demographics


It is just 12 years since we reached six billion and the growth is set to continue, to nine billion by 2050 it is estimated – that’s around three times the number of people on Earth when I was born.

These figures would be unimaginable to the pessimists, from Thomas Malthus onwards, who have consistently warned that the world cannot sustain any more people. The challenges presented by such rapidly growing demands on the planet’s water, energy resources and farmland are significant. Yet, human ingenuity has succeeded thus far in not just providing for a rising population but massively increasing the living standards of most people.

One of the curious paradoxes of population growth is that the more able people are to sustain large families, because they become wealthier, the less inclined they are to actually have more children.

So, while greater affluence is often blamed for increasing the strains on the world’s finite resources, it is possible that a richer world may be a more sustainable one because it will cause a natural levelling off in population growth.

That is some way off, however. In the short term the number of people will continue to rise and this has a number of implications for investors. Three of the more important are related to food, urbanisation and growth in consumption.

It is estimated that food production will need to rise by 50pc by 2030. In part this is to do with more mouths to feed, but it is also a consequence of those mouths’ changing appetites. As people grow wealthier their diets change and they consume more protein such as meat and dairy products.

With 7kg of grain required to produce just 1kg of meat, this puts an increasing strain on existing agricultural acreage. The solution cannot simply be to bring more land into cultivation because the most productive has already been used and industrialisation and urbanisation are eating into what is already under the plough.

The second consequence of the current rate of population growth is a rapid increase in the proportion of urban dwellers. In 1950, around one third of the world’s people lived in cities but by 2025 it is forecast that 60pc will live in urban areas.

The biggest implication of this growth is for infrastructure spending and the raw materials that make that kind of development possible. One recent estimate by the OECD suggested that 3.5pc of the world’s economic output needs to be channelled each year into building, or rebuilding, electricity, road, rail, water and telecoms networks.

The third big consequence of population growth is a rapid increase in the high-consuming middle class.

This group of people, which has moved beyond subsistence to a life in which it can realistically aspire to own consumer goods and spend money on services such as health care, education and finance, is predicted to rise from around 400m to 1.2bn between 2000 and 2030. As the chart shows, much of this will be in just two countries, China and India.

Understanding changing consumption patterns is a key concern of investors today. For example, the growing female participation rate in the workforce in many developing markets is important because of women’s differing spending patterns. Brazil is already the world’s third largest market for cosmetics, fragrances and toiletries.

Other areas of growth include financial services – where mortgages and consumer loans are relatively undeveloped in emerging markets like Russia; beverages – Nigeria is now the world’s biggest market for Guinness; and, inevitably, cars – the ultimate signifier of “arrival”.

Investment is in part about recognising and attempting to profit from trends. Sometimes these can be hard to spot and harder to understand. In the case of population growth, however, the direction of travel and its consequences are unusually predictable. Wherever you are, number seven billion, all the best.

Tom Stevenson is an investment director at Fidelity Worldwide Investment. The views expressed are his own. He tweets at @tomstevenson63.

Would seem to be a predominantly East Coast sport.

Obamacare is another nail in the coffin.

Obviously, it simply cannot be afforded. The future liabilities are overpowering. So what’s the solution?

A HUGE variation in the shortening of life among different groups in the United States is revealed in a new study* led by a team of researchers at the Harvard School of Public Health. The study, published in PLoS Medicine, looked at four preventable risk factors: smoking, high blood pressure, elevated blood-glucose levels and being overweight. It then examined how these risk factors reduced life expectancy in eight population groups. Most at risk were Southern rural blacks, who had the largest reduction in life expectancy from these risk factors, with men living 6.7 years less and women 5.7 years less (or, put another way, could expect to gain those years if they were to live healthier lives). Asian Americans had their lives shortened the least, by 4.1 years for men and 3.6 years for women.

Kill “em.

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The current recession, engendered via the credit crisis, and the proposed intervention of the state through increased regulation and legislation, a creeping socialism, has dire consequences if pursued to the logical conclusion.

The rich world’s populations are ageing, and ageing quite rapidly. According to the UN’s latest data and forcast, the median age for all countries is due to rise from 29yrs to 38yrs. At present, some 11% of the worlds 6.9 billion people are over 60

Taking the UN’s central forecast, by 2050 that share will have risen to 22% of a population of 9 billion, but an even higher 33% in OECD countries. That is 1/3 people will be drawing a pension.

