Central Perk

duminică, 6 mai 2012

Mish's Global Economic Trend Analysis

“We Embittered the People to Protect the Future of the Nation"
Voters Punish New Democracy and Pasok; New Election, Euro Exit Coming Up? Best thing For Greece is Tell the Troika "Go to Hell"
Splintering of Greece: Will Anyone Rule? Exit Poll Has Anti-Bailout Party in Second Place
New American Dream is Renting; Reflections on Renting Houses, Cars, Books, Clothes; Will Rentership Fuel the Next Boom? What About Home Prices?

“We Embittered the People to Protect the Future of the Nation"

Posted: 06 May 2012 09:53 PM PDT

If you want to understand the reason PASOK went down in flames in a crushing defeat in Greek elections, simply look at the arrogance and gall of party leader Evangelos Venizelos in a statement following the election.

"We embittered the people so we could protect the future of the nation", said PASOK party leader and troika sponsored clown, Evangelos Venizelos.

Ekathimerini reports Election swing leaves Greece teetering.

PASOK leader Evangelos Venizelos and New Democracy chief Antonis Samaras both declared themselves open to the idea of forming a pro-European national unity administration that would include other parties and would seek to renegotiate the terms of the EU-IMF loan agreement.

"All Greeks have to get to know each other again," said Venizelos, who admitted that PASOK had paid the price for carrying the burden of the crisis. "We embittered the people so we could protect the future of the nation."

He said that the possibility of forming a national unity government with a "European orientation" regardless of parties' positions on the bailout should be explored.

Samaras said he would seek to form a "national salvation government" to keep the country in the eurozone and pledged to "amend" Greece's debt deal with foreign creditors in a bid to boost growth. He attributed the outcome of the elections, in which voters punished the two main parties, to "the disappointment of the Greek people for dead-end policies that have pushed them to the limits."

However, the possibility of a third group joining such a government looked extremely slim last night. Perhaps the best hope for Greece's two main parties would have been Democratic Left, which maintained a clear pro-European stance during the campaign.

However, party leader Fotis Kouvelis repeated his position that cooperation with New Democracy and PASOK was not in Democratic Left's intentions. "The results show people's frustration and anger," he said.

A failure by PASOK and ND to form a government would leave second-placed SYRIZA, the night's big winners, with the option of trying to form a government. Greece's electoral law means that in case of a hung parliament, the first party has three days to form a government, followed by the second party and then the group that comes in third.

National Salvation Party

The idea that Troika sponsored clowns can form the basis of Greek salvation is ridiculous. Furthermore, Venizelos' statement is right up there with other top Orwellian idiocies.

Top Orwellian Comments Of All Times

An American major after the destruction of the Vietnamese Village Ben Tre: "It became necessary to destroy the village in order to save it."
Vice President Joe Biden: "We Have to Go Spend Money to Keep From Going Bankrupt."
President George W. Bush: "I've abandoned free-market principles to save the free-market system."(For a discussion please see The Most Redeeming Feature of Capitalism is Failure)
Nancy Pelosi said "We have to pass the health care bill to see what's in it." (YouTube Video)
Larry Summers says "The central irony of financial crisis is that while it is caused by too much confidence, too much borrowing and lending and too much spending, it can only be resolved with more confidence, more borrowing and lending, and more spending." (Reuters)

We can safely add "We embittered the people so we could protect the future of the nation" to that list. As I said, Best thing For Greece is Tell the Troika "Go to Hell", and the election proves most Greek voters know it, even though they have been brainwashed into wanting to stay in the euro.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List

Voters Punish New Democracy and Pasok; New Election, Euro Exit Coming Up? Best thing For Greece is Tell the Troika "Go to Hell"

Posted: 06 May 2012 06:20 PM PDT

Assuming no defects in Pasok or the New Democracy parties, the pro-austerity may just scrape together enough votes to barely piece together a ruling coalition.

How long the coalition lasts is another matter as Pasok was humiliated with a third place showing.

Reuters reports Angry Greeks reject bailout, risk euro exit

The latest official results, with over 61 percent of the vote counted, showed the only two major parties supporting an EU/IMF program that keeps Greece from bankruptcy would be hard pressed to form a lasting coalition.

