The Russian Conundrum

[HeyEng]

As I am posting this, I’m watching this video by Peter Zaihan and only about twenty minutes or so into this video but there is a ton of information that I have not seen or read anywhere else. This should be shown at intel briefings for an insight into what it going to happen in the next few months with the conflict in Ukraine! 

 

[kaputt]

Isn’t there a whole thread for this? 

[GrndPndr]

2 hours ago, kaputt said:

Isn’t there a whole thread for this? 

Yes, but instead of a conundrum, it is Shenanigans.  I prefer shenanigans, it reminds me of drinking.

[Guardian]

Aren’t shenanigans good, unless prefixed by “evil?” Those are evil shenanigans.

[HeyEng]

The first twenty minutes or so of the video talks about Russia and Ukraine, but really Peter’s whole presentation is really about the end of globalization and the declining birth rates (China being the most egregious example, their population will shrink by half after 2050), the changing energy and wheat market, as well as numerous other topics. I probably should have picked a better title as Russia only occupies a small portion of the briefing  

There were numerous officers in the zoom audience so I wonder if this was some sort of DOD sponsored event.

The video is over two hours long and I’m still digesting all the implications presented in Peter’s presentation. 
 

[pawnman]

2 hours ago, Guardian said:

Aren’t shenanigans good, unless prefixed by “evil?” Those are evil shenanigans.

[Prozac]

13 hours ago, Guardian said:

Aren’t shenanigans good, unless prefixed by “evil?” Those are evil shenanigans.

All I know is Shenaniganz is my favorite restaurant. 

[Random Guy]

On 5/26/2022 at 2:51 AM, HeyEng said:

As I am posting this, I’m watching this video by Peter Zaihan and only about twenty minutes or so into this video but there is a ton of information that I have not seen or read anywhere else. This should be shown at intel briefings for an insight into what it going to happen in the next few months with the conflict in Ukraine! 

 

 

He mentions that interest rates in capital markets are functions of demographics, that 'as people age they will remove "liquidity" from capital markets driving up rates', this is false in a bank money system. Interest rates are a policy variable. It's up to the Fed to choose what rates it wants to target, and that's what everyone pays to borrow from banks and money markets. It doesn't matter what people choose to do with the bank deposits they don't spend.

He also seems to think of money as physical tokens--he literally says 'people will put their money to use in the stock market' which is nonsensical. Making purchasing of financial assets in secondary markets doesn't have any effect on future production, its just price speculation, as the firm doesn't receive those funds (retail investors don't have access to private markets where actual investments can be made). More importantly, any financial asset purchased is sold, so the seller holds those deposits and the total amount of money in the system never changes (you can't pull money out of the financial system)--the only way deposits at the commercial bank layer or the central bank layer can leave the system is by repaying debt, or striking it from a ledger. He seems to literally think that when people 'invest' the money is planted in the ground (it's gone!) and then becomes more money and stuff in the future--which is how it's taught in neoclassical models like loanable funds, so...  

He uses language like 'Capital [money] will shrivel up' to imply the total amount of money in the system will decrease due to demographics (saving increases)--that assumes that banks' lending behaviour is fixed while population changes, and that's false. As an example, about 60% of total money created at any given time comes from mortgage debt, credit cards, and car (large durable goods) loans. Its true that young people take on more of such debt, such that less young people would imply less of this debt and less money in the system for spending, but banks can just as easily come up with other products for older populations to sustain debt levels. And, the gov can always supplement total money by spending directly themselves. Both of these things must occur when savings rates rise, in order to create the money required to meet debt repayment obligations. But, if populations aren't growing anyway, and total consumption is falling, you technically don't need more debt anyway except to sustain unproductive lending that inflated asset prices.

 

TL;DR: the speaker uses an incorrect economic model and draws false conclusions about economic phenonmenon. He says interest rates will rise and money supply contract because of population decreasing, when in fact interest rates are a policy variable and the money supply will continue remain flexible according to bank money creation. 

