attributed to John Kenneth Galbraith but apparently actually from Ezra Solomon, a member of the Council of Economic Advisors during the Nixon administration.

 

[l8_apex]

We need to increase the number of young people in our country. Traditionally, there are only 2 ways to accomplish this. 1) Increase procreation to more than 2 children per family unit, or 2) Increase immigration.

The obvious solution is number 2.

And I'd say that obviously #1 is preferable, and easily attainable if the gov't were to incentivize it.

Not sure if that's possible, well here is an example:
Hungary

 

[CaptTom]

I think one problem is that we measure our economic success based almost solely on "growth."

While it's very possible to have a vibrant, successful society without it, the rich and powerful only care about personally becoming more rich and powerful.

Somehow, I think the rest of us will do just fine if population trends downward.

 

[OldShooter]

And I'd say that obviously #1 is preferable, and easily attainable if the gov't were to incentivize it.

Not sure if that's possible, well here is an example:
Hungary

Yup. In maybe 20 years some of those kids will switch from being consumers of national wealth and begin to contribute to Hungarian society. Incentivising birth rate is a long-term strategy and doesn't always work well. Ask China.

The advantage of immigrants is that they come immediately ready to work and at least partially educated. A sensible immigration program like Canada's would would attract highly educated workers and also capital investment. Jeez, we might even be able to retain the foreign graduate students that we currently pay to educate and then kick out of the country.

... Somehow, I think the rest of us will do just fine if population trends downward.

The Japanese are developing care robots because they do not expect to have enough workers to care for the elderly. There is also problem of a declining ratio of taxpaying workers to retirees and consequent pressure on pensions. "In the U.S. the ratio today is 4.6, and it is projected to decline to 1.9 by 2100—fewer than half as many workers to support a retiree as there are now. " https://blogs.scientificamerican.co...-workers-to-retirees-will-plummet-worldwide1/ Be careful what you wish for.

 

[MichaelB]

US population growth is definitely not following the same trend as Japan, China, or western Europe. Those societies have reached their peaks and are facing declines in total population, and sharper declines in working age people and total work force. The loss of work force will be especially noteworthy in China. Japan may reach a crisis.

The US has a much more stable population. The total population is expected to grow, albeit slowly, and the work force will also grow, slightly faster than the overall number.

The US Census Bureau has a neat tool to look at population projections around the world. It can be found here. Scroll down to look at the population pyramid, then use the slider to see how the age demographics change.

 

[OldShooter]

... The US has a much more stable population. The total population is expected to grow, albeit slowly, and the work force will also grow, slightly faster than the overall number. ...

Yes. The growth is through assumptions on immigration, not by growth in the current population. The forecast fertility rate is less than 1.9, well below replacement. Smart immigration policies are a way to escape the worker and brainpower shortage that will develop without immigration.

 

[MichaelB]

Unfortunately, the discussion is attracting opinions on current immigration policy. This isn’t the propoer thread for that.

 

[LRDave]

^^^ I don't believe there IS a proper thread for that. "Oh-so-subtle" P-word commentary is never actually "oh-so-subtle".

 

[MichaelB]

^^^ I don't believe there IS a proper thread for that.

Indeed.

 

[pb4uski]

^^^ I don't believe there IS a proper thread for that. "Oh-so-subtle" P-word commentary is never actually "oh-so-subtle".

And no propoer thread for it either.

 

[CaptTom]

The Japanese are developing care robots because they do not expect to have enough workers to care for the elderly. There is also problem of a declining ratio of taxpaying workers to retirees and consequent pressure on pensions.

Yes, there are structural changes which would have to happen. My point is we need to embrace them, rather than stick with "business as usual" and depending on eternal growth to get us out of a bind.

One thing we can count on is improved productivity. Be it robots or more efficient manufacturing, we already make more products with fewer effort than at any time in human history. And the pace is only accelerating.

At some point we have to stop measuring our success by how much "stuff" we can accumulate and look at our quality of life. I think at that point, growth won't look so necessary.