While many may suggest the U.S. is actually in better shape than Japan after the collapse of its asset price bubble because of its demographic strength, Albert Edwards argues that, actually, the U.S. may be in worse demographic shape.
The reality is that, while Japan may have been faced with a rapidly retiring population, the U.S. version may be worse in terms of per cent of population working, according to Edwards.
From Societe Generale:
The front page chart shows how asset prices in the US topped out 15 years after Japan (i.e. 2007 v 1992), entirely in line with the topping out of the working population as a share of the total. Now I haven’t really cracked this one but chatting this through with a number of people, I would suggest that although GDP growth may be more closely related to the absolute growth of the working population, asset price inflation may be more closely related to the proportion of workers in the general population.
If that is the case, as the former baby-boomers start to retire this burgeoning cohort will tend to liquidate assets.
So, with the per cent of workers of the U.S. population in decline, and retirees selling off assets like homes and stocks, prices are going to go down, regardless of Bernanke’s attempts to stop it.
Photo: Societe Generale