 

 

He also makes statements about 'US Productivity is higher than China' which is always a red flag, because economists don't actually measure productivity, they measure spot income against average income. So if your income is larger than the average income, you are considered 'productive', but someone earning $5M a year from a bond portfolio doing nothing but sitting on a beach is certainly not 'more productive' than someone working for living, even a pilot, for example. For more info about how the language around 'productivity' is wildly misused and abused, a good recent source for non-economists is a guy called Blair Fix who has lots of articles available on debunking the subject. 

https://economicsfromthetopdown.com/2019/11/14/productivity-does-not-explain-wages/

 

Edited May 27, 2022 by Random Guy

[FourFans]

well...thanks for that nerdgasm from Random Guy.  I'm sure you're entirely correct.

AAAANYWAY, HeyEng, thanks for posting that video.  It brings up a lot of compelling perspectives and information that I'll be mulling over for a while.

[SurelySerious]

If only there was another thread for random esoteric essays on finance.

[HeyEng]

Peter Zeihan also did a briefing for the MWFC at Fort Benning which shows some sort of interest in military circles of his ideas. One thing he failed to mention in the that presentation (he did sort of allude to it indirectly) is that in addition to loosing a pool of a nations production age population (ages around 20-50 depending on country), a country also faces a shrinking pool of military age adults (ages 18-40).

The US has a birth rate of about 1.7 (the birth rate needs to be 2.1 for replacement value) so for the time being we still have a sustainable pool of military age adults, but countries like S. Korea are struggling to recruit enough troops currently and will face difficulty in the near future (probably N. Korea as well but who knows).

 

China’s years of their “one child” policy (which they have abandoned) has really screwed with their demographic makeup resulting in the world’s fastest aging population. Peter claims by 2050 China will have half the population that they have today!

 

[Random Guy]

On 5/28/2022 at 4:15 AM, FourFans130 said:

well...thanks for that nerdgasm from Random Guy.  I'm sure you're entirely correct.

AAAANYWAY, HeyEng, thanks for posting that video.  It brings up a lot of compelling perspectives and information that I'll be mulling over for a while.

The poor folks in the audience have no way of verifying anything he's saying. They are forced to assume specialization in economics is valid and trust his statements, when mainstream econ is wrong on most everything. It's painful to watch.

 

 

Edited May 30, 2022 by Random Guy

[FLEA]

8 hours ago, HeyEng said:

Peter Zeihan also did a briefing for the MWFC at Fort Benning which shows some sort of interest in military circles of his ideas. One thing he failed to mention in the that presentation (he did sort of allude to it indirectly) is that in addition to loosing a pool of a nations production age population (ages around 20-50 depending on country), a country also faces a shrinking pool of military age adults (ages 18-40).

The US has a birth rate of about 1.7 (the birth rate needs to be 2.1 for replacement value) so for the time being we still have a sustainable pool of military age adults, but countries like S. Korea are struggling to recruit enough troops currently and will face difficulty in the near future (probably N. Korea as well but who knows).

 

China’s years of their “one child” policy (which they have abandoned) has really screwed with their demographic makeup resulting in the world’s fastest aging population. Peter claims by 2050 China will have half the population that they have today!

 

Something else interesting about the one child policy in China is it has been correlated with a huge uptick in crime and civil unrest. Turns out when you have a shit ton of men in a population without a sexual partner, they tend to get restless and express their frustrations other ways. 

[HeyEng]

24 minutes ago, Random Guy said:

The poor folks in the audience have no way of verifying anything he's saying. They are forced to assume specialization in economics is valid and trust his statements, when mainstream econ is wrong on most everything. It's painful to watch.

I think everyone is getting hung up on the term productivity, if you use the economic textbook definition and apply an apple to apple comparison between Chinese and U.S. workers, then the Chinese are more productive than US workers based (largely) on the disparity of cost.

I would argue and I think Peter is also arguing that while the Chinese are great at making widgets, the United States is good at making widgets and really great at creating those widgets (and marketing them). Most of the products made in China are designs for US companies or stolen or copied from us and other countries. 
 

When you take into account the electricity costs to run factories in China vs the U.S. and the fact that you have to ship those products here then the productivity formula favors the U.S.