New Democracy was polling just under 20 percent and PASOK a humiliating 13.6 percent with the Left Coalition on 16.2.

In the last election in 2009, PASOK won a landslide victory with 44 percent and the Left Coalition had just 5 percent.

Left Coalition leader Alexis Tsipras, at 37 Greece's youngest political leader, hailed a peaceful revolution and said German Chancellor Angela Merkel should understand that austerity policies had been defeated.

In another indication of the extent of public anger, the extreme right Golden Dawn party was poised to take nearly 7 percent of the vote. This would allow such a party to enter parliament for the first time since the fall of a military dictatorship in 1974.

Several analysts said the unprecedented fragmentation of the vote could bode weeks of instability and force another election. But a New Democracy source said the party would not ask for repeat elections if it finished up as the largest party. Samaras is likely to be invited to try to form a government on Monday.

Greece faces an acid test as soon as next month when it must give parliamentary approval for over 11 billion euros in extra spending cuts for 2013 and 2014 in exchange for more EU/IMF aid.

That looks like a tough task even if a new government can be formed in time, given the success of anti-bailout parties.

Under the constitution, Greek President Karolos Papoulias will give the biggest party after the election three days to form a government. If it fails, the next largest group gets a chance and so on down the line. If they all fail, new polls would be called about three weeks later.

Best thing For Greece is Tell the Troika "Go to Hell"

Short-term Greece is likely to face strong inflation, perhaps even hyperinflation if it returns to the Drachma. However, long-term Greece faces a 10 year or longer permanent recession with austerity upon austerity upon austerity if the eurozone stays intact and Greece stays in the eurozone.

Had Greece left the eurozone two years ago it would be far better off today, and the sooner it tells the Troika where to go, the sooner Greece has a chance to recover.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List

Splintering of Greece: Will Anyone Rule? Exit Poll Has Anti-Bailout Party in Second Place

Posted: 06 May 2012 09:55 AM PDT

Preliminary exit polls are not good for the pro-austerity, keep Greece in the Eurozone at any cost coalition as 3 parties vie for top post

An exit poll commissioned by Greek media shows three parties are vying for the top spot in the country's critical parliamentary elections, with no definitive front-runner and none gaining enough votes to form a government.

According to the exit poll, the conservative New Democracy party will get between 17 percent and 20 percent; the formerly majority socialist PASOK between 14 percent and 17 percent, and the left-wing Radical Left Coalition, or Syriza, between 15.5 percent and 18.5 percent.

The extreme right-wing Golden Dawn is projected to win enough votes to enter parliament, with between 6 percent and 8 percent, well above the necessary 3 percent threshold.

It is widely expected that New Democracy and PASOK will combine to form a coalition. Both want to stay with the Euro. However, New Democracy wants changes made to agreed upon austerity measures.

PASOK leader Evangelos Venizelos is nothing but a tool for the eurocrat clowns and appears to be a big loser in the elections vs expectations just a few short weeks ago.

Exit Poll Has Anti-Bailout Party in Second Place

Other exit polls show the Radical Left Coalition (Syriza) at 16-19%. Bloomberg reports New Democracy Slightly Ahead in Greek Election, Exit Poll Shows

Antonis Samaras's New Democracy party showed a slight lead in Greek elections today, receiving between 17 percent and 20 percent of the vote, an exit poll forecast.

Anti-bailout party Syriza got between 16 percent and 19 percent, according to the exit poll broadcast on state-run television NET. Socialist Pasok got between 14 percent and 17 percent, according to the poll.

Spotlight on the Radical Left

The Wall Street Journal proclaims Greek Leftist Comes Into His Own

Young and charismatic, Alexis Tsipras may be the man to watch on the Greek political scene.

The 37-year-old, who's an engineer by training, heads the Coalition of the Radical Left — or Syriza — an umbrella left-wing party that brings together various leftist strands ranging from Communist to Social-democrat and environmentalist groups.

