57. Introduction to Demographic Doom and the Post-Nuclear Family

Below is the transcript for my Demographic Doom Podcast episode #57, released on 3 May 2021. The "home page" for this episode—with annotations, links, corrections and a place for comments—is the YouTube version (64 minutes, with video). The audio version is housed at Podbean and is available on most major podcast platforms, including iTunes and Google Podcasts. The main website for this project is DemographicDoom.com. Twitter: @DemographicDoom. Glenn Campbell home page: Glenn-Campbell.com

This transcript is based on the automatically generated YouTube transcript, corrected by me based on my memory of what I said. I have not checked the transcript against the actual broadcast. Editing consisted mainly of inserting punctuation and paragraphs and removing repetitive words and phrases. Passages in bold text are ones I consider particularly quotable. Items in [square brackets] are minor grammatical corrections. Items in {curly brackets} are factual corrections or amplifications. —Glenn Campbell

I'm Glenn Campbell. I call myself a demographic philosopher. I'm looking at life and trying to predict the future through the lens of demography, or the study of human populations.

In this episode of my podcast, I'm going to try to bring it all back to center, try to summarize everything I’ve talked about and everything that has motivated me in this project. What is Demographic Doom, and what am I hoping to accomplish here? 

This is an unusual episode. If you're looking at the Youtube version, you can actually see my face in this episode. Usually you don't, and the reason for that is most of my episodes are heavily produced. I write a script for every episode and I sweat over that script for weeks before I record the podcast, and then I edit it. I very heavily edit my podcasts, and this one is different. It's totally off the cuff. You might might find a few edits in here now and then, but mostly I'm just spewing my theories without a script. I ought to be able to do this, because you should know your own theories, the theories you've worked on for four years. You should be able to cough them up on demand, so that's what I'm going to do. 

So what is our Demographic Doom? I've named my project this. I've named my podcast this. My Twitter feed is called @DemographicDoom. So what is the Demographic Doom that we're facing? 

Well it's complicated, and it's also very simple. Let's start with the simple part: What is the biggest crisis facing mankind right now? I think what you're going to say is climate change, and that's certainly a humongous crisis, but it's not the thing that is going to cause mankind the most pain, because even if we have screwed up the environment, mankind will adjust. People will move from place to place. They will adapt to the changing climate, just they like they've adapted to conditions in the past. 

Our even bigger doom is something that we cannot adapt to, [that] we cannot negotiate at least in the short term. And the core of our doom is the lack of babies in the developed world. We're not producing enough babies to sustain ourselves, at least in the industrialized countries. And this is measured by something called the "fertility rate". It's a statistic that says how many babies each woman in a society is producing on average. They need to need to produce about 2.1 babies per woman. They need to produce 2, first of all, because men can't do it. Men are kind of deadbeats. They can't produce any babies, so an average woman has to produce 2 babies to make up for the average man. And that 0.1 is sort of like a fudge factor, because not every baby that you produce is going to go on to produce a child themselves. They could die in childhood. 

So the commonly accepted "replacement rate", as it is called, is 2.1, and there is hardly any country in the developed world that is anywhere close to that. They've all fallen far below that, and I mean every country—every country that's safe to visit, let's say. 

That includes China. China had this One-Child Policy, which seemed brilliant at the time, but now they don't have enough babies because they've achieved their goals of only one child per couple. China is peaking in population. But it's also true everywhere in the Western world, in Europe and North America. Europe is especially bad. It hasn't produced enough babies for some time now.

So this why is this a disaster? You know, an environmentalist is gonna say, "Well, that's great for Mother Earth. We're gonna reduce the population. There's gonna be less impact, less pollution, less carbon produced if we have fewer people." And that sounds wonderful except for the problem of getting there, because if you're going to have less than two babies per woman, the natural tendency then is to end up having too many old people. 

