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The Box



March 04, 2008 – Comments (8)

I was reading DemonDoug's latest blog with the Nikkei chart showing their market still at half of what it was in the bubble around 1990.  I was also reading how Greendunk didn't see the housing or stock market bubbles.

It seems to me that box from which we get so much analysis is consistently minute.  Doug's post reminded me how there doesn't see to be much focus on the age distribution in Japan and its affect on their market.  Indeed, a question I wonder about is an aging population almost a requirement for the type of housing bubble we saw and the one in Japan?  With an aging population you simply have more people at a point in their lives where they have money for a second home and naturally more competition. 

But, there comes a time when the aging population isn't generating the same assets and price is about supply and demand.  When their demand goes down, and even negative as they liquidate, price has to go down.

And where is world population looked at in the markets?  I met a woman once who talked about when Vancouver was a village, that's around 2,000 people.  There's over 2 million people there once.  The rise in human population has even enormous expansion opportunity for anyone in business and that can't happen anymore.  We are forever about economic growth, but ultimately we hit a point where we are at economic sustainability and we see that the grow was just about this arberrant period in our history when population grew like the Earth had no bounds.  And we developed belief systems about the economy as if this could happen forever.

The ascent of human population has been following an exponential curve for the last 500 years or so, the entire time our modern economic theory has developed around.  The human population curve simply tells me those theories are going to be seriously tested. 

World Population, 12000 Years

And China's increasing standard of living means the ride continues?  Give me a break.  They have about 2.5% of the water per person in that country compared to Canada.  The US is bursting at the seams for its inablity to increase its water supply and the serious water issues many communities face.  China is limited by their natural resources, plain and simple.  The cost of raising the standard of living become increasingly exponential and ultimately water issues will provide the ceiling.

8 Comments – Post Your Own

#1) On March 04, 2008 at 9:27 AM, dwot (28.88) wrote:

Once again, debt is the devil and why I am so bearish... 

And moronic methods designed to increase debt have run out...

I my very long post "Six Degrees of Leverage" I take a very close look at what the declining interest rates mean to the nature of debt for households.  Low interest rates are only good if you have a constant level of debt, instead we have a level of debt that has increased to a relative level of ability to service debt with a fixed ratio of income.  There is practically SFA looking at the difference of this debt to households and how it increases debt slavery.  The number of times that I've talked about mortgages and the high cost of living and have had mostly older people respond that they never had the benefit of lower interest rates is demonstrative of the gross ignorance around how much less empowered people are to gain control of low interest debt, and it is all related to the debt servicing ratio never adjusting to lower rates.

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#2) On March 04, 2008 at 9:52 AM, dwot (28.88) wrote:

And in that second link, the flight to two year treasuries is a very good idea.

Personally, I've run to Canada Savings Bonds because I'm concerned about how much US crap the Canadian banks will eat.  I think our banks would have some problems with our own housing bubbles, although not the type of disaster the US is facing simply because our lending standards never got so goosy doosy.  But, eating US crap and then dealing with our own crap is likely to leave some of our banks looking unhealthy.  But ultimately, our housing bubble bursts and far more of the losses will be taken by the home owners rather than banks and other investors.  And we have always had much higher insurance premiums for low equity mortgages.

This gross mismatching of long term debt to short term debt is a disaster of unprecedent proportions in the US.  Canada f--ks up this way and the whole lot of mortgages have had a chance to correct in 5 years.  The US has 30-year nightmares for the banks. Selling it to investors was a way to make it seem ok, but in this case there is poetic justice in that the banks didn't get a chance to unload the most toxic last run of this crap on unsuspecting investors.  

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#3) On March 04, 2008 at 1:37 PM, AnomaLee (28.90) wrote:

At least no Canandian Banks have faced what Northern Rock has faced. I still think similar situations would have occurred globally if not for Central Banks around the world throwing tax-payer money to these institutions like they were confetti.

The exponential growth of human-kind is unsustainable.. Population growth is the biggest reason why companies like Philip Morris have had impressive growth over the past 50 years.  I share the feeling that debt is evil. I think we're reaching the point of saturation for both. I'm not able to look for this article at the moment, but I think you would find it interesting to see birthrates post-WWII and it's link to debt. I think debt has been the greatest instrument created controlling birthrates.

