Trinh Profile picture
Sep 26, 2019 25 tweets 18 min read
The double Ds - demographic & debt - & how that leads to the triple Ds - DEFLATION.

Ready?
#demographics World population growth rates are expected to slow, w/ contraction in many places (think Europe, East Asia - Japan, China, South Korea, etc).

We will grow at the slowest pace than anytime since 1950. Growth rate peaked in 1965-1970 👈🏻
#demographics Breaking this down into regions - very clear that Asian population peaking & will fall.

Look at Sub-Saharan Africa. Note that this is a projection & we shouldn't take anything beyond 2050 too seriously. The UN revises this very often but still useful for trends.
#demographics Let's look at contribution to population growth by country. Ready?

#1 India 🇮🇳
#2 Nigeria 🇳🇬
#3 Pakistan 🇵🇰
#4 Congo 🇨🇬
#5 Ethiopia 🇪🇹
#6 Tanzania 🇹🇿
#7 Indonesia 🇮🇩
#8 Egypt 🇪🇬
#10 USA 🇺🇸
#demographics Most populous country by rankings from 1999 to 2050 (2100 is a bit far away here). By 2050:

#1 India 🇮🇳
#2 China 🇨🇳
#3 Nigeria 🇳🇬
#4 USA 🇺🇸

China population expected to decline while US still increases. Indonesia drops out of fourth place 😱
#demographics Countries where population will DECLINE by at least 1% b/n 2019 & 2050. Ready?

>-20% decline is full of European countries
>-15% is Japan 🇯🇵 - Japanese people becoming rare
>-5% Russia, Taiwan, Thailand - also becoming rarer
>-2% China 🇨🇳 👈🏻

USA not there !
#demographics This is the mother of all charts b/c economists care about working age population to see if the change of labor will be helpful or a drag to growth. In East Asia, that will FALL SHARPLY.

In South Asia, that will RISE. A complete juxtaposition.
#demographics Once upon a time in 1990, the world was very youthful. Not too many >65-year old around (life expectancy lower). Only the UK & Nordic countries had >15% of population >65.

Today, everyone has aged & made fewer babies & so silvering. By 2050, on Africa is young 👇🏻🌍
#demographics We are not replacing ourselves fast enough in Asia (not South Asia however) & Europe. Why? Not having enough babies. Speaking of which, I was obsessed about Archie the royal baby last night - only 1 though, need 1 more to replace both parents.

Birth below 2 👇🏻👇🏻👇🏻
#demographics We are living longer (80s👵🏻🥳) & expected to live longer - so treat your body well as u have to see it for a while. Anyway, not good news if u work for a pension fund or social security office. Haha.

Oh wells. Long silvering stocks?🤷🏻‍♀️
#demographics People voting with their feet? Net international migration during 2010 to 2020.

Look at the USA 🇺🇸 - off the chart!!! A lot of net + migration (I moved to HK in 2011 so -1). Germany big too.

Who sees net outflows? India & China. Also Venezuela. Biggest is Syria!
#demographics This chart is just so heart-breaking for Russia & Italy & good for the USA & the Americas in general & Australia too!

Okay, so if u got net +inflows of people & net +natural increase (births>deaths) = HOT PINK (e.g., 🇺🇸🦘🇦🇺)

If deaths>births and net outflow = BLUE
All about #demographics 👇🏻👇🏻👇🏻 - they got statistics too on urbanization etc. Free to download. Have fun!

population.un.org/wpp/Publicatio…

Okay, #debt - the fun stuff! This is the @BIS_org turf. The quarterly bulletin! @HyunSongShin - my fav economist 🤓

bis.org/publ/qtrpdf/r_…
@BIS_org @HyunSongShin #debt We know that debt is not the issue b/c that is asset on the other side of the balance sheet.

But debt can be debilitating if income can't grow faster than the debt. Economists look at debt as a percentage share of income. At the macro level, % of GDP

Private debt % GDP👇🏻
@BIS_org @HyunSongShin Let's step back & think about this for a second for those not in finance. Say your annual income = 100. But u don't want to stay at 100, u want to grow to say 200 in 10yrs & so u borrow $ & hopefully invest to upskill & not consume &that ur new skills gets u to say 200 salary. OK
@BIS_org @HyunSongShin When u take on debt, u make 2 assumptions: a) the investment will payoff in making you more productive (rise in income); b) interest expense + payment sustainable.

So u have a problem if: a) income declines; b) interest expenses rise; c) debt too high & principal payment rise👈🏻
@BIS_org @HyunSongShin Let's look at the situation & assume that all these economies make 100 per year. In the Euro area, private debt is ~160; Off the chart in Sweden at 240.

In EM Asia, China private sector debt is 210 for 100 income, Korea ~150, Malaysia >120, Thailand ~120

India & Indonesia low
@BIS_org @HyunSongShin This is what we call the STOCK of private sector debt. When you have a lot of debt & the debt is greater than your current income, 2 other elements are important:

Time horizon to repay the debt & interest expense on the debt (how fast it compounds relative to ur income) 👈🏻👈🏻👈🏻
@BIS_org @HyunSongShin If the term of debt is SHORT-TERM, u're in a pretty hurry to pay it back, which is basically a lot of China's private sector debt. So u're constantly needing to roll over this debt as it EXCEEDS income.

When this happens, if ur income growth is weakening, u'd want RATES TO FALL
@BIS_org @HyunSongShin Ur risk appetite to take on debt's contingent upon expectation of higher return or paying this back won't destroy ur future well being (economists call this smoothing consumption as u're rational). If profits fall, rates sticky, expectations of future worse, have a flow issue too
@BIS_org @HyunSongShin This goes back to @michaelxpettis tweet yesterday on it is not a supply but a demand issue in China. I think it is both. When a system is too leveraged, it only make sense to increase risk if the reward of that risk is big enough as debt payment burden high already.

