We are embarking upon a population crisis. This is going to have profound impact on the economics of these countries.
The ones at the top of the list are:
- Japan
- South Korea
- China
- Italy
- Russia
This is not the total list. Many other countries are facing similar situation. The fact that fertility rates are falling is going to cause a great deal of pain in the future.
Japan is the poster child for this, dealing with the issue over the last few decades. It also epitomizes what is coming up for a country like China.
Population Linked to Economics
The parallel between China and Japan has to be make clear. While they both face similarities, China is dealing with much bigger numbers. Even a 50% decline in the number of people will still leave it about twice the size of the US.
That said, we can look to some stats for guidance.
Right now the Chinee has more companies on the Global 500. There were 142 on the list in 2023. If we look back 30 years, that number was 3.
This would be viewed as rather optimistic.
However, this is where we could start the alignment with Japan's history.
In 2000, there were 107 Japanese firms on the list. This number dwindled to 41 in 2023, a 62% decline.
Demographics is destiny. And for China, it is looking very similar.
The problem with this situation is that before people die, they get old.
Deflationary Apocalypse
Many feel that inflation bad, deflation good.
The reality is deflation can be worse than inflation. In the United States, the greatest deflationary period was called "The Great Depression". This was not a, well, great time for most in the country.
People feel prices coming down is a good thing. The problem with this idea is that people get very selective in their pricing.
Do you want your cryptocurrency to drop in price? How about the value of real estate? Many would say yes to the latter.
Here is the problem. This is Tokyo real estate.
Notice how it is still down from its peak, 35 years later.
Imagine having to sell your home and bring a check to closing....many years later.
How would that sit with you?
Of course, the biggest impact is upon spending. As the situation takes hold due to demographics, the economy starts to slow, When this happens, supply starts to adjust, usually meaning less products are produced. For companies, this means layoffs.
When people talk about falling prices, they mean consumer goods. Everyone wants lower prices. Of course, this takes place where taxes, insurance, regulation and other costs are rising. Then we have the employees who want to get paid money.
How does this work when prices are falling? It doesn't and this is when people get laid off.
Naturally, this only compounds the problem.
For a country like China, it is expected to have more than 400 million people 60 or older by 2035. This is larger than the entire population of the United States.
How is a smaller population of younger workers going to support these people. China did just raise the retirement age, upsetting many of the workers.
Ultimately this becomes a situation that cannot be escaped. Without a growing number of people, growth becomes difficult. Technology can offset it but the problem becomes consumption.
There are always two sides: supply and demand.
Producing goods without people to consume in the quantities produced could lead to major issues.
Many countries are facing it.
Notice how Japan's lost decades is now moving into its 4th decade.
Posted Using InLeo Alpha