What else would stop couples from having 5+ kids in 'developed nations' like their grand-parents?

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#4) On March 04, 2008 at 2:10 PM, CycleFreak7 (< 20) wrote:

I should stop reading your blog entries. They are depressing.

Note that I do not disagree with you. In fact, you are spot-on.

Still depressing though. 

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#5) On March 04, 2008 at 3:41 PM, DemonDoug (31.33) wrote:

hey dwot, do you know if there is a website for canada like is for the us?  I've been looking into buying some foreign bonds (would really like to buy some NZ bonds too), but can't seem to find one for canadian tbills.  Are americans even allowed to own tbills?

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#6) On March 04, 2008 at 4:23 PM, StockSpreadsheet (67.70) wrote:

Urbanization tends to stop people from having 5+ kids.  As long as the population is mostly rural, kids are a benefit as they are free labor on the farm.  Once the family moves to the city, then kids become a liability.  You have to pay to send them to school, cloth them in clothes acceptable at the school, and child labor laws prevent you from putting them to work in the same way you did on the farm.  If you look at a list of the nations with the highest and lowest birth rates, and rates of population increase, you will find that most of the high-growth-rate countries are largely rural and farming is the main occupation of a lot of their people, (India, Africa, etc.), and the lowest growth rate countries are largely urban, (Japan, Europe, the U.S., etc.), and a very small part of their population is involved in farming, (less than 5% for the U.S., dispite our large agricultural output, though that 5% might be low if you count legal and illegal farm workers from Mexico and elsewhere).

I do also agree that eventually, resources, (especially food production), will eventually limit population growth in the future, (by mass starvation if not by careful family planning).  Once we reach that equalibrium, then the only way that the human population would be able to increase is by colonizing other worlds, so that we had new sources of food and other raw materials.  I can see the population hitting the sustainable limit in the next 50 to 100 years.  I don't see us actually colonizing another planet in the next 50 to 100 years, though it might be possible.  They are trying to plan a trip to Mars in the next few years after all.


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#7) On March 04, 2008 at 5:12 PM, AnomaLee (28.90) wrote:

"You have to pay to send them to school, cloth them in clothes acceptable at the school, and child labor laws prevent you from putting them to work in the same way you did on the farm."

World birth rates have dramatically decreased in the past 200 years while the material quality of life and healthcare have increased dramatically. Utlimately, there has been only one factor that has kept birth rates from being near their historical norms over the past two centuries, and I believe that it has become far less feasible economically...

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#8) On March 04, 2008 at 6:49 PM, dwot (28.88) wrote:

AnomaLee, I hope so, but there is $40 billion of asset backed paper than I know of that is frozen.  Royal bank was big into selling the asset backed paper from what I can see.  We are definitely stronger, but I think there will be rough times coming.

I think our fantasy teachings about social programs is what stopped people from having big families.  When I was in school they taught us that third world countries had big families because they wanted to make sure they were looked after in their retirement.  I was taught we have government and social programs and so we don't need to have big families.

Well, the tax burden has simply increased and increased and increased for younger people relative to older people to pay for this fantasy and it is going to fall apart.  If it is hard for a family with two children to help support or support their parents in a developing countries just because we put a middle man call government in doesn't make it easier.

I think that you are correct that as it got harder and younger people ended up with more debt and way less disposible income, they delayed having children and had less children.

Sorry CycleFreak...  I read the most depressing story I've read so far this week and that one wasn't about finances...

Doug, Americans can't buy Canada Savings Bonds,, but there are treasury bills,

Craig, I think we've already reached the population limit on the planet.  Funny, or not so funny you bring up population limits.  The depressing article I read was that this scientist that has been dead-on in all of his environmental assessments now thinks we've gone past the point of no return on global warming and in 100 years there will probably only be about 20% of the human population...  His position is that now environmental measures are a waste of time and it is time to prepare for a scorched Earth...

I remember studying that population curve back around 1980 and it didn't make me feel good or secure back then and what have we done about it in 28 years?  SFA.  Like bacteria in a petri dish, our consequences will be harsh.  And, while population growth has increase, water used has out grown population growth, I believe quadrupling in the time population growth doubled.

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