His party has seen its polling figures rise in recent weeks, ahead of the May 6 elections. The last polls—before a two week blackout period imposed ahead of Sunday's vote–showed Syriza poised to become the third largest party for the first time in its history, garnering on average above 10% of the popular vote.

Mr. Tsipras advocates the annulment of Greece's second bailout program with the fiscal-consolidation and structural-reform policies attached to it.

In a recent interview with a Greek website, Mr. Tsipras said the country was becoming a "protectorate, a colony" under the tough measures that Greece's troika of creditors–the European Union, the European Central Bank and the International Monetary Fund–demand to continue funding the country's bailout.

"It is not our choice to leave the euro. But the sacrifices made by the Greek people are not for the euro, they are for oligarchs, the plutocrats, the big capital," he said in the interview, adding that these sacrifices were made so that "[German Chancellor Angela] Mrs. Merkel and the northern countries benefit and run surpluses and the southerners run deficits."

Tsipras could well find himself leading the main opposition party after the elections, if Pasok and New Democracy form a coalition government. If Syriza does get around 12%, a realistic prospect according to Nikolakopoulos, that would translate to roughly 30 deputies in a highly-fragmented, 300-seat parliament. That would put the young party leader in a strong position to continue spreading his anti-austerity message.

The WSJ article was written three days ago. If exit polls are accurate, the Radical Left will not be in third place with 10% of the vote, but rather second place with perhaps as much as 18 or even 19 percent of the vote.

It is going to be very difficult forming a coalition government out of this splintered mess.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List

New American Dream is Renting; Reflections on Renting Houses, Cars, Books, Clothes; Will Rentership Fuel the Next Boom? What About Home Prices?

Posted: 06 May 2012 01:07 AM PDT

Housing has now gone full circle. President Bush's "Ownership Society" has morphed into the "Rentership Society". The attitude applies to more than houses as noted in the Wall Street Journal article Renting Prosperity by Daniel Gross.

Americans are getting used to the idea of renting the good life, from cars to couture to homes. Daniel Gross explores our shift from a nation of owners to an economy permanently on the move—and how it will lead to the next boom.

In the American mind, renting has long symbolized striving—striving, that is, well short of achieving. But as we climb our way out of the Great Recession, it seems something has changed. Americans are getting over the idea of owning the American dream; increasingly, they're OK with renting it. Homeownership is on the decline, and home rentership is on the rise. But the trend isn't limited to the housing market. Across the board—for goods ranging from cars to books to clothes—Americans are increasingly acclimating to the idea of giving up the stability of being an owner for the flexibility of being a renter. This may sound like a decline in living standards. But the new realities of our increasingly mobile economy make it more likely that this transition from an Ownership Society to what might be called a Rentership Society, far from being a drag, will unleash a wave of economic efficiency that could fuel the next boom.

The reaction to extended leverage and foolish borrowing isn't to stop consuming and buying; it is to consume and buy more intelligently. That's what the Rentership Society is all about. And it starts at home. Literally. Housing is the biggest single component of consumption in the U.S. economy and the source of much of our present misery. According to the Bureau of Labor Statistics, the typical consumer spends about 32% of his or her budget on shelter. In the last decade, that generally meant borrowing a lot of money to take "ownership" of a home.

For an increasing number of Americans, though, it simply makes more sense to rent these days. According to Moody's, by late 2011 it was cheaper to rent than to own in 72% of American metropolitan areas, up from 54% a decade ago. And the more people who do it, the more socially acceptable and desirable it becomes. The decline in the ownership rate means that about three million more households rent today than did at the height of the bubble.

Zipcars and College Textbooks

Gross points out that students are increasing renting books as opposed to buying them. Of course there are also Kindle and other electronic ways of purchasing or renting books as well.

The same holds true for cars, and not just long-term leases either.

Gross writes ...

The Bureau of Labor Statistics says that private transportation—owning and running a car—is the second largest cost for a typical American household, accounting for 16% of expenditures. Factoring in finance costs, depreciation, repairs, insurance, taxes and gas, AAA calculates that an owner of a midsize sedan who drives 15,000 miles a year spends $8,588 a year on his car.