Peter Zaihan has been making the talk show rounds because his book is releasing in June which claims that we are nearing the end of globalization.

[FLEA]

33 minutes ago, HeyEng said:

I think everyone is getting hung up on the term productivity, if you use the economic textbook definition and apply an apple to apple comparison between Chinese and U.S. workers, then the Chinese are more productive than US workers based (largely) on the disparity of cost.

I would argue and I think Peter is also arguing that while the Chinese are great at making widgets, the United States is good at making widgets and really great at creating those widgets (and marketing them). Most of the products made in China are designs for US companies or stolen or copied from us and other countries. 
 

When you take into account the electricity costs to run factories in China vs the U.S. and the fact that you have to ship those products here then the productivity formula favors the U.S.

Peter Zaihan has been making the talk show rounds because his book is releasing in June which claims that we are nearing the end of globalization.

Elon Musk has been very vocal about population decline recently and I'm wondering if this is connected. 

[HeyEng]

1 hour ago, FLEA said:

Elon Musk has been very vocal about population decline recently and I'm wondering if this is connected. 

This trend first came to my attention about ten years ago with an article in The Ecominist, but really has started after WWII as countries become more urbanized and you don’t need a bunch of kids to work the farm or other nasty jobs before we invented teenagers.

Back when that Ecominist article was written, European birth rates were dropping below replacement values. Sweden was so concerned about the trend that they started “paying” mothers to have babies, I think they get a monthly stipend for each kid they have until they are pre-teens or something like that. As a result their birth rate is 1.9 which is higher than most other European countries.

Whats funny is that Sweden expects their mothers to work too! Stay-at-home mothers are treated as somewhat of a pariah.

[Random Guy]

The birth rate in the US and the EU are approximately equal (1.6 vs 1.5), and the birth rate globally is mostly below replacement rate. The only place that doesn't hold is where birth control is not widely available, which is Africa. 

 

So in general, assuming developed countries want to continue to provide the same amount of goods and services to a nearly constant population over the next 20 to 50 years, they have to import some workers from Africa and other undeveloped regions. Hence why the EU accepted an influx of migrants from the ME & NA, despite the risks involved. However, immigration to the US is decreasing as well, as incomes & quality of life are no longer sufficiently higher there than in other parts of the so-called 'global south'. That is, prices of critical goods and services are too high to draw migrants or for households to have larger families.

 

 

 

All this means is that the total share of income going to households is too low, or conversely, the share of total income going to the financial (banks, NBFIs) and non-financial sector (firms) is too high. This is a well know fact, and one of the reasons why the US recently implemented a subsidy for families with children, an acknowledgement that the current economic system generates an insufficient amount of bargaining power for domestic workers resulting in wages that are too low and overly reliant on credit (and hence interest rate conditions) to finance living. 

 

But the statements made that China will implode based on these conditions applies to all developed states, in that context, as all are experiencing the exact same thing: an inability to maintain a workforce that produces the current level of output using just the domestic population.

But what's not being discussed is that given stagnating or decreasing population levels in all developed states, fewer total goods and services are required to sustain the population. We don't need more stuff. In that case, the problem isn't one of insufficient goods & services available for households leading to an implosion of the state. The problem is that the total capacity to produce goods and services is larger than the population it serves, which means owners of Capital (machines, factories, and methods of producing things) and owners of the corresponding financial assets (capital) face decreasing prices and lower monetary values for this wealth. This is known as a 'general glut' in economic parlance, one where the 'captains of industry (& their bankers finance)' are desperate for the prices of everything not to collapse. 

 

[Random Guy]

Edit after finishing the video:

The logic of his argument is remarkably empty from a production standpoint: China & Germany (current sources of most global production) don't need current levels of energy if their export market disappears, their factories and machines will be turned off. Meanwhile the US (current destination for most exports) will be heavily reliant on imports to 1) survive in the short term and 2) to onshore productive capacity and build a domestic industrial base for the long term. The US needs those imports (think 'we have no PPE!' during the initial shutdowns).

