The market is not very optimistic about the global macro economy in 2019, and many market participants are worried that the current economic cycle may be nearing completion.
Chris Hamilton, an economic commentator on the well-known financial website Econimica, pointed out that the worse news compared with the end of economic expansion is that this economic cycle may go down the channel with the population cycle, which will bring more impact to the economy than the Fed.currencyThe ability to regulate policies.
He defines the population aged 0-69 as the world's major consumer group, of which 20 to 69 years old is a potential working population, and 15 to 45 years old is a potential child-raising population.
Since 1988, the annual growth of major global consumer groups has decreased by 30 million. He expects that the world's major consumer groups will grow by 11 million in 2019, a 75% decrease from the peak in 1988. In 2025, the world's major consumer groups will grow for the first time and will enter a period of negative growth. By 2035, the annual growth of the world's major consumer groups will be minus 10 million.
(Annual growth of major global consumer groups, image source: Chris Hamilton,)
Looking back at the recession since the 1960s (the black bar time below), the world's major consumer groups are still growing significantly. Together with the Fed’s interest rate cuts and the US government’s stimulating fiscal policies, these population growths have revived the US economy in the past recessions and fueled the global economic recovery.
From 1960 to 1990, the annual consumption growth of high- and middle-income countries in the world ranged from 30 million to 40 million. However, this figure dropped from an average of 20 million per year between 1995 and 2015.
(Global major consumer groups growth and economic recession, image source: Chris Hamilton)
Hamilton pessimistically predicts that if this period of economic cycle expansion ends in 2019, the effects of traditional American coping strategies such as interest rate cuts and stimulating policies will be the weakest since World War II. Because the growth of the world's major consumer groups in 2019 will only increase by 11 million.
He believes that the slowdown in the growth of the world's major consumer groups is why the Fed and the US government do everything they can to prevent the next recession, which will force the relevant departments to respond with more radical measures in the coming recession. negativeinterest rateAnd large-scale stimulating policies.
But he warned that the longer the recession is delayed, the less population growth will be, in other words, the fewer "fuels" to restart the next US and global economic activity.
If the annual population growth change is used as an indicator of demand change or inflation, it is not difficult to understand why the Fed's federal funds rate is highly correlated with population growth. Therefore, he predicted that the federal funds rate will soon enter the negative range following the population cycle.
The US economy is likely to enter recession
Hamilton believes that the US economy is likely to enter a recessionary phase. Because the current US population is basically not growing, but the employment rate is rising, the United States will not have enough employable population to maintain the current economic growth rate.
(US employment ratio, image source: Chris Hamilton)
On the other hand, US federal government debt continues to rise, whether it owes foreign debt or owes debt to other parts of the US government. Among them, the US federal government's external debt surged after 2007, surpassing 16 trillion US dollars in 2018.
(US federal government debt is high, photo source: Chris Hamilton)
He warned that in addition to 2009 and 2010, 2018 was the year in which the US Treasury issued the most bonds. In 2018, the US economy was in good shape, and the federal government issued so many bonds. When the next recession hits, how much new debt the US government can issue makes him worry.
(US Treasury's debt circulation, image source: Chris Hamilton)
(Article source: WEEX)