A nation's economy will struggle to grow when its biggest spenders are in decline. It makes intuitive sense. And it partially explains our Macro team's global #GrowthSlowing thesis.
Make no mistake. Populations in the world's developed economies is getting greyer every passing day. Whether we're talking about the United States, Europe or Japan, all three are seeing the age bracket of 35 to 54 year olds – the age where consumption peaks – slow and in even decline. It's a particularly troubling trend in Europe and Japan.
Big demographic headwinds obviously create thorny issues for economic growth. As advanced economies plunge off this massive demographic cliff in the coming years, consumption will naturally decline as people save more and buy less.
It also has implications for global monetary policy. None of this sits well with central bankers. In their desperation, expect them to open up the monetary spigots (more than they already have). Unfortunately, flooding greying economies with easy money is like pouring water into a bucket full of holes.
Here's a look at the important 35-54 year old population growth (or lack thereof) in U.S., Europe and Japan.
Things may get downright nasty.
Our Macro team has dubbed Japan's demographic outlook "plunging into the abyss." Over the coming years, Japan's population of 35 to 54 year olds will decline at an accelerating rate. Tokyo remains the Twlight Zone playground for central bank tinkering and the grand "Abenomics" experiment. Things could get a lot more ridiculous than the Bank of Japan's existing negative interest rate policy (NIRP) and owning 60% of its country's ETF market.
Things are looking up.
The Millennial generation will largely bail out the U.S. economy in the coming years. Household debt as a percentage of GDP has been declining, along with the population of people aged 35-54 years old. But both, unsurprisingly, are bottoming out. More peak level consumers equals more debt. (We can almost picture Fed head Janet Yellen praising the heavens over this fact.)
Not so fast, Janet. As you can see in the chart below, this downtrend should continue to weigh on growth over the coming two or three years.
Europe's outlook? Not good.
The Eurozone is getting older. Low birth rates and a backlash against proposed immigration policies, will leave the E.U. mired in slow growth. The next decade won't be easy for any company tethered to the continent's consumption. In all likelihood, ECB head Mario Draghi won't be around in 2021 when this crisis hits its apex. But his legacy will be cemented. He'll be the guy who said he'd do "whatever it takes" to bailout the E.U. economy but failed.
All told, we reiterate our call...