If global trade stops... surplus states are in bargaining positions because their industrial capacity already exists. This was the position of the US following WW2, and its surplus position was the source of bargaining power that led to Bretton Woods in the first place (not of gold or financial claims on others, but of real resources and output capacity). A massive increase in unemployment from a collapse in export markets can be managed by surplus states, they produce everything they need in real terms to sustain their non-working population (they are not reliant on imports). It's largely naive to think that the US's dependence upon imports does not place it in a very vulnerable position, but he doesn't mention this once in the briefing. The biggest benefactor of global trade is the US, which can exchange a currency it creates for real goods & services. But, his presentation is oriented in a way that makes it sound like it's actually the rest of the world that are the biggest benefactors of globalisation, which is false. 

I would argue he certainly got it right, that the US is in the position to use or withhold its military to extract exports it needs from the rest of the world because some of its military capability is not reliant on imports and it has abundant energy to fuel itself, but that makes us the bad guy from the perspective of the rest of the world. I can't tress this point enough, in the context of this briefing, given how he's arguing that a US with ample energy and no industrial capacity will be in a secure position [because they can use their military & energy to guarantee access to commodities elsewhere in the world]. This secord part in [brackets] that is the unspoken core premise of his briefing's argument is almost a literal restatement of British imperial ideology. 

Edited May 30, 2022 by Random Guy

[ClearedHot]

On 5/28/2022 at 8:54 AM, HeyEng said:

The US has a birth rate of about 1.7 (the birth rate needs to be 2.1 for replacement value) so for the time being we still have a sustainable pool of military age adults, but countries like S. Korea are struggling to recruit enough troops currently and will face difficulty in the near future (probably N. Korea as well but who knows).

I've been been banging (sts), the birth rate drum for sometime, over ten years ago I visited Russia after having written a paper on just this topic.  The war in Ukraine has had all sorts of second and third order effects including running the draft early, running a second round and just last week raising the age of service in Russia to 65.  They are in serious trouble.

There is another factor not discussed in depth in your numbers, immigration is independent of birth rate and adds large numbers to our population each year.  The United States is the top destination for immigration, with 47 million immigrants the U.S. has the highest population of immigrants in the world.  For the last 30 years the U.S. has taken an average of 1 million LEGAL immigrants each year.  During the same period the U.S. has had a falling average number of births from 4 million to 3.6 million in 2020.  As such we "officially add approximately 4.6 million U.S. citizens each year, of which 20% come from other countries.

Illegal immigration is the game changer.  The population of illegal immigrants living in the U.S. has varied from 10-12 million over the past 10 years.  We don't know how many have made it in undetected but in 2021 there were 1.7 million encounters according to CBP.  CIS and U.S. Census data indicates approximately 1.3 million illegals made it in between Jan 2021 and Jan 2022, with the situation at the border and the future of Title 42 in doubt, the numbers are certain to rise.

The impacts from illegal immigration are both positive and negative, the extent of which can be argued by others.  What is clear is the increase in illegal immigration happened under Obama and now Biden.  The numbers remained steady under Trump.

Whatever your view, immigration (most specifically illegal immigration), will have a  profound impact on our country by 2060.

 

[tac airlifter]

On 5/28/2022 at 5:03 PM, FLEA said:

Turns out when you have a shit ton of men in a population without a sexual partner, they tend to get restless and express their frustrations other ways. 

Sounds like every deployment under GO1

[HeyEng]

On 5/28/2022 at 6:03 PM, FLEA said:

Something else interesting about the one child policy in China is it has been correlated with a huge uptick in crime and civil unrest. Turns out when you have a shit ton of men in a population without a sexual partner, they tend to get restless and express their frustrations other ways. 

Yea, that frustration results in about a million Chinese women a year being kidnapped to become “wives” by poor, rural men! As usual with the Chinese system, any effort to bring attention to this problem results in the typical repression and lack of prosecution to those doing the kidnapping. 

[Prozac]

3 hours ago, ClearedHot said:

I've been been banging (sts), the birth rate drum for sometime, over ten years ago I visited Russia after having written a paper on just this topic.  The war in Ukraine has had all sorts of second and third order effects including running the draft early, running a second round and just last week raising the age of service in Russia to 65.  They are in serious trouble.

