Recession, Postponed

Welcome to This Week’s Leyendecker View

We are what we repeatedly do.
Excellence, then, is not an act, but a habit.
– Aristotle

A BIG THINK

This week’s selected podcast makes the case that although population will continue to grow for at least a couple more decades, we are really in the midst of a depopulation crisis. How can that be? 

The population is growing for one big reason: People are living much longer than ever before. The older people live, the more the earth’s population grows as new babies are born. 

But buried in the data that few seem to consider is that the earth’s annual birth rate actually peaked in 2012 at 144MM. In 2022, only 134MM people were born. And the trend line is for fewer babies to be born all over the globe. Consider listening to the podcast to get more perspectives on the forces behind this phenomenon and its serious circumstances.

But there’s one conundrum this excellent podcast episode does not cover. Declining population will eventually result in too much stuff. Of course, one might ponder the environmental consequences of too much stuff, but there’s another perspective that may need attention: If you have too much stuff, then the value of that stuff is going to decline. 

A good example of this can be seen in Japan and Italy, countries leading the demographic decline. In both countries, you can acquire a house for quite a low sum of money. Sometimes almost no money:

Buy a house in Italy for $1

Buy a house in Japan for $25K

At least the Japanese are trying to hold up their home values. But the real story is that, not long from now, home values will be declining all over the world, just like they are in Italy and Japan. 

The problem is that houses make up the largest amount of consumer debt. So at some point down the road, homeowners better pay off their debt, or lenders are going to be sitting on declining collateral values. 

We may be worried about inflation today, and inflation may be stickier than we hope for the next few years. But not far down the road, deflation looks like it will return, and maybe with a vengeance. 

Countries around the world are going to have too many houses, too much stuff and too many makers of stuff as older people die off and the younger people choose to have fewer children. Will our financial system then be at risk with declining asset values and declining collateral values?

THE ECONOMIC VIEW

US consumer sentiment
Is at a two-year high
Credit card debt keeps rising
While delinquency rates are below average
Yet loan rejection rates are rising

Initial jobless claims fall
The employment market remains resilient.

Dude, Where’s My Recession?
Paul Krugman channels Paul Krugman.

If Prime Day is an economic indicator
Consumers are not deterred

THE INFLATION BOGEYMAN

Russia pulled out of Ukraine grain deal
Triggering a rise in grain prices

Economists not sure on recession
Soft landing, no landing, or…

Will greedflation
Be replaced by wageflation?

THE LABOR VIEW

Want a great AI job?
Best move to the West Coast

Pay is catching up with inflation
Will companies now raise prices?

Pilots to get raises up to 40%
You think ticket prices will rise?

MEANWHILE IN EUROPE

UK politics is a mess
Citizens see an even bigger mess
The country is no longer rich
There are implications for the US

Demand for European factory space rises
Here comes the nearshoring march.

Yet luxury goods sales are stumbling
One of Europe’s leading industries.

GLOBAL

Africa’s most industrialized country
Is a sea of chaos and dysfunction

The global economy is sagging
Masters of the universe are working it out.

Global trade is not recovering
What does this say about globalization?

PLAYING WITH FIRE

China buys record amount of Russian oil
Subsidizing Putin’s war.

UK spy chief says Putin is “humiliated”
How dangerous is a wounded animal?

Kremlin says no grain deal
Until its demands are met.
Then it bombs Ukraine grain silos
Ukraine-bound ships may be targets
Where Ukrainian grain is exported

THE NEW COLD WAR

Where countries stand on Russia
The friends and foes map?

China and Algeria get cozy
China to provide lots of economic help.

Iran and Russia throw their weight around
The Middle East is still a hot spot.

FINANCE

What industry has wind in its sails?
Defense, for sure

Where are investors between fear and greed?
Currently at extreme greed

Big banks blow out earnings
Who’s talking about a recession?

REAL ESTATE

Homeowners are not selling
Who wants to give up that 3% mortgage?
Good news for new home builders

Our ever-efficient government
Has a ton of unused office space

China’s big developer, Evergrande
Just reported over $81B in losses

TECHNOLOGY

The chip industry is in a big slump
Yet we’re building lots of new plants?
Samsung profits fall 96%

Meta releases an AI upgrade
It will be open source.

Could Google be the next Xerox?
How they bungled AI

THE CHAT ON AI

Microsoft to charge $30 per month to use its AI
Preparing for royalty payments and/or fines?
Customer acquisition would earn them billions

Apple is close to releasing its chatbot
What will it do?

ChatGPT use drops about 10%
Probably because school is out

THE NEXT NORMAL

As autism rates skyrocket
A huge social services catastrophe awaits.