Population and demographic statistics are robust. They are robust simply because humans genetically do not exceed lifespans as a cohort in any numbers that are statistically significant. Sure everyone hears on occasion of an aunt Nelly who reaches 111yrs old, but statistically, she is insignificant, thus Gaussian distributions are like gold here.

A number of solutions have been promulgated in how to solve this problem of a falling and diminishing workforce. Although ironically we are wrestling with massive unemployment figures, in secular terms, we are running out of employable people with which to support the huge burden that is coming. The primary solution seems to be, raise the retirement age to 70yrs old.

Is this practical? Certainly in some cases, and jobs, it is perfectly practiable, Warren Buffett is not an anomaly, many fund managers are in that same age grouping. CEO’s of major Corporations may also fall into this demographic. After that, things start getting a bit fuzzy.

Athletes, road diggers, service workers, prostitutes, etc, tend not to be able to work into their 70’s [and potentially beyond] due to falls in physicality. Production workers for capital goods, consumer goods, all fall into this declining productivity, unless increasing percentages of capital are employed, thus reducing the labour component.

Productivity is the key to wealth. You produce more, you have more goods/services to exchange or consume and their price falls. Thus the real cost of living falls. Thus those on fixed and low incomes become better provided for, and concurrently more able to provide for themselves.

The slow move towards an ever increasing social democracy impairs the ability of a shrinking workforce to provide [via productivity] the necessary wealth to maintain current standards of living. The state is hopelessly inefficient at allocating capital. We will therefore see a continued decline in productivity as labour [as a % of total productivity] falls.

Politicians are inept. Their short-termism that drives the requirement to become elected, has almost doomed the Western capitalistic economies to an irretreivable decline. If it can be salvaged, then it needs to start now. Digging a deeper hole via monetary policy combined with harebrained fiscal deficits needs to stop. True capitalism needs to be restored.

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Just to add to your enjoyment, not only financial contagion…we can now add another potential medical pandemic. This would give an excellent excuse for countries looking to implement trade tariffs, to implement import bans…the ultimate tariff.

GENEVA (AP) — Countries planned quarantines, tightened rules on pork imports and tested airline passengers for fevers as global health officials tried Sunday to come up with uniform ways to battle a deadly strain of swine flu. Nations from New Zealand to France reported new suspected cases.

World Health Organization Director-General Margaret Chan held teleconferences with staff and flu experts around the world but stopped short of recommending specific measures to stop the disease, urging governments to step up their surveillance of suspicious outbreaks.

Governments including China, Russia and Taiwan began planning to put anyone with symptoms of the deadly virus under quarantine.

Others were increasing their screening of pigs and pork imports from the Americas or banning them outright despite health officials’ reassurances that it was safe to eat thoroughly cooked pork.

Some nations issued travel warnings for Mexico.

Chan called the outbreak a public health emergency of “pandemic potential” because the virus can pass from human to human.

Her agency was considering whether to issue nonbinding recommendations on travel and trade restrictions, and even border closures. It is up to governments to decide whether to follow the advice.

“Countries are encouraged to do anything that they feel would be a precautionary measure,” WHO spokeswoman Aphaluck Bhatiasevi said. “All countries need to enhance their monitoring.”

New Zealand said that 10 students who took a school trip to Mexico “likely” had swine flu. Israel said a man who had recently visited Mexico had been hospitalized while authorities try to determine whether he had the disease. French Health Ministry officials said four possible cases of swine flu are currently under investigation, including a family of three in the northern Nord region and a woman in the Paris region. The four recently returned from Mexico. Tests on two separate cases of suspected swine flu proved negative, they said.

Spain’s Health Ministry said three people who just returned from Mexico were under observation in hospitals in the northern Basque region, in southeastern Albacete and the Mediterranean port city of Valencia.

Mexico closed schools, museums, libraries and theaters in a bid to contain the outbreak after hundreds were sickened there. In the U.S., there have been at least 11 confirmed cases of swine flu in California, Texas and Kansas. Patients have ranged in age from 9 to over 50. At least two were hospitalized. All recovered or are recovering.

New York health officials said more than 100 students at the St. Francis Preparatory School, in Queens, recently began suffering a fever, sore throat and aches and pains. Some of their relatives also have been ill.

Some St. Francis students had recently traveled to Mexico, The New York Times and New York Post reported Sunday.

