Via John Rubino’s Substack,

With financial collapse and global war inching closer every day, you’d have to be an anxiety junkie to worry about distant things like demographic trends.

Still, the population debate is interesting, with economists, statisticians, and techies disagreeing over whether the world of 2100 will have too many people, too few, or just the right number. To summarize the three scenarios:

Too many people. We already exceed the Earth’s carrying capacity and developing country populations will continue to increase for at least the next half-century, leading to mass extinctions, degradation of farmland and aquifers, and widespread famine. Meanwhile, automation will eliminate millions of jobs, causing mass unemployment, civil unrest, and bankrupt governments. This is “negative feedback loop” all the way down.

Too few people. Birth rates are plunging and by mid-century there won’t be enough young workers to support a growing number of retirees, resulting in a global inflationary depression and/or massive cuts in social programs that leave millions of retirees destitute.

Just the right number. The workforce shrinks while automation eliminates jobs, keeping labor markets more or less in balance. Productive capacity expands, retirees are supported, and the environment starts to heal.

It really does matter which of these actually happens.

How we got here

The human population has exploded thanks to industrialization, fossil fuels, and better public health:

But now birth rates are plunging. A population is stable when the typical woman has 2.1 kids. During the past few millennia, that number was obviously a lot higher (see above). But lately, birth rates have plunged, with the “replacement rate” threshold just a few years off.

Here in the US, we’re tracking the global rate pretty closely:

Why the sudden fertility collapse?

The short answer is urbanization. In agricultural societies, children are free labor so people have lots of them. When people move from farms to cramped apartments in crowded cities, kids are more trouble than they’re worth, so families shrink. Today’s world is rapidly urbanizing, so fertility rates are plunging.

Some populations, including big ones like Germany and China, are already declining. But Italy is leading the way in Europe. From Reuters:

Births in Italy hit record low in 2022, population shrinks further

Births in Italy dropped to a new historic low below 400,000 in 2022, national statistics bureau ISTAT said on Friday, as the population continued to shrink.

Italy’s dearth of babies is considered a national emergency, and fixing the problem was a prominent policy pledge by Giorgia Meloni ahead of last year’s election which saw her become the country’s first woman prime minister.

Last year Italy recorded more than 12 deaths for every seven births and the resident population fell by 179,000 to 58.85 million, ISTAT said in its annual demographic report.

Italy recorded 392,600 births in 2022, down from 400,249 the previous year, ISTAT said, the 14th consecutive fall and the lowest number since the country’s unification in 1861.

The fertility rate edged down to 1.24 children per woman from 1.25 in 2021. Italy’s overall population has been falling steadily since 2014, with a cumulative loss since then of more than 1.36 million people, equivalent to the residents of Milan, the country’s second biggest city.

ISTAT predicted in September that Italy could lose almost a fifth of its residents, with the population set to decline, under a baseline scenario, to 54.2 million in 2050 and 47.7 million in 2070.

Japan, meanwhile, offers a glimpse of Asia’s future:

Japan’s Population Projected to Fall to 87 Million in 2070

(Nippon) – Japan’s population, which stood at 126.2 million in 2020, will drop below 100 million by 2056 and to 87 million or around two-thirds of the current figure by 2070, according to reported projections by the National Institute of Population and Social Security Research.

Japan’s population grew continuously after World War II, surpassing 100 million for the first time in 1967, during a period of rapid economic growth. After peaking at 128.1 million in 2008, however, the figure has been falling ever since. The 87-million projected population for 2070 is almost the same level as it was in 1953 when the country was still recovering from the aftermath of the war.

A breakdown of the population composition in 2070 shows 33.7 million people or 38.7% are predicted to be seniors aged 65 or over. In contrast, the working-age population (aged 15 to 64) will be 45.4 million, meaning that the number of workers supporting each senior will decrease from 2.1 to 1.3. The working generation, who normally drive both production and consumption, may become overwhelmed by the extra burden of social security. The population of children, aged 0 to 14, is predicted to fall to 8.0 million by 2070, representing less than 10% of the total population, leading to concern that Japanese society will not be sustainable.

Can a single worker support both themself and a retiree? That doesn’t seem mathematically possible, hence the financial doomsday predictions.

Immigration to the rescue?

Fertility stats for individual countries don’t include the several billion poor, desperate people who would happily move to Europe, the US, or Japan. From the previously quoted Reuters article on Italy:

[Italy’s falling births were] offset by immigration, with immigrants exceeding emigrants by 229,000 last year compared with a net inflow of 160,000 in 2021. Foreigners made up 8.6% of the country’s population in 2022, for a total of 5.05 million.

