Quote:
Originally Posted by Bend it like Bourgeois
Japans had an ageing and shrinking population for 10 years though. They had similar issues to the US, then got old and started dying. Their GDP per capita grows, but overall not. They had no hope of recovery.
Is the US in the same position? Is there an example other than Japan where the population is not an issue?
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America is not much different than Japan once you subtract Hispanic and LDS-member reproductive rates. The 'American elite' - the slightly upper middle class+ skilled work force at the heart of American economic leadership - who earn the most money, consume the most goods and in general are responsible for distinguishing American productivity from that of smaller/less prestigous nations is rapidly aging (baby boomers) and has generally reproduced at well below replacement rates. Even worse, that echo generation of Baby Boomers children is reproducing even more slowly than their parents.
The areas least like Japan are American southern border states and Utah. The areas most like Japan (very close in fact but about 20 years behind - which is interesting when you look at Japan's peak ~16 years or so ago) is the entire eastern seaboard and much of the pacific coast (minus Hispanics in California). hmmm, I wonder where America's industrial and financial heartland is? I wonder what is looking to be in massive decline and on the brink of collapse... ? What has been hollowed-out and outsourced enmass? What is suffering from a massive lack of meaningful leadership and/or innovation and not simply borrowing from true world innovators elsewhere and/or benefiting from exploiting opportunities outside the United States in emerging (and future leader) foreign nations?
These Baby Boomers, just like in Japan, have been moving through their peak earning/productivity years the last little while and they are now going to be looking to start drawing down what savings they have (in Real Estate and in other assets like Equities) and/or reducing their consumption as they face the reality of a long long long period between the end of their working life and the extended age to which they are projected to live. They all watched their asset values rise (thus fueling more demand and more of a rise and more demand and more of a rise, as bubbles tend to inflate) and now they all will watch as they decline as they all have the not-so-unique idea to use it for retirement.
Perhaps more importantly though in regards to fertility rate and average age is that comparatively America is ahead of Western Europe and Japan but waaaaaaay behind India, China and a number of other emerging power house economies. America may be able to tread water in the short term but I do not see how, with the current systemic internal decay, they can realistically maintain a world leadership position? And therefore not have long term malaise in the stock markets?
We were already seeing a massive shift of capital away from American markets in IPO's and such before this even happened.
As for the other part of your post, historically the DOW, for example, moves through LONG multi-year periods where returns are somewhere between negative and close-to-flat:
http://www.bestmindsinc.com/document...2yearchart.pdf
As for other examples where prices did not simply recover, a number of historic price bubbles come to mind like with sugar or tulips, but most directly I guess the Great Depression is a good example of extended periods to earn back losses?
No two boom/bust cycles are going to be identical (obviously?) but with the Great Depression it took from 1929 until the mid-1950's to regain losses in the market (almost an entire working-life of average worker) and another many years to get much above that.
(As an aside, unemployment hit about 25% during the depression 5 YEARS after the initial decline in the markets and did not get below 10% until 1943, well into the WWII.)
I also saw this little graph from 2002 (before credit market debt REALLY exploded!) and while hardly scientific shows an interesting correlation (and now unheeded warning):
Claeren.