China, Apple, de-dollarization, and the demographic problem that the FED is keeping an eye on

Zeihan interviewed by TMF’s Bill Mann

China-collapse & famine in 10 years. Cause-depopulation demographics. So much for China is the #1 economy.
Apple was slow to move from China. Apple will have difficulty in the transfer of manufacturing/assembly infrastructure. At least a 5 year hit.
Why have interest rates low over the past 15-20 years. Demography-aging population with an abundance of capital and declining personal expenditure needs. But now geezers will need their capital for themselves especially health care. Zeihan believe US prime will rise. Higher interest rates will negatively impact the technology industry.

Well technology is almost 30% of the S&P 500. And we have benefited from the large run up in tech stocks. What if that goes away?

And with the scarcity of capital; a return to the 1980’s double digit CD & US 10 year treasury yields?


From the paragraph that statement is in I take it as longer term. Was it meant as this year and next? I doubt it.

Zeihan is probably wrong if he means longer term. Our tech might get hurt by European competition. But overall this is our market for the taking.

The higher rates are not in a vacuum but a larger context a year from now. If you look back as zero percent FF rate then it is bad but in a different context it becomes less meaningful.

Technology did best in the US R&D wise in the 1950s. Demand side econ.

Zeihan predicted interest rate increase in the next few years and that it will remain high due less access to capital due US demographic issues.

Prime rate was 2 to 3% in the 1950’s-very low like in 2011-17 & 2020-2022.
Prime today is 8.23 roughly double what it was a year ago. Non-tech zombie corporations will feel the pinch as their loans come due for renewal.

Zeihan is grasping for straws with the demographic stuff. Yeah it is true what the demographics will be that does not mean it follows that rates will be higher.

Ben Bernanke’s counter cyclical economics is the reason the institutions want higher rates.

Zeihan bases quite of few of his predictions on demographics.
The China is toast in 10 years is one such prediction.

The size of the aging baby boomer generation [20% of the population] has driven up the median age of the USA.

Boomers will be spending their assets for travel & fun & on healthcare. That pile of assets will diminish rather than increase. That will decrease available capital.

Quite different from the 1975-2015 period in which boomers saved & invested driving the economy & providing corporations with many workers. Generation X whom will or have taken over for the boomers is a third smaller in size causing a bottleneck in providing the number of needed workers.
The Millennial generation is larger than the boomer generation. But they have not yet aged into peak earning years quite yet.
And additional funding will be required for the social security & medicare programs. That will require higher taxation upon those still working. Thus cutting into disposable income of workers.

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China is toast because there is literally no more water to build out more of their economy.

If I point at someone on the street and say, “do you have a ten dollar bill in your wallet”? He looks and says yes I should not then assume I am always right. Zeihan is making all sorts of assumptions that are not true. The largest is that if the population is older factory production will fall. There are hundreds of millions of young people in China. Factories do not need that many workers because of production methods and automation.