Debt 👇🏻
@BIS_org @HyunSongShin @michaelxpettis What's going on with growth? Globally, in places where demographic challenges are massive (Europe, Japan, Korea, China) & debt is high (same group), there is a growth problem. This is esp an issue if a country like the US is less willing than before to be consumer of last resort.
@BIS_org @HyunSongShin @michaelxpettis So demographic (adverse transition) + debt (debt as a share of GDP>2 times) = Weaker growth.

But do not underestimate central banks' resolve to fight this pull. How? Lowering interest rates. Japan. Europe. Korea. and China too when it has space to do so once it sorts out protein
@BIS_org @HyunSongShin @michaelxpettis In all scenarios of the World Bank's long-term projection, China growth will decelerate below 6% 👇🏻👇🏻👇🏻
@BIS_org @HyunSongShin @michaelxpettis Today, the Bank of Korea raised its concern regarding the STOCK of debt Korea has & the deterioration of earnings (exports in double digits contraction) on the repayment ability, although says still OK so far. That said, Korean households debt/disposable income is 159%.

👇🏻👇🏻👇🏻

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More from @Trinhnomics

Feb 15
I watched the Edge of War the other day & it's about Chamberlain appeasement to Hitler in Munich. He thought that appeasing Hitler's thirst to invade stops with giving him the Sudenteland from his ally Czechoslovakia would end in peace.

He gave a speech afterwards about peace.
Of course you know what happens next, Hitler ambition wasn't just the Sudenteland. He was so happy with Chamberlain's wishful approach to geopolitics and proceeded to attack its neighbors. It took the invasion of Poland for war to be declared by the UK on 3 September 1939.
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Feb 10
Good morning! Shall we discuss something a bit more structural, although this is a cyclical theme in 2022 across Asia, from China to India and Southeast Asia. Let's talk about #infrastructure , which is the theme of the hour & the next decade🛣️🌉🚆📶⚡️

@natixis @NatixisResearch
Today, infrastructure stocks are soaring in China as hope of government policy leaning towards this sector to shore up domestic demand in sagging growth momentum.

In India, infrastructure has been a big theme & even more so after the expanded budget that prioritizes it ⏫📈.
Why is infrastructure the theme of the hour and the next 2 decades? Simply put: infrastructure is essential for the improvement of the quality of life, production of goods, services and to raise productivity of labor.

Demand for infrastructure is high & will sky rocket.
Read 36 tweets
Feb 7
Good morning! Hope you have a great Lunar New Year and happy Tet! I did even if it was uneventful. First year as a mom and giving out lots of li xi. Now, back to our regular programming of daily reminder of brent 92.8/barrel and markets completely priced out negative rates in EUR
Let me put this another way, Brent crude is +19.35% so far this year and other commodities like palm oil is up too.

I hope u listened when I said you should fear inflation more than Omicron. The Scandinavians have decided that pandemic is over.

Anyway, let's stay w/ inflation.
Let's look at global rates - what do you see? Or shall I say it differently, what don't you see?

NEGATIVE EUROPEAN RATES, esp BUND.

Ok, why? Inflation! I told you, central banks DO NOT PROMISE YOU A ROSE GARDEN. Christine changed her tune when CPI hit 5.1%.

So did JPO at 7%
Read 10 tweets
Jan 30
Highly recommend this story for everyone to read. First, it is beautifully written & honest, especially the part about the fear of not being chosen during HS for class assignments. Second, it gives us insight on the little things we need to do to enable mobility for the disabled.
As a mother, I wheel my baby around the city a lot. He can’t walk yet & too heavy to carry around. And when I stroll him around, I notice that Hong Kong is not wheel-chair/stroller friendly at all. Pavements don’t have a natural curve to enable u to go straight & so u can’t move
I actually haven’t seen any wheel chair around Hong Kong unless it is being pushed by someone & just on a few roads where this is possible.

Accessibility is limited & can’t tell u how excited I get when I see a ramp.

But my angst is a sliver of what disabled people face.
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Jan 27
Good morning! Shall we talk about US Q4 GDP? It was gangbuster at 5.5% YoY (we use this to compare to Asian countries) or this is what Q4 2021 vs Q4 2020. Nominal GDP grew 11.7%YoY and so US nominal GDP expanded 10.2% in 2021.

Fed is still doing QE & rates are close to zero.👈
I compare the quarterly %YoY chart here of the US nominal, US real and China real GDP. Note that as China decelerates towards 4% in Q4, US GDP accelerated to 5.5%.

Last year, the US grew 5.7% in 2021 vs 2020 (which fell -3.4% vs 2019) so a lot of it is making up for lost time.
US nominal GDP was USD22.99trn or USD23trn (good number to remember so when people say this is X% of GDP). And so it added 2.1trn or 10% in 2021 to total 23trn by end of the year.

Now what does that say about 2022? If consensus is right, going to be about 25trn by end of this yr
Read 5 tweets
Jan 27
This report by @business is just great! Congress ownership of tech makes tech regulations awkward! Guess who owns a ton of tech? @SpeakerPelosi

And will she regulate? So far, she's not keen to! She doesn't want to regulate tech. We wonder why...

>100 million dollars invested🤗
Asked by reporters whether she should regulate tech, she responded, "We are a free-market economy." And she hated the idea.

I wonder why? >100 million dollars at stake for her
Congressional trading persists!!! Yes, persists! This is a person that has been around in government since the 1980s and is seeking re-election at 81 years old whose family own >100 million dollars in tech.

Do we have a conflict of interest here? Do we? Hmm
Read 7 tweets

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