DEMOGRAPHIC WINTER IS CRIPPLING THE ECONOMY

 

DEMOGRAPHIC WINTER IS CRIPPLING THE ECONOMY

Posted on | March 6, 2012 by Stefano Gennarini, J.D. |

According to an interview published in the WSJ the prospects of investment returns for babyboomers with money in US markets are “depressing” because of the slow demographic growth in the US.

Karen Damato interviewed well known portfolio manager, asset management executive, and researcher, Robert D. Arnott, on the expected trends.

Mr. Arnott told Damato the funds he manages have already abandoned US stocks for emerging markets because they “offer higher yields and better debt coverage, paired with much richer growth opportunities than the U.S.”

In the interview Mr. Arnott said:

This very year, for the first time in U.S. history, the population of senior citizens rises faster than the working-age population. Less than 10 years ago, when the baby boomers’ kids were coming into the labor force and the very skimpy roster of Depression babies was retiring, we had 10 new additions to the working-age cadre for each one new senior citizen.

It goes to 10-to-1 in the opposite direction in 10 years. There will be 10 new senior citizens for each new working-age citizen. If that’s not a political, economic and capital-markets game changer, I don’t know what is.

Damato summed up the problem:

The problem in a nutshell: The ratio of retirees to active workers in the U.S. will balloon. As retirees sell stocks and then bonds to support themselves, there will be fewer younger investors to buy those securities, keeping a lid on prices. Meanwhile, strong demand from boomers and a limited supply of workers will boost the prices of goods and services the boomers need.

Robert D. Arnott, and Denis B. Chaves, is the author of a paper that analyzes the effect of demography on finacial markets and the economy titled “Demographic Changes, Financial Markets, and the Economy” and published this year in the Financial Analysts Journal.

The demographic changes brought on by the contraceptive “revolution” are causing profound disruptions to great power politics also, as a new collection of papers “Population Decline and the Remaking of Great Power Politics” edited by Susan Yoshihara and Douglas A. Sylva details. Must read.

This research digs deep to address the one of the greatest problems threatening societies everywhere in the third millenium. It often goes unmentioned because it challenges the predominant narrative that commodifies children and marriage. So long as the media, academia and powerful entities like the United Nations characterize pregnancy as a malady, and marriage and families as an irrelevancy, real solutions to the problem of demographic decline cannot be addressed