The reason humans are dying out is simple and straightforward. It’s best summarized in the famous line from Walt Kelly’s 1970 Pogo cartoon: “We have met the enemy and he is us.”

Humans are the reason humans are dying out. We’re not having enough babies. It’s that simple.

When I use the word “enough” it’s important to put a mathematical value on that. This is not guesswork. The key number is 2.1. That refers to 2.1 children per couple, known as the replacement rate. The replacement rate is the number of children each couple must have on average to maintain global population at a constant level.

A birth rate of 1.8 is below the replacement rate of 2.1. This means your population is declining. It may be aging also as the existing population lives longer and new births neither replace the dying nor lower the median age.

A birth rate of 4.1 is well above the replacement rate. This means your population is expanding and your median age is falling even as individuals live longer. Behavior is complex, but the math is really that simple. The replacement rate of 2.1 is the dividing line between population growth and decline.

Why isn’t the replacement rate 2.0? If two people have two children doesn’t that maintain the population at a constant level? The answer is no because of infant mortality and other premature deaths.

If a couple has two children and one dies before reaching adulthood, then only one child can contribute to future population growth as an adult. A birth rate of 2.1 makes up for this factor and contributes two adult children per two adult parents.

Obviously, no one has 2.1 children. The replacement rate is an average. If five couples have three children each and two other couples have one child each, the average of the seven couples is 2.43 per couple, comfortably above the replacement rate of 2.1.

Likewise, there’s no need for each couple to have an equal number of boys and girls. Again, it’s all about the averages. If one couple has three boys and another couple has three girls the overall boy/girl distribution is 50/50 and the birth rate is 3.0. That works just fine to grow the population.

By the way, in large population samples there are slightly more boys than girls born. That’s perfectly normal and is caused by genetic factors. It’s not a problem. As long as there are more boys than girls then there’s no practical limit on the ability of each female to reproduce.

That’s what counts in demographics.

This is the reality: Demographics are not just one of many factors affecting markets. Demographics are the dominant factor by a wide margin.

I can all list the factors that affect market prices. These include interest rates, exchange rates, inflation, deflation, central bank policy rates, supply chains, geopolitics, consumer expectations and many more.

Still, none of these are as important as demographics because demographics are about people and economies are nothing more than the sum total of the actions of individuals in those economies.

Demographically, Japan is the canary in the coal mine. Japan has had multiple recessions and no sustained growth for over thirty years. This modern depression coincides with the fact that Japan has the oldest society of any major economy.

The median age in Japan today is 48.6 years. (Today’s median age in the U.S. is 38.5 and in China it is 38.4).

Those numbers will get worse rapidly. In 2050, the Japanese median will be 53 years. China will be 50 years and the U.S. will be 42 years. Old age is highly correlated with Alzheimer’s Disease, Parkinson’s Disease, and dementia. Japan is already an aging, slow-growth society.

The rest of the world will soon be Japan. The demographic time bomb has already detonated.

Those expecting sub-Sahara Africa to make up for low birth rates in the developed world may be disappointed to find that African birth rates are dropping sharply and may soon be as low as those in North America and Western Europe.

What about China and India, with their massive populations?

Together, these two countries have a population of about 2.8 billion people out of a total world population of about 7.9 billion people. In other words, China and India have 35% of all the people on the planet. As they go, so goes the world population.

Contrary to popular perception, China’s population is collapsing, and India will not grow as fast as many expect and may soon begin its own steep decline.

This phenomenon is global. Almost all developed economies have birth rates below the replacement level. Those countries with higher birth rates are seeing those rates decline sharply.

There is a global convergence on birth rates less than 2.1 even among countries with higher rates today. What’s driving this mega-trend?

The three biggest drivers are urbanization, education and women’s emancipation. All three have an amplifying effect.

Demographic collapse is inevitable; it’s already baked into existing birth rates and likely trends. Still, it’s not the end of the world. It won’t even be the end of humanity. But it will be the end of an economic paradigm of higher growth, higher consumption and higher output that has prevailed for the past two hundred years.

The new paradigm will consist of fewer people in larger cities – an unprecedented form of urbanization beyond what we know already. Legacy industries such as automobiles will fall by the wayside. Healthcare generally and elder care in particular will boom.

There will be no shortage of investment opportunities. Yet, investors will need to avoid many traditional investments that have performed well in the past but will have little or no role in an aging and highly urbanized future.

This article appeared at ZeroHedge.com at:  https://www.zerohedge.com/geopolitical/demographic-time-bomb

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