Shifting Demographics, Debt and Currencies: Part 2
06 Aug 2024
In our previous paper, we examined how the currencies of the most highly indebted countries with the largest ratio of retirees to the working age population tended to fall versus those with less debt and younger populations. In particular, we looked at the two extreme points of the demographic and debt spectrums, Japan and Mexico, and how Mexican peso futures contracts outperformed yen futures contracts. In this paper, we explore the state of the rest of the world as we head into the second half of the 2020s.
China’s 2024 demography is remarkable in that it looks nearly identical to Japan’s 20 years ago (Figures 1 & 2). What this might imply is that in 2044, China could look a lot like Japan today.
China and South Korea: Are they headed down the same path as Japan?
Figure 1: China’s 2024 demographics look nearly identical to Japan 20 years ago
Figure 2: Japan might be a harbinger of China’s future
Figure 3: The PBoC is the only central bank in the world to have lower rates than two years ago
Figure 4: As its debt increased & population aged, China has been allowing a weaker currency
Figure 5: China’s debt-to-GDP ratios have soared past Europe and the U.S.
Figure 6: South Korea’s labor force is set to shrink considerably
Figure 7: South Korea has more debt than U.S. and Europe, and nearly as much as China
Figure 8: South Korea’s exchange rate has weakened amid falling birth rates & rising debt
The Eurozone: Also beginning to look like Japan
Figure 9: The Eurozone has a massive bulge of workers aged 50-60 on the cusp of retirement
Figure 10: Debt varies considerably across the Eurozone
Figure 11: European currencies have largely weakened versus U.S. since 2008.
Figure 12: U.K. demographics fall between the Eurozone and the U.S.
Figure 13: U.S. demographics look pretty solid for the moment with no inverted pyramid.
The Other Dollars: Australia, Canada and New Zealand
Figure 14: Australia has fairly average demographics
Figure 15: Canada has seen a sharper fall off in births than Australia or New Zealand
Figure 16: New Zealand’s demographic profile closely resembles the U.S.
Brazil, India and South Africa.
Figure 17: Brazil has favorable demographics
Figure 18: India’s workforce will continue to grow for decades
Figure 19: South Africa’s population is booming
Figure 20: Interest-bearing deposits in BRL, INR and ZAR have kept pace with those in USD