Enter auto-sharing firm Zipcar. Founded in 2000, it grew by focusing on cities and college campuses. It uses information technology to manage its fleet, and control access—people get cards that let them into garages where cars are kept and into the cars themselves. Users in New York pay a $60 annual fee and then $8.75 per hour on weekdays and $13.75 per hour on weekends—no extra charge for gas or insurance or miles. As the U.S. economy contracted, Zipcar went into hyper-growth: from 225,000 members in 2008 to 650,000 members and 9,500 cars in November 2011. Zipcar, which went public in 2011, has had success in the predictable big cities like Boston, New York and San Francisco, but its vehicles can also be found on 350 college campuses and in smaller cities like Providence, R.I., and Portland, Ore. Large rental agencies like Enterprise and Avis have responded by rolling out similar services.

Will Rentership Fuel the Next Boom? When? Why?

Gross put together a nice article explaining what is happening but the article falls far short of the opening premise "how it will lead to the next boom".

I see no reason renting Zipcars, textbooks, or houses will lead to a boom in anything. Every dime Zipcars makes is a dime lost by GM, Ford, and Toyota.

Kindle is going to put numerous bookstores out of business.

Younger Americans are not buying cars and houses because they cannot afford them. Collectively saddled with a trillion dollars in student loans, many cannot afford to buy much of anything, especially poor job prospects and falling wages.

I see no boom from this. Rather, I see pressures on profits in multiple places for multiple reasons.

What About Housing?

Renting cars and textbooks is the start of a trend that makes perfect economic sense. However, Zipcars, textbooks, clothes, and electronics are one thing, and housing is another.

When sentiment on houses reaches the widespread belief "It's Better to Rent", prices are bottoming. I expressed that thought on numerous occasions since 2005.

This is how I currently see things.

This is how I have called the housing bubble and bust in real time over the years.

March 26, 2005: It's a Totally New Paradigm
June 07, 2005: It's time to shift the arrow
April 10, 2006: US vs. Japan Land Prices Pictorial Update
February 15, 2008: Housing Bottom Nowhere in Sight
December 01, 2008: Housing Update - How Far To The Bottom?
July 13, 2009: Housing Update - How Far To The Bottom?
June 20, 2011: When was the Housing Peak and How Far to the Bottom?
March 13, 2012: How Far Have Home Prices "Really" Fallen? HPI Upcoming Changes; HPI and the CPI

The first four links above are quite humorous. The denial from Bernanke and others is stunningly funny.

Bottoming Process

Some cities are further from the bottom than others, but it is likely some cities have now finally bottomed.

That said, I do not think home prices are going much of anywhere "in general" because there is still years of shadow inventory and years of foreclosures to work through.

Moreover boomer demographics suggest much downsizing is ahead (and who will boomers sell their mansions to?)

Finally, generation Y has far different attitudes than boomers regarding wealth, debt, and possessions and will carry those attitudes for a long time having seen firsthand the trouble their parents and grandparents got into with too much debt, and how they are in the same boat with student debt.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List

Seth's Blog : Avoiding false metrics

Avoiding false metrics

At the local gym, it's not unusual to see hardcore members contorting themselves to fool the stairmaster machine into giving them good numbers. If you use your arms, you can lift yourself off the machine and trick it into thinking you're working yourself really hard.

Of course, you end up with cramped shoulders and a lousy workout, but who cares, the machine said you burned 600 calories...

The same thing happens with authors who put themselves and their readers through the wringer to get a spot on the New York Times Bestseller list (more on this here). Danielle LaPorte built a huge campaign around putting her book on the list, she succeeded in selling a huge number of hardcover copies in a week (far more than most other books) but didn't make the list because of a secret editorial decision that she's not privy to. At the same time, other authors who do a better job of decoding the secrets end up on the list with far fewer sold.

The point isn't that the list is crooked and unfair (though it is). It measures how good you are at getting on the list, not how many copies of the book your readers buy. The reason to avoid the false metric is that it messes with your shoulders, with the way you approach the work, with the real reason you did the project in the first place.