Preliminary tests of samples taken from sick students’ noses and throats confirmed that at least eight had a non-human strain of influenza type A, indicating probable cases of swine flu, city health officials said. The exact subtypes were still unknown, and the federal Centers for Disease Control and Prevention was conducting further tests.

Hong Kong and Taiwan said visitors who came back from flu-affected areas with fevers would be quarantined. China said anyone experiencing flu-like symptoms within two weeks of arrival an affected area had to report to authorities. A Russian health agency said any passenger from North America running a fever would be quarantined until cause of the fever is determined.

Tokyo’s Narita airport installed a device to test the temperatures of passengers arriving from Mexico.

Indonesia increased surveillance at all entry points for travelers with flu-like symptoms — using devices at airports that were put in place years ago to monitor for severe acute respiratory syndrome, or SARS, and bird flu. It said it was ready to quarantine suspected victims if necessary.

Hong Kong and South Korea warned against travel to the Mexican capital and three affected provinces. Italy’s health ministry also advised citizens to postpone travel to affected areas.

Symptoms of the flu-like illness include a fever of more than 100 degrees Fahrenheit (37.8 degrees Celsius), body aches, coughing, a sore throat, respiratory congestion and, in some cases, vomiting and diarrhea.

At least 81 people have died from severe pneumonia caused by the disease in Mexico, according to the WHO.

The virus is usually contracted through direct contact with pigs, but Joseph Domenech, chief of animal health service at U.N. Food and Agriculture Agency in Rome, said all indications were that the virus is being spread through human-to-human transmission.

No vaccine specifically protects against swine flu, and it is unclear how much protection current human flu vaccines might offer.

Russia banned the import of meat products from Mexico, California, Texans and Kansas. South Korea said it would increase the number of its influenza virus checks on pork products from Mexico and the U.S.

Serbia on Saturday banned all imports of pork from North America, despite reassurances from the FAO that pigs appear not to be the immediate source of infection.

Italy’s agriculture lobby, Coldiretti, warned against panic reaction, noting that farmers lost hundreds of millions of euros (dollars) because of consumers boycotts during the 2001 mad cow scare and the 2005 bird flu outbreak.

Japanese Agriculture Minister Shigeru Ishiba appeared on TV to calm consumers, saying it was safe to eat pork.

In Egypt, health authorities were examining about 350,000 pigs being raised in Cairo and other provinces for swine flu.

The WHO’s pandemic alert level is currently at to phase 3. The organization said the level could be raised to phase 4 if the virus shows sustained ability to pass from human to human.

Phase 5 would be reached if the virus is found in at least two countries in the same region.

“The declaration of phase 5 is a strong signal that a pandemic is imminent and that the time to finalize the organization, communication, and implementation of the planned mitigation measures is short,” WHO said.

Phase 6 would indicate a full-scale global pandemic.

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US household wealth is falling, and falling hard. Unlike the dot.com crash and market meltdown that destroyed wealth, the inflating housing bubble mitigated that loss.

The current combined loss of housing wealth combined with stockmarket losses and associated pension assets has caused a very rapid and large loss.

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The implications for the economy are manifold in theory, but how it actually may play out will be the subject played out in the markets over the next couple of years, potentially longer.

The demographic timebomb has been written about extensively by numerous authors. Here are some figures that have been extrapolated forward, that would be required to pay for the baby-boom generation.

By L. Kotlikoff

If successive cohorts of Chinese continue to save like current cohorts, if the Chinese government can restrain growth in expenditures, and if Chinese technology and education levels ultimately catch up with those of the West and Japan, the model’s long run looks much brighter. China eventually becomes the world’s saver and, thereby, the developed world’s savoir [sic] with respect to its long-run supply of capital and long-run general equilibrium prospects. And, rather than seeing the real wage per unit of human capital fall, the West and Japan see it rise by one fifth percent by 2030 and by three fifths by 2100. These wage increases are over and above those associated with technical progress, which we model as increasing the human capital endowments of successive cohorts.

On the other hand, our findings about the developed world’s fiscal condition are quite troubling. Even under the most favorable macroeconomic scenario, tax rates will rise dramatically over time in the developed world to pay baby boomers their government-promised pension and health benefits. As Argentina has so recently shown, countries can grow quite well for years even with unsustainable fiscal policies. But if they wait too long to address those policies, the financial markets will do it for them, with often quite ruinous consequences

– 70% increase in personal and corporate income taxes;
– 109% hike in payroll taxes;
– 91% cut in federal discretionary spending; or
– 45% cut in Social Security and Medicare benefits