So shrinking countries can, if necessary, just import new workers to maintain their population. But this risks the replacement of their culture with an alien one, thus defeating the purpose of the program. Better, perhaps, to stay Japanese or Italian to the bitter end than commit cultural suicide half a century early. For developed countries, this might be the central political debate of the next few decades.

Automation: savior or existential threat?

Goldman Sachs predicts that AI will automate 46% of administrative jobs, 44% of legal jobs, and 37% of architecture and engineering. In developed countries, this would mean 28% of workers being replaced by machines. In a sign of things to come, IBM recently announced plans to replace almost 8,000 jobs with AI, with human resources professionals being the first to go.

But Goldman notes that emerging technologies also create new jobs, so the net impact isn’t clear.

(Yahoo) – While speaking at the U.K.’s inaugural A.I. Safety Summit last week, serial founder, investor, and CEO Elon Musk predicted that AI would inevitably remove the need for all jobs.

“It’s hard to say exactly what that moment is, but there will come a point where no job is needed,” Musk told U.K. Prime Minister Rishi Sunak. “You can have a job if you want to have a job, or sort of personal satisfaction, but the AI will be able to do everything.”

That may sound alarming to many, and even Musk joked that he wasn’t sure “if that makes people comfortable or uncomfortable.” But Musk’s perspective was apparently more positive, describing his vision as a “protopian” future with AI.

“I think everyone will have access to this magic genie, and you’re able to ask any question. It’ll be certainly bigger for education. It’ll be the best tutor,” he said. “And there will be no shortage of goods and services. It will be an age of abundance.”

He also suggested AI will lead to a “universal high income,” an apparent superior to universal basic income, which other Silicon Valley figures like Sam Altman and Mark Zuckerberg have advocated for. “We won’t have universal basic income. We’ll have universal high income,” Musk said, without clarifying how the two differ. “In some sense, it’ll be somewhat of a leveler, an equalizer.”

Totally manageable transition

The deeper one digs into the population issue, the less scary it becomes. For every demographic threat, there’s a solution. But since the (always preferable) laissez-faire approach won’t work in cultures where free individuals are choosing not to reproduce, this might be an issue where even libertarians will have to hold their noses and accept major government interventions. Some examples:

Low birth rate countries can create immigration programs that actively recruit adults with useful skills, and/or young people from compatible cultures (emphasis on “compatible”). Then eschew multiculturalism and encourage/demand assimilation. The work gets done and the culture survives.

Low birth rate countries can also just pay people to breed. As with most other things, there’s a number that gets results, and a coordinated policy of tax breaks, direct cash payments, and subsidies for daycare, education, housing, etc., might make parenting an attractive job. Ideally, the extra kids thus produced would more than cover their cost by working and paying taxes.

If automation is eliminating too many jobs, tax the robots’ owners and use the proceeds to finance new private sector opportunities, institute mandatory national service, and/or beef up the social safety net. This is a version of Elon Musk’s “post-scarcity” techno-utopia, and the sudden emergence of AI brings it into sight.

Assuming we get through this decade’s immediate threats, it might be a relief to confront some problems that have actual solutions.

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A new report has found that ProPublica, which bills itself as “an independent, nonprofit newsroom that produces investigative journalism with moral force”, is actually bankrolled by Democrats and attacks conservatives 23 times more than the left. 

An analysis recently published by Restoration of America (ROA) found, after reviewing more than 700 ProPublica articles published between January 2022 and September 2023, that it is “23 times more likely to attack conservatives than the Left.”

The analysis reads: “Of the 716 articles reviewed, 242 were politically slanted, with a large disparity between anti-liberal and anti-leftist pieces. In total, 232 were anti-conservative and 10 were anti-left.”

The political leanings of ProPublica’s team seem to align with the organization’s reported figures, as an examination by ROA found a significant number of the staff to be registered Democrats, according to The Federalist. Out of the 65 staff members whose political affiliations were ascertainable, 35 in total, 27 were registered as Democrats, in contrast to just three who were registered Republicans.

The ROA report adds: “Consider that ProPublica is often characterized as a nonprofit ‘watchdog’ rather than as a partisan group by left-leaning and ‘mainstream’ publications, if it’s characterized at all. Contrast that with these same publications’ treatment of conservative groups as biased, partisan, or ideologically motivated. That’s a credibility it doesn’t deserve.”