A third example: many car brands now go to obsessive lengths to contact recent car buyers and ask them to rate their buying experience on a scale of one to five. They use these rankings to allocate cars to dealers, ostensibly to reward the good dealerships. Of course, the dealers are in on the game, and instead of doing the intended thing--providing a great experience--all they do is work hard to get people to give them a five when a drone in a call center makes the call. Many of them will clearly state to a customer, "If anything has happened today that would prevent you from giving us a five when they call, please tell us right now..."

The system of false metrics doesn't create a better buying experience, it creates a threatened customer with pressure to give a five.

And my last example: The Arbitron radio rating system used to rely on diaries in which it asked radio listeners to write down which station they had listened to during the day. Several consultants came along with a service that they guaranteed would raise the ratings of any station that hired them. The secret? Repeat the station's call letters twice as often. It turned out that more repetition led to better recall, which led to more people writing down the call letters which led to 'better' ratings.

A useful metric is both accurate (in that it measures what it says it measures) and aligned with your goals. Making your numbers go up (any numbers--your bmi, your blood sugar, your customer service ratings) is pointless is if the numbers aren't related to why you went to work this morning.

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sâmbătă, 5 mai 2012

Mish's Global Economic Trend Analysis

2.2 Million Go On Disability Since Mid-2010; Fraud Explains Falling Unemployment Rate; Will Higher Disability Taxes Fix the Problem?

Posted: 05 May 2012 11:53 AM PDT

Since mid-2010, precisely the time millions of US citizens used up all of their 99 week of unemployment insurance, disability claims have risen by 2.2 million. Those on disability are not counted in the workforce and are not considered unemployed.

Please consider Disabled Americans Shrink Size of U.S. Labor Force

The number of workers receiving Social Security Disability Insurance (SSDI) jumped 22 percent to 8.7 million in April from 7.1 million in December 2007, Social Security data show. That helps explain as much as one quarter of the decline in the U.S. labor-force participation rate during the period, according to economists at JPMorgan Chase & Co. and Morgan Stanley.

The participation rate -- the share of working-age people holding a job or seeking one -- was 63.8 percent in March after falling to a three-decade low of 63.7 percent in January. Disability recipients may account for as much as 0.5 percentage point of the more than 2 point drop since the end of 2007, the economists calculate, and that contribution could grow when some extended unemployment benefits expire at the end of this year.

"How we measure and understand what's going on in the economy can be influenced by the degree to which various public- support programs are available and being used," said Michael Feroli, chief U.S. economist at JPMorgan in New York. "With a rising number of disability beneficiaries, there are both lower unemployment rates and lower participation rates."

More than 99 percent of all SSDI beneficiaries remain in the program until retirement age, David Greenlaw, a managing director in New York at Morgan Stanley, wrote in a March research note, citing government data. The program provides an average of $1,111 in monthly income to eligible workers with a physical or mental impairment that will last at least 12 months or result in death, according to Social Security.

Unemployment insurance requires that applicants search for job opportunities, while disability insurance requires they be unable to work.

Lax Screening Procedures

Less-stringent screening procedures, more attractive benefits and a waning need for less-skilled workers have bolstered SSDI rolls.

In addition, "difficult-to-verify disorders," including muscle pain and mental illness, more easily qualify for SSDI under program reforms, [David] Autor [economist at Massachusetts Institute of Technology] wrote in a 2011 paper.

Based on current trends, 7 percent of the nonelderly adult population could be receiving disability benefits by 2018, Richard Burkhauser and Mary Daly wrote in the spring issue of the Journal of Policy Analysis and Management. That's two years after the SSDI program will run through its trust fund, according to an April report by the Social Security trustees. Costs Increase

Costs Increase

Costs have increased with the rolls: The program spent $132 billion last year, more than twice as much as in 2000.

Non-Solutions

Richard Burkhauser, a policy professor at Cornell University, and Mary Daly, associate research director at the Federal Reserve Bank of San Francisco, think the solution is to raise taxes on businesses with larger shares of people on disability.

So does David H. Autor in a white paper The Unsustainable Rise of the Disability Rolls in the United States: Causes, Consequences, and Policy Options.

While the paper provides a clear understanding of the problem, their proposed solutions, centering around more taxes, would make it more likely that businesses fire workers before they go on disability, make it more likely businesses will seek younger, not obese workers in excellent health in the first place.