If each generation produces half as many children as the previous generation, then what you have is an upside-down pyramid where old people dominate the planet. And that's bad news for the economy, bad news in all sorts of different ways. So why is it bad news? Well, it's bad news because old people get old, and at a certain point, you retire. But even if we make retirement illegal, at a certain point old people get sick. And they get sicker and sicker as they get older and older. 

It used to be you just died at age 60. You'd have a heart attack, and you died. Now people live to 70, 80, 90, 100, and if you've got too many people on the top of the pyramid and not many people at the bottom of the pyramid, the whole economics of the world are unsustainable.

Just think of it within our current system: There was a time when there was maybe five or six workers for every retired person. That would have been back in the days when Social Security first started, and today we're getting to the point where there's barely one or two workers supporting one retired person [an exaggeration], and that's simply unsustainable. You can't keep going that way.

And there's other problems with a falling population, and those have to do with the commitments you've already made. Governments have made huge debt commitments, and if their populations were to fall by half, they can't make payments on those commitments, so those commitments have to go into default.

And there's the whole idea of institutions not being sustainable because they simply don't have enough bodies. There's certain economies of scale in having a lot of people. If you take, let's say, a community of 20,000 people, and you cut it down to 10,000 people, then you might not be able to support things like your sewer system and all your municipal services, because those are all set up for a much bigger population.

So in many different ways, a fall in population is a disastrous thing and at least in the medium term, it is not good for the environment. The simple calculus that environmentalists use is every human being is producing so much carbon, so you reduce the number of human beings, you're reducing the amount of carbon. And that sounds correct in a stable-state universe, in a place that is just like us, but it's not going to happen that way.

Once institutions start collapsing and government debt becomes unpayable, what you have is governments that become weaker and weaker and weaker and are less able to enforce environmental regulations. You know, if the US Government were to collapse—which is not impossible—the Environmental Protection Agency would also collapse, and suddenly people are going to be throwing stuff into the rivers because there's no strong governmental authority enforcing environmental rules.

So, yes, over time it's probably best that we have fewer people on the planet. We have 8 or 9 billion right now [officially 7.7 billion]. Maybe it's healthier to have 4 or 5 billion or even less. The whole problem is getting back there while still sustaining your society. So this is the core problem. The core of our Demographic Doom is not enough babies in the developed world. 

Now we have all sorts of other little kinds of Doom all branching off of that one Doom. I would say that the Number Two Doom that we're facing—that is actually going to cause a lot more pain a lot more quickly—and that is economic collapse. And the economic collapse in our society really hinges on government debt. We seem to be coming out of a pandemic right now. This is May 2021, and we're coming out of a pandemic where the government has spent tons of money. The US Government alone has spent roughly twice as much money as it has taken in in taxes. In the past two years, in 2020 and 2021, it will almost certainly spend twice as much money as it is taking in.

Even before the pandemic, the government was borrowing one of every four dollars it spent. So governments have been are deeply in the hole. We haven't seen any major effects of this right now, but there will be, because to spend this money that the government doesn't have, the government is borrowing this money and ultimately it is printing this money. And this just can't go on forever. It didn't sustain Venezuela or Zimbabwe or Weimar Germany. You can't just print money forever. Sooner or later you have to pay the piper.

So this is the Doom that is bearing down on us right now. Within a very short period of time—it could be tomorrow, could be two years from now, it could be five years from now—but sooner or later there will be some kind of major monetary collapse when we realize that all the government all the money that the government has printed isn't good for anything. There's going to be devastating effects. I can't predict exactly what those effects would be. Will it be hyperinflation? Will it be a stock market collapse? But it's going to be big. 

You may ask, well, what has this got to do with demographics? What it has to do with demographics is that our whole system was built for a different population profile. Our system rose up in an era when things were always growing. That's what America was always from the beginning. It's growing, growing, growing. And this was especially true in the late 40s and the 1950s, when we had the Baby Boom. We produced a lot of babies, and the population shot way up. Now the population is leveling off. Our whole system is built upon the idea that things everything would grow forever, and whenever everything doesn't grow forever, then we got a crisis. All of these economic assumptions that we've made during these growth periods become invalid and they have to crash. Things have to crash.