The Federalist reported that ProPublica has been accused by some observers of participating in partisan campaigns, notably against conservative Supreme Court justices. The outlet has published several pieces on Justices Clarence Thomas and Samuel Alito, accused by some of attempting to cast ethical aspersions on these judges without substantial proof

Politico has similarly been implicated in these efforts, targeting Justice Neil Gorsuch.

The Federalist also notes that beyond staff political affiliations, ProPublica’s funding sources have also drawn attention. Reports indicate that ProPublica has received significant funding from The Sandler Foundation, a benefactor of left-leaning initiatives, contributing close to $50 million since 2010.

The Sandler Foundation has also donated to other progressive organizations, such as the Campaign Legal Center and the American Constitution Society, both of which have been critical of conservative judicial figures. The Federalist writes:

According to the report, ProPublica’s biggest donor is The Sandler Foundation, an organization that’s backed numerous left-wing causes and has given ProPublica nearly $50 million since 2010. Since 2015, The Sandler Foundation has given $7.5 million to the Campaign Legal Center (CLC), a left-wing organization funded by leftist billionaire George Soros that “focuses on strict enforcement of campaign finance laws.” According to ROA, ProPublica has also received millions of dollars ($3 million) from the Foundation to Promote Open Society, another Soros-backed group.

American Constitution Society (ACS), which has been described as “the Left’s answer to the Federalist Society,” has also received millions from the Sandler group in recent years.

Another prominent ProPublica donor is the Marisla Foundation, which in addition to giving more than $2 million to ProPublica, has given roughly $1 million to the Center for Responsibility and Ethics in Washington, or CREW. As described by ROA, CREW is a “legal advocacy group connected to Republican-turned-Democrat strategist David Becker’s partisan Super PAC American Bridge 21st Century,” and has “worked to remove Thomas from his position” on the high court.

Finally, the ROA highlighted that ProPublica’s critical coverage of conservative Supreme Court justices frequently includes perspectives from officials of certain progressive organizations.

For instance, in an article critical of Justice Thomas, ProPublica referenced Nancy Gertner, a former federal judge appointed by Bill Clinton, but failed to mention her role with the American Constitution Society. Additionally, ProPublica has sourced commentary from Kedric Payne of the Campaign Legal Center, an ethics watchdog, who has appeared before the Senate Judiciary Committee to discuss Supreme Court ethics, particularly concerning Justice Thomas.

Given all of that being exposed, one can’t help but wonder if that’s why they suddenly decided to go after Warren Buffett today?

“See, we do go after non-conservatives too…” We can hear the spin now.

Complete disaster.

That’s the only way one can describe today’s 30Y auction, which many expected could be challenging after a mediocre 3Y and a subpar 10Y auction earlier this year, but nobody expected… this.

The bond priced at a high yield of 4.769%, which was below last month’s 4.837%, and just shy of the April 2010 high. But more importantly, it tailed the When Issued by a whopping 5.3bps, which was… well… terrible, because as shown in the chart below, this was the biggest tail on record (going back to 2016).

The bid to cover was just as bad: at 2.236 it was the lowest since Dec 2021.

The internals were even worse as foreign bidders (Indirects) tumbled from 65.1% to 60.1%, the lowest since Nov 2021, and with Directs taking down only 15.2%, banks (Dealers) were forced to step up and take the balance, or a whopping 24.7%, double the recent average of 12.7%, and the highest since Nov 2021.

This is a big warning flag because every time we have seen a surge in Dealer takedowns, some sort of Fed intervention – QE or otherwise – has usually followed and we doubt this time will be different.

So what happened? Well, maybe the bond market read our note from earlier this week in which we explained “How Treasury Averted A Bond Market “Earthquake” In The Last Second: What Everyone Missed In The TBAC’s Remarkable Refunding Presentation.” It may be difficult to fool the bond market for a second time.

The market reaction to the catastrophic 30Y auction was immediately, sparking a swift and painful response across markets with bonds and stocks hammered lower and the dollar spiking.

Treasury yields  – as you would expect – exploded higher, with 30Y Yields back up to pre-payrolls levels…

That is the biggest spike in 30Y yields since March 2020…

But the entire curve is higher in yields…

Stocks tanked…

Regional bank stocks tumbled…

The dollar ripped back up to pre-payrolls levels…

Finally, we note that this ugly auction comes as Treasury Liquidity is evaporating dramatically…

The Fed (and The Treasury) have a problem!!