While I am sure that happens today, nothing like incentives from the Fed to increase that pressure on businesses.

How About Stopping the Fraud?

Autor's proposals dot not go far enough to stop what is clear fraud.

Indeed, Autor explicitly states "A second lesson, evident from the drug and alcohol addiction experience, is that highly motivated applicants in many cases will eventually succeed in obtaining benefits, particularly because of the 1984 liberalization of the criteria for pain and mental illness. While this latter observation highlights that the SSDI disability determination system is badly in need of modernization, my main conclusion is that better gatekeeping cannot be the centerpiece of effective SSDI reform."

I do not buy that, nor do I buy the excuse "Revoking benefits en masse from needy beneficiaries is not politically viable, whether or not this would be desirable from an efficiency standpoint."

What about the "not-needy, fraudulent beneficiaries"?

Moreover, this country better come to grips about what is "politically viable" before government percent of GDP soars to 56% like it is in France, or worse yet, the extremely unstable mess in Greece or Spain.

From an "efficiency" standpoint one has to be nuts to not to want to stop the fraud. And throwing money at alcoholics, drug addicts, and those claiming mental stress does nothing but increase those number of claims.

Mental Illness

I talked about mental illness and fraud on February 20, 2012 in Disability Fraud Holds Down Unemployment Rate; Jobless Disability Claims Hit Record $200B in January

Pre-crisis, mental illness constituted about 33% of claims. Now it's 43%. The cost is staggering, over $200 billion a year.

I did some calculations in the above link and this is what it looks like with a mere 10% rate of fraudulent claims.

Unemployment Rate with 10% Fraud

10% of 27.5 million is 2,750,000.

The civilian labor force would rise to 157,145,000 from 154,395,000

The number of unemployed would rise to 15,508,000 from 12,758,000

The resultant unemployment rate would be 15508/157145 = 9.9%

Is there anyone who thinks disability fraud is less than 10%? If not, then the unemployment rate would be at least 9.9% assuming those in fraudulent claims started looking for work.

Those numbers are as of the February BLS jobs release and would undoubtedly be worse now given Friday's Payroll Disaster: Nonfarm Payroll +115,000 Establishment Survey But -169,000 Household Survey, Labor Force Drops by 342,000

Amazing Achievement is Fraud

In the last year, the civilian population rose by 3,638,000. Yet the labor force only rose by 945,000. Those not in the labor force rose by 2,693,000.

In the last month, actual employment fell by 169,000, but the unemployment rate dropped by .1%.

That is an amazing "achievement" to say the least.

Since Mid-2010 2.2 Million Went on Disability

Notice the jump in claims after the recession was allegedly long-over.

The timing coincides with unemployment benefits expiring at 99 weeks. Supposedly higher taxes will fix the problem. I say "nonsense".

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List

China's Population Poised to Crash in Perfect Demographic Storm

Posted: 05 May 2012 12:19 AM PDT

Those who still have not gotten the message that China's expected growth rate of 7% is not going to happen are advised to consider the viewpoints of Nicholas Eberstadt who studies demographics for the American Enterprise Institute.

Bloomberg covers Eberstadt's demographic projections in an interesting article on China's Pending Population Crash

Today's most important population trend is falling birthrates. The world's total fertility rate -- the number of children the average woman will bear over her lifetime -- has dropped to 2.6 today from 4.9 in 1960. Half of the people in the world live in countries where the fertility rate is below what demographers reckon is the replacement level of 2.1, and are thus in shrinking societies.

As Eberstadt points out, we can make predictions about the next 20 years with reasonable accuracy. The U.S.'s traditional allies in western Europe and Japan will have less weight in the world. Already the median age in western Europe is higher than that of the U.S.'s oldest state: Florida. That median age is rising 1.5 days every week. Japan had only 40 percent as many births in 2007 as it had in 1947.

These countries will have smaller workforces, lower savings rates and higher government debt as a result of their aging. They will probably lose dynamism, as well.

