More money has been printed around the world for national bailouts and economic stimulus than can easily be counted. It is no secret that the populations of developed nations are getting older and older. Another fact is that historic birth rates are very low among most of these developed nations that also happen to need economic stimulus.
24/7 Wall St. considered what this implies for the debt burden, and negative effects these will create for the generations ahead. Frankly, it is alarming that we all likely will have to apologize over and over to our children for the financial mess we have left them.
The U.S. Federal Reserve is the chief proponent to quantitative easing, with the tally already in the trillions of dollars. Now Japan is taking more aggressive action to boost inflation and stimulus with bond and asset buying. There will end up being much more stimulus efforts in the United Kingdom. Europe has promised to do whatever it takes to save the euro and has used various methods short of wholesale money printing to save national debt and deficit issues when they arise.
It is easy to see the common themes from nation to nation. These countries are throwing hundreds of billions or trillions of dollars at their economies, which all share low real growth in gross domestic product or actual GDP contraction today. The more serious common issues ahead are structural: aging or elderly populations, low birth rates, high unemployment rates and high debt levels.
Consider your own portion of a nation’s debt based on the total population now. Then imagine the per-person burden in the future when smaller numbers of people are employed in these countries, total debt rises along with debt servicing and future costs of social services have to be maintained or expanded. One projection to add to the future debt burden concern is that the population of Organization for Economic Cooperation and Development (OECD) countries is now expected to grow by less than 0.2% per year until 2050.
The Federal Reserve is buying close to $85 billion in bonds each month in its quantitative easing. Japan has now pledged quantitative easing and stimulus at a rate of about $75 billion per month, and Britain is near $600 billion into asset purchases. Efforts from the European Central Bank are still not the printing press kind. The combined intention is to keep the world’s economy flowing and growing. Unfortunately, the likely dark side of these efforts is the endless liabilities and wrecked value of fiat currencies ahead.
What happens when nations start to realize that birth rates are so low that the per-person burden starts to act the same as compounded interest ahead? If fewer workers are paying for a monster liability, it increases the larger share of the burden per person and it is virtual compounding.
Social Security payments, senior and disabled health care, unemployment benefits, food assistance, housing assistance and other social programs are often considered to be similar to pyramid scheme because they require larger and larger numbers of participants and/or dollars coming into the system to be viable in the years ahead. The developed world has to consider what the burden will be when the future working population is smaller, and we have not even considered the anxiety that relative pay and purchasing power will be lower ahead after taxes.
Immigration is a wild card and has helped population growth in the United States and elsewhere, but the trend of today among the developed nations is to curb immigration unless it is to start businesses. Immigrants of the future may be more interested in heading to nations of growth rather than nations where the finances are considered too burdensome on the population.
24/7 Wall St. has taken data from the CIA World Factbook, the OECD and Eurostat to get comparative data. The observation requires no grand conspiracy theories and requires no “assuming the worst case” scenarios to be more than alarming.
Here is the list of bailout nations (or their leaders) ranked by annual birth rates per 1,000 people. We also have shown ranked population growth rates, how much of the population is 65 years old or more, and what the fertility rates are. We included the current unemployment rates followed by current debt-to-GDP for the economic glue.