Demographics

silverharp

An article I came across the other day , I thought the chart was worth a post. How imprtant a factor I'm not sure but cant help thinking it will affect savings rates , consumption , and economic growth.


http://www.thegreatbustahead.com/pi_article_feb2004.pdf

I'm confused, is that a graph of the Dow against the number of people who are 45-54?

silverharp

Deleted User wrote: »

I'm confused, is that a graph of the Dow against the number of people who are 45-54?

He's making a link bewteen the performance of the stockmarket and the peak spenders in the economy. Open to debate I guess. His thesis is that this age group drives the economy

Interesing idea, but one that would only really hold if you are measuring when the 'baby boomers' are at that stage, as otherwise then preformance is driven by younger people.
At least thats what a 10 second analysis tells me!

maniac101

Surely the 50% drop in the DJIA in the last 18 months has put paid to this guy's one-dimensional hypothesis? The current financial crisis, which can't be linked to the US demographic, undermines this theory. If the demograhic ever was a driver for the index, it would be still wrong to assume that the relationship that existed between the two parameters in 1920 would somehow be the exact same today. This completely ignores the onset of globalisation in recent years, for instance, and the diminishing importance of the US middle classes in a global economy. By 2030, the 70 million babyboomers in the USA will be far less significant, compared to the 8 billion people worldwide competing for dwindling resources.

silverharp

maniac101 wrote: »

Surely the 50% drop in the DJIA in the last 18 months has put paid to this guy's one-dimensional hypothesis? The current financial crisis, which can't be linked to the US demographic, undermines this theory. If the demograhic ever was a driver for the index, it would be still wrong to assume that the relationship that existed between the two parameters in 1920 would somehow be the exact same today. This completely ignores the onset of globalisation in recent years, for instance, and the diminishing importance of the US middle classes in a global economy. By 2030, the 70 million babyboomers in the USA will be far less significant, compared to the 8 billion people worldwide competing for dwindling resources.

Absolutely in this case other causes ran ahead of this factor, I'm not saying its the holy grail, but it may act as a constraint on US growth in the next decade and I wasnt linking it to global growth per say.
In terms of the US they would hope to be coming out of recession in 2010/11, the demographics issue would imply that you have a workforce slowing down either in earning ability or spending abilty after running up the mother of all debts.

Économiste Monétaire

Unless there's some large recovery in U.S. house prices, people will revert to more benign forms of saving and attempt to deleverage their personal balance sheets. I wonder what the average, or median, rate of capital gains, from house prices inflation, were for '02-'07. I doubt the U.S. consumer will return to being the world's debtor, the similarities to Japanese mid '90s demographic factors are unnerving; an ageing population just hit with a reduction in notional wealth. Maybe Obama will adjust social security to increase the benefits beyond 3% p.a. for every year worked after 65. Although, the BOP deficit hasn't collapsed as quickly as some had previously speculated.

daveirl

This post has been deleted.

silverharp

Économiste Monétaire wrote: »

Unless there's some large recovery in U.S. house prices, people will revert to more benign forms of saving and attempt to deleverage their personal balance sheets. I wonder what the average, or median, rate of capital gains, from house prices inflation, were for '02-'07. I doubt the U.S. consumer will return to being the world's debtor, the similarities to Japanese mid '90s demographic factors are unnerving; an ageing population just hit with a reduction in notional wealth. Maybe Obama will adjust social security to increase the benefits beyond 3% p.a. for every year worked after 65. Although, the BOP deficit hasn't collapsed as quickly as some had previously speculated.

The numbers below would reflect what consumers thought they could save based on the "phoney" (a good Peter Schiff word:pac:) housing and stock gains

I cant see anyway out of the develeraging cycle in the medium term. One deflationary forecast I have is for the CPI to get to -3% and bond yields to hit 8%, thats a real interest rate of 11% , anything that even trends in that direction will make a nonsense of the current policy decisions.



US Personal Savings Rate - Yearly:

Year/ US Household Savings Rate (as a % of disposable income)
1991/ 7.3
1992/ 7.7
1993/ 5.8
1994/ 4.8
1995/ 4.6
1996/ 4.0
1997/ 3.6
1998/ 4.3
1999/ 2.4
2000/ 2.3
2001/ 1.8
2002/ 2.4
2003/ 2.1
2004/ 2.1
2005/ 0.4
2006/ 0.7
2007/ 0.6

Source: OECD

Économiste Monétaire

daveirl wrote: »

This post has been deleted.

Well, relative to Europe (by that I mean Germany) and Japan, the U.S. still has a large number of persons in the youth cohort. But, it's the problem of so many nearing retirement and having their 401(k)'s (or whatever) decimated. That's not good when your economy consists of ~60-70% consumption. As Silverharp's original post was referencing to, these people are your biggest spenders.

silverharp wrote: »

The numbers below would reflect what consumers thought they could save based on the "phoney" (a good Peter Schiff word:pac:) housing and stock gains

I cant see anyway out of the develeraging cycle in the medium term. One deflationary forecast I have is for the CPI to get to -3% and bond yields to hit 8%, thats a real interest rate of 11% , anything that even trends in that direction will make a nonsense of the current policy decisions.



US Personal Savings Rate - Yearly:

Year/ US Household Savings Rate (as a % of disposable income)
1991/ 7.3
1992/ 7.7
1993/ 5.8
1994/ 4.8
1995/ 4.6
1996/ 4.0
1997/ 3.6
1998/ 4.3
1999/ 2.4
2000/ 2.3
2001/ 1.8
2002/ 2.4
2003/ 2.1
2004/ 2.1
2005/ 0.4
2006/ 0.7
2007/ 0.6

Source: OECD

Thanks. I believe it went negative in '08.

thebang

Should they use immigration to counteract this?