All these effects will, in turn, almost certainly make these countries even less willing than they already are to spend money on their armed forces. Americans who want Europe to bear more of the free world's military burden -- or even provide for its own defense -- are probably going to be disappointed. So will those who expect Europe to take on humanitarian missions. It won't even be able to maintain its current weight in future debates about the values of peace and democracy.

China's rise over the last generation has been stunning, but straight-line projections of its future power and influence ignore that its birthrate is 30 percent below the replacement rate.

The Census Bureau predicts that China's population will peak in 2026, just 14 years from now. Its labor force will shrink, and its over-65 population will more than double over the next 20 years, from 115 million to 240 million. It will age very rapidly. Only Japan has aged faster -- and Japan had the great advantage of growing rich before it grew old. By 2030, China will have a slightly higher proportion of the population that is elderly than western Europe does today -- and western Europe, recall, has a higher median age than Florida.

China's Challenges

China, notoriously, has another demographic challenge. The normal sex ratio at birth is about 103 to 105 boys for every 100 girls. In China, as a result of the one-child policy and sex- selective abortion, that ratio has been 120 boys for every 100 girls. From 2000 to 2030, the percentage of men in their late 30s who have never been married is projected to quintuple. Eberstadt doesn't believe that having an "army of unmarriageable young men" will improve the country's economy or social cohesion.

Foreign-policy thinkers can often lose sight of demographic trends, Eberstadt says, because from a policy makers' view "they tend to look really glacial. If it's not happening in the next 48 to 72 hours, it's not in the inbox." But "population change gradually and very unforgivingly alters the realm of the possible."

World Population Prospects and the Global Economic Outlook

Enticed by that lead-in, inquiring minds are digging further into the views of Nicholas Eberstadt.

Please consider the following snips from World Population Prospects and the Global Economic Outlook, a 42 page working paper by Nicholas Eberstadt.

China

By almost all accounts today, no major economy has more radiant prospects for the coming decades than China. Such assessments are predicated on extrapolation of the country's extraordinary recent record of performance into the future. Over the past generation, China's economic transformation has been nothing less than dazzling. In the three decades following Deng Xiaoping's 1978 moves toward overarching systemic reform, by Angus Maddison's reckoning, China's GDP grew almost ten-fold: averaging an estimated 7.5% growth a year for 30 years—and if we go by other sources, China's growth rates would have been even more rapid. No economy in world history has ever grown so fast for so long. Over this same interim, China also emerged from self-imposed autarky to become a major player in the world economy. Today it is number one in both merchandise exports and in holdings of foreign exchange reserves. In aggregate, China now appears to be the world's second largest economy, edging out Japan last year.

Chinese policymakers confidently predict the country's torrid growth will continue on into the future; Beijing officially forecasts annual growth rates of roughly 7% per year between now and 2030. This rosy prognosis is accepted by many in the world financial community, and even by some of the intelligence and security services that advise Western governments. But there is a major problem with this optimistic reading of China's economic future—it does not seem to take into account the demographic tempests that China will have to weather in the years immediately ahead. A wide sweep of new, powerful and fundamentally unfamiliar demographic forces are now gathering in China in the years ahead, and will buffet the country simultaneously. China is confronting the demographic version of ―the perfect storm,‖ and these new demographic realities may ultimately force us to revise today's received wisdom about ―China's rise.‖

China's future demographic profile will differ substantially from its current population situation, mainly because of the country's low levels of fertility. Although there are some inconsistencies and problems in official Chinese population data, population specialists believe that China became a sub-replacement fertility society about two decades ago—and that birth rates have fallen far below the replacement level since then. The Census Bureau, for example, believes that China's current TFR is about 1.5—over 30% below the level required for long-term population stability.

Figure 4. Projected Population Structure: China, 2010 vs. 2030

In this future China, there would be fewer people under the age of 50 than in China today—and many fewer Chinese in their 20s and early 30s. On the other hand, there would be many more elderly Chinese than today—vastly more, in fact, in their 60s, 70s and 80s.

