Charting China's Imminent Implosion

Debt is money spent in the present and an obligation to be repaid in the future.  Given this, I thought I'd contrast China's population of young versus their obligation to be repaid in the future.

The chart below shows the 0 to 24 year old Chinese population (green line) versus Chinese debt (red line) and GDP (black line).  The 0 to 24 year old Chinese population swelled by over 300 million from 1950 to it's ultimate peak in 1991.  Since that peak, the total population of young in China has fallen by 176 million, or a 30% decline in the number of children across China.  Moving forward, the UN medium estimate hopes the formal elimination of the one child policy will simply slow the rate of decline in the population...but by no means will China's fast declining childbearing population (those aged 15-44) nor disproportionately young male population potentially be offset by a slightly less negative birth rate.  Contrast that with the quantity of debt being forcibly injected into a nation that faces a massive imminent population decline.

To put that debt into perspective, the chart below shows that total debt and annual GDP each divided by the 0 to 24 year old Chinese population.  As of 2018, every child and young adult in China under the age of 25 is presently responsible for over $100 thousand dollars in debt while the annual economic activity (GDP) created by all this debt continues to lag ever faster. 

And the coming decade only worsens as the young population continues its unabated fall and debt creation (absent concomitant economic growth) continues soaring... building more capacity all for a population that is set to collapse?!?

China's predicament and reaction to it are not particularly unique...but given China's size, the ultimate global impact of China's slow motion train wreck will be unprecedented... particularly as their 15 to 64 year old population is now in indefinite decline.  Chart below shows annual change in Chinese 15 to 64 year old population, in both millions (green columns) and percentage (blue line).

Massive overcapacity (thanks to over a decade of government mandated mal-investment) versus a ever swifter declining base of consumption does not add up to a burgeoning middle class or a happy ending.

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Extra Credit -

Just for comparative discussion sake, below is the US 15 to 24 year old population (orange line) and employment among them (blue line) since 1979 (the year of peak employment among 15 to 24yr/old Americans).

And just for fun, US federal debt per capita of the 0 to 24 year old US population (a bit unfair comparison as I'm only showing US federal debt vs. 0 to 24yr/olds against China total debt vs. 0-24yr/olds above...but you get the idea).

Authored by Chris Hamilton via Econimica blog

For The First Time Ever, Younger Americans Are Less Optimistic Than Their Parents

Superficially, last week's University of Michigan consumer confidence report could not have been better: rising above 101, it was the highest number since 2004 (even if it was driven entirely by rising optimism from poorer households, while those in the top third have started to lose faith in Trumponomics). However, less noted among the various survey questions was one troubling finding: for the first time in history, Americans younger than 35 are less optimistic, - and have less confidence in the economy - than older Americans, those aged 55 and over, which includes their parents.

As the Deutsche Bank chart below shows, this has never happened in the 60 years the University of Michigan has been collecting data.

This stark reversal in outlooks is hardly a surprise: as MartkWatch notes

Meanwhile, spending "only" 30% of their income on rent or a mortgage, a golden rule for decades, is near-impossible for most young Americans.

While many are quick to blame "selfish" Boomers for creating the perfect storm for their offspring and future generations, Americans appear - at least on paper- to be concerned about the economic prospects of those who come after them, even if the numbers don't look good.

As MarketWatch reminds us, a 2017 Pew study found that just 37% of Americans believe today’s children will grow up to be better off financially than their parents: roughly 49% of 18- to 29-year-olds believe that the next generation will be worse off, while more than half,

“The U.S. may be one of the richest countries in the world, with one of the highest per capita gross domestic products among major nations, but Americans are fairly pessimistic about economic prospects for their country’s children,” said the Pew study author, Bruce Stokes.

And while an economic depression has yet to be observed, the signs are unmistakable: for the first time in more than 130 years, Americans aged 18 to 34 were more likely to live with their parents than with a spouse or partner in their own household, partly due to millennials getting married later in life and spiraling student debt.

It's not just doom and gloom, and record interest-bearing liabilities: Millennials also have assets. A recent BofA report found that nearly half (47%) of working millennials have $15,000 or more in savings and 16% have $100,000 or more in savings. On the other hand, the definition of assets was a little "loose":  BofA asked about the

Speaking to MarketWatch, Peter Schiff had a far bleaker take. Schiff said the middle class has been gutted by over-regulation, an escalating cost of living and stagnant wages. “Families are smaller,” he told MarketWatch

He's right of course, but as usual the time to panic will come only after the next event, which will be either an economic depression, or a stock market crash, both of which would be for the ages.

Fonte: qui