As states legalize marijuana
More people test positive at work

The prospect of childless cities
Are cities becoming too expensive?

THE WAR ON CARBON

The US Strategic Petroleum Reserve
May never be fully refilled

Want to help cool the planet?
Use this white paint

OPEC expects 2024 oil demand growth
Not going anywhere, anytime soon…

THE NEW ENERGY TRANSITION

Ontario, Canada wants more big nuclear power
And small nuclear plants, too
More shunning of wind and solar.

Nuclear microreactors
Here’s what to know
The US air force is ready to sign up

Can we supercharge nature
To suck carbon from the air?

THE EV DREAM

EVs have a tire pollution problem
What other EV problems lurk?

Ford cuts F-150 Lightning price
Will normal truck buyers care?
While Mach-E Mustang sales lag

EV prices are falling
EV inventory is piling up
There’s more supply than demand.
Yet an avalanche of new EVs is coming

THE CHINA SYNDROME

What do the Chinese think of other countries?
The US and Japan are their least favorites

The CCP doesn’t like a song.
So they are trying to ban it

China’s economic growth falters
No longer the world’s oyster.
Can EVs and solar panels save it?

THE WASHING-TONE

The biggest winners of Biden’s climate law
Are foreign companies

It needs to be harder for companies to merge
Biden administration wants fewer behemoths.

After China, Yellen went to India
The delicate dance of geopolitics.

MAKING A BETTER YOU

Want to reduce your stress?
Then party like it’s 1399

Better balance is key to aging well.
Here are some easy exercises

Get off the “hedonic treadmill”
To be happier and more successful.

HOW ABOUT A BREAK

Sci-fi writer H.G. Wells
Predicted Oppenheimer and the bomb

What does your poop say about you?
Perhaps a lot about your wellbeing.

What is ending-consciousness meditation?
It’s a way to clear the mind.

IT’S VACATION TIME

36 hours in Copenhagen
Get me out of the Texas heat!

Ghibli Park is a tribute to anime.
Maybe the next Disneyland???
A little video tour

E-biking Turkey’s Taurus Mountains
Beauty beyond the crowds.

SONG OF THE WEEK

“Barbie Girl”
Johnny Cash channels Barbie.
AI created this song, folks

Bonus track…
The “Hey” song.

CASTING AROUND THE PODS

The depopulation bomb
What happens when the population declines?

VIDEOS OF THE WEEK

As a wounded RFK lay dying.
He spoke his last words to a busboy

The reviews are in
Barbie is a hit.
Or is it a preachy drag?

The Swimmer
A transcendent experience.

FROM THE HEADHUNTER’S KITCHEN

5 tips for better coffee
Up your Joe game.

23 easy dessert salads
Salad = healthy, right?

Yammy swordfish Milanese
Chicken fried steak fish, oh my.

THE RANDOMS

When excess savings that resulted from the pandemic is spent, it becomes someone else’s income. In essence, all that pandemic stimulus has an economic multiplier effect that waterfalls across the economy longer than we may have considered. Perhaps this is a factor in our recent economic resilience.

When will the Fed start to reduce interest rates? Most likely only after something material in our economy breaks.

One lag effect of inflation is labor demanding higher wages. When workers are forced to pay more for goods and services, they begin to ask for higher wages. Now we’re seeing worker strikes more frequently. As workers win greater pay, companies will likely raise prices, causing inflation to return. This was the pattern of the 1970s. It may be the natural pattern for all inflationary periods.

The Chinese Communist Party is attempting to make illegal a song that sprang up during its Hong Kong takeover. Guess we’re going to see if it’s possible to turn democratic free thinkers into pawns of the state.

Read enough headlines about the current summer heat wave, and you’d think the end of the world is around the corner. But then, the stock market keeps going up. Not quite sure what to think of that.

The biggest problem with government policies is the unintended consequences that show up years later. It now appears that legalizing marijuana might have been a bad idea, maybe a very bad idea. 

As a wise friend often says, beware the tyranny of good intentions.

A recent WSJ story suggests that Europeans are getting poorer. A Bloomberg op-ed author says the UK is no longer a rich country. If Europe is such an economic mess, maybe their bureaucrats should quit telling the rest of the world how to live. Or maybe we should stop listening to them.

Director Christopher Nolan’s new film Oppenheimer is supposed to be a warning to today’s technology innovators. So much for light-hearted summer fun. Maybe that’s why the term “Barbenheimer” has surfaced. After seeing Oppenheimer, you may need to see Barbie to get your mind back to normal, whatever that is these days.

Are we living in a FOMO economy and society?

IN CASE YOU MISSED IT

A Manufacturing Boom Is Coming
July 14, 2023

Rates, Higher for Longer?
July 7, 2023