There is another factor not discussed in depth in your numbers, immigration is independent of birth rate and adds large numbers to our population each year.  The United States is the top destination for immigration, with 47 million immigrants the U.S. has the highest population of immigrants in the world.  For the last 30 years the U.S. has taken an average of 1 million LEGAL immigrants each year.  During the same period the U.S. has had a falling average number of births from 4 million to 3.6 million in 2020.  As such we "officially add approximately 4.6 million U.S. citizens each year, of which 20% come from other countries.

Illegal immigration is the game changer.  The population of illegal immigrants living in the U.S. has varied from 10-12 million over the past 10 years.  We don't know how many have made it in undetected but in 2021 there were 1.7 million encounters according to CBP.  CIS and U.S. Census data indicates approximately 1.3 million illegals made it in between Jan 2021 and Jan 2022, with the situation at the border and the future of Title 42 in doubt, the numbers are certain to rise.

The impacts from illegal immigration are both positive and negative, the extent of which can be argued by others.  What is clear is the increase in illegal immigration happened under Obama and now Biden.  The numbers remained steady under Trump.

Whatever your view, immigration (most specifically illegal immigration), will have a  profound impact on our country by 2060.

 

Demography is going to be a key buzzword, maybe THE key buzzword, in the coming decades. 

[GrndPndr]

On 5/28/2022 at 6:03 PM, FLEA said:

<snip>Turns out when you have a shit ton of men in a population without a sexual partner, they tend to get restless and express their frustrations other ways. 

Yeah, they were frustrated enough to go looking for the Monkey Pox.

[Random Guy]

On 5/30/2022 at 2:20 PM, ClearedHot said:

I've been been banging (sts), the birth rate drum for sometime, over ten years ago I visited Russia after having written a paper on just this topic.  The war in Ukraine has had all sorts of second and third order effects including running the draft early, running a second round and just last week raising the age of service in Russia to 65.  They are in serious trouble.

There is another factor not discussed in depth in your numbers, immigration is independent of birth rate and adds large numbers to our population each year.  The United States is the top destination for immigration, with 47 million immigrants the U.S. has the highest population of immigrants in the world.  For the last 30 years the U.S. has taken an average of 1 million LEGAL immigrants each year.  During the same period the U.S. has had a falling average number of births from 4 million to 3.6 million in 2020.  As such we "officially add approximately 4.6 million U.S. citizens each year, of which 20% come from other countries.

Illegal immigration is the game changer.  The population of illegal immigrants living in the U.S. has varied from 10-12 million over the past 10 years.  We don't know how many have made it in undetected but in 2021 there were 1.7 million encounters according to CBP.  CIS and U.S. Census data indicates approximately 1.3 million illegals made it in between Jan 2021 and Jan 2022, with the situation at the border and the future of Title 42 in doubt, the numbers are certain to rise.

The impacts from illegal immigration are both positive and negative, the extent of which can be argued by others.  What is clear is the increase in illegal immigration happened under Obama and now Biden.  The numbers remained steady under Trump.

Whatever your view, immigration (most specifically illegal immigration), will have a  profound impact on our country by 2060.

 

 

 

Where are you getting your data from? Doesn't the latest US Census data show the 2020 - 2021 total population change at ~400k? 

 

 

https://www.census.gov/data/datasets/time-series/demo/popest/2020s-national-total.html

 

 

 

 

And the projection dataset is from 2017, is that correct?

 

[ClearedHot]

18 hours ago, Random Guy said:

Where are you getting your data from? Doesn't the latest US Census data show the 2020 - 2021 total population change at ~400k?

I presume the census data has some qualifiers (we know there was a case about whether or not illegals would be counted.)  Regardless, per the CDC there were 3,605,201 reported births in the U.S. in 2020, down 4% from the number in 2019 (3,747,540).  Per PRB.org there were 2,854,838 deaths in the U.S. in 2019.  I don't know how the Census folks rectify the two numbers, if it is independent polling then there is obviously an issue with their collection methodology.