This Demographic Shift Makes Our Social Security Useless
by Tyler Durden - Jun 15, 2016 7:20 PM
http://www.zerohedge.com/news/2016-06-15/demographic-shift-makes-our-social-security-uselessSubmitted by Patrick Cox via MauldinEconomics.com,
The 2008 financial crisis delivered a TKO to the global economy. Since then, the media has been reassuring us that the US economy is recovering.
Unfortunately, it has been the weakest post-recession recovery in modern history. Some people have seen no recovery whatsoever, and most Americans are losing ground and hope.
Why have so many people been so wrong?
It was reasonable to assume things were going to get better; that’s how business cycles always played out in the past. Historic patterns tricked many into thinking that the typical recovery would follow.
Historical patterns, however, have changed. Forever. And that is due to the biggest macroeconomic event in modern history.
The biggest demographic transition in modern history
Contrary to popular belief, population growth has started to decline. From now on, every subsequent generation will be smaller. Fertility rates in the West are already well below replacement rates, and the rest of the world is quickly catching up.
New data show that the US birth rate is at historic lows, certainly in response to economic weakness. People have always delayed childbirth in uncertain economic times. We’re seeing this today at unprecedented levels.
Our current fertility rate is barely over 1.8 children per woman. We need at least 2.1 children per woman to keep a steady growth in population and maintain economic stability. The impact of this demographic shift is immeasurable—except in the broadest of terms.
Unfortunately, almost no one with influence or authority seems to grasp this change. Most people, therefore, assume that all the age-old patterns are still in place.
I think the Obama administration was so convinced that the economy would fully recover on its own, it didn’t pay attention to the issue. This ignorance was a major mistake because demographics have fundamentally altered the dynamics of economic growth.
As the population ages, so do the costs associated with chronic age-related disease. In the past, one generation could run up a bill and send it to a much larger future generation. Due to its size, the future generation could pay off this debt without excessive pain.
That’s no longer the case. Even though today’s generation is diminishing, it will still have to bear the burden of a much larger past generation. The social welfare model has been turned on its head, and we’re already seeing the consequences.
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