This dramatic shift in China's population profile has four major economic and social implications for the years immediately ahead. The first is the end of labor force growth. Over the past three decades of hyper-rapid development in China, the country's working age population rose by over two-thirds—growing by an average of about 1.8% a year. By contrast, as we have already seen, China's total working age population is set to fall between 2010 and 2030. (By Census Bureau projections, China's working age manpower will be peaking in 2016—just 5 years from now; by 2030, it stands to be shrinking by almost 1% a year).

Furthermore, as noted above, China's manpower pool will be graying over these years; in fact, by 2030, there would be more than four older (50-64 years) prospective workers for every three younger counterparts (15-29 years)—a complete inversion of the current ratio.19 With a smaller and much greyer Chinese workforce on the horizon, sustaining the growth rates of the recent past would be a truly counterintuitive proposition.

Second, there is the broader issue of rapid and pervasive population aging. Though Chinese authorities may have clamped down on births for three decades, the country will be experiencing a population explosion of senior citizens over the next twenty years (progeny of the pre-population control era). In 2010, about 115 million Chinese were 65 or older; by 2030, the corresponding number is projected to approach 240 million—meaning that China's cohort of senior citizens would be soaring at an average rate of 3.7% per year.

By 2030, according to Census Bureau projections, China's median age will be higher than the USA's—and according to projections by Chinese demographers, over 22% of rural China's population will be 65 or older.

(In aged Italy and Germany today, the corresponding proportion is 20%.) How China's coming tsunami of senior citizens is to be supported remains an unanswered question. As yet, China has no national public pension system in place, and only the most rudimentary of public provisions for rural health care. Meeting the needs of its rapidly growing elderly population, however, will undoubtedly place economic and social pressures on China that no country of a comparable income level has ever before had to face.

Five Reasons China's Growth Rate Projections Will Not Happen

Peak Oil
Unsustainable, very troubled State-Owned-Enterprise (SOE) investment model
Regime change will shift from investment export driven model to consumption driven model and the transition will be extremely painful
Crash of China's property bubble
Demographics

Those are five powerful reasons supporting the thesis China's growth is not sustainable. Any one of them could sink growth prospects. Collectively, they represent an overwhelming obstacle to rosy growth projections.

For more on points two and three, including a pair of bets between Michael Pettis at China Financial Markets and The Economist magazine, please see 12 Predictions by Michael Pettis on China; Non-Food Commodity Prices Will Collapse Over Next Three to Four Years; Nails in the Hard Landing Coffin?

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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Damn Cool Pics

Fun at illegal Water Slide in Australia
Land Diving in Vanuatu
Wake Up Call: The Truth Behind Success With Mobile Apps [Infographic]

Fun at illegal Water Slide in Australia

Posted: 04 May 2012 11:26 PM PDT

The blonde dude seemed hot at first...then he kept talking and making weird ass faces. Plus the music. WTF?

Fun: climbing over a barbed wire fence in rural Australia to coast down an illegal water slide.

Less fun: water sliding head first into a concrete wall.

Land Diving in Vanuatu

Posted: 04 May 2012 10:13 PM PDT

Land diving (Nagol or N'gol) is a special tribal ritual that looks like bungee jumping performed by the men of the southern part of Pentecost Island, Vanuatu. Men jump off of wooden towers around 20 to 30 metres (66 to 98 ft) high, with two tree vines wrapped around the ankles. Land diving is done without any safety equipment. The land diver's objective or at least one of the requirements of the land dive is that he must hit his head on the ground. The tradition has developed into a tourist attraction.

It is believed that the ritual of the N'gol began centuries, perhaps millennia ago, when a beaten woman ran away from her husband, Tamale. He found her hiding in a tall tree and called to her that if she came down he might beat her.

Local residents believe he climbed the tree and as he made his final grab, she leaped. In anguish at her death (or anger that he had missed her) Tamale jumped after her, not realising his wife had tied liana vines around her ankles and survived the fall.

Wake Up Call: The Truth Behind Success With Mobile Apps [Infographic]

Posted: 04 May 2012 10:07 PM PDT

With over a million applications in app stores across platform, app developers are finding it increasingly challenging to cut through the noise and get their app discovered and downloaded. So what does it take to succeed in this marketplace?

Click on Image to Enlarge.

Via: App-promo

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