And I'm talking about a crash along the lines of the Great Depression or even worse because our government this time is the one that's deeply in debt. Government wasn't too badly in debt [at the start of] the great depression but now it is. And the government is the underpinning of the currency, the US dollar. If the government fails, in some form the US dollar has to fail as well. 

So the immediate crisis is the Baby Boomers, the people of my generation who were born between 1946 and 1964, and there were tons of us. In my neighborhood, a lot of families had had four or five kids in the family. Now you very rarely see four or five kids in a family, but it was the norm back in my day.

All of these Baby Boomers fueled the economy. They were a drain on the economy initially in the 1960s and 70s, because they were using up educational resources. They were requiring government resources and not paying any taxes, because kids don't pay taxes. But then in the last quarter of the 20th Century and in the first decade of the 21st Century, those Baby Boomers came of age. They began to earn a lot of money and spend a lot of money, and they were the great engine that drove our economy. 

What's happening to those Baby Boomers now? Well, they're retiring and instead of producing tax revenue and producing goods and producing stuff that powers our economy, now we're draining the government. We're draining the government of its resources. We're collecting on our Social Security. We're spending Medicare money. We're redeeming our stocks. We are now a drain on society.

And because we, as the Baby Boomers, didn't have many kids ourselves—and as a matter of fact, I’ve had zero myself—and our children, or the children I didn't have—aren't having many children. So we've got a top-heavy system with too many Baby Boomers retiring all at once [with] no workers to support them. Yet the government is still spending money like it was the boom times. The boom times I consider 1980 to 2008. Those were the big boom times. You may not remember them fondly, but in retrospect, they were a time of great economic growth around the world. And we're still spending money and making commitments as though that growth was going on even though it has ended. 

So in 2011, the baby boomers started retiring, started reaching age 65, and they're just like a tidal wave—a tsunami of old people, a silver tsunami. That's kind of a one-time demographic issue. It's not so much that we don't have enough babies but that we don't have as many babies as we did in the Baby Boom. So to sustain our Social Security system and our pension systems, we would have had to keep making babies at the same rate we did it during the Baby Boom, which obviously didn't happen. Since 1964 until the end of the century, America was at least making as many babies as [people who] were dying. It was at least replacing the population, [but] now in the 2020s, especially with the pandemic, we're hardly making babies at all. 

You can tell this if you live in America or Europe and you go out for a drive. How many kids do you see? Well, not many. By comparison, how many dogs do you see? It seems like everyone's got a dog, everybody's out strolling with their dog—their beautiful Labrador Retrievers or whatever—and they're doting on their dogs. But how many kids do you see? What is the proportion of dogs to baby carriages out on the street today? Depending on your city, I'll bet the dogs are five-to-one to baby carriages or ten-to-one. The past couple days, I’ve gone driving in the Boston area, and I see one or two baby carriages and only a handful of kids—actual human children—and tons and tons of dogs, because that's where everybody is putting their parental attention now. They're putting it onto their dogs.

Now I love dogs. I transport dogs for a living, and I enjoy hanging out with dogs, but as an investment, it's not really a good investment for society. You devote 10 years to a dog [but] what happens at the end of those 10 years? Well, the dog dies, and it contributes nothing to society, whereas if you had invested 20 years in a child. He would have contributed something to society.

Let's go back to the global situation. As I say, there's not enough babies in the developed world, but what about the undeveloped world? What about the poorest countries in Africa? There we have what was once called a “population explosion”. It's still happening in Africa. Nigeria and Niger and Congo—all these places are still producing a lot of babies, so their population is exploding.

The populations of the rest of the world are not exactly shrinking yet, because we still have some momentum built up. It's called “demographic momentum” where if you stop having babies right now, the population doesn't fall immediately. There's a lagging effect, but most of the countries of the world are coming to a peak. 

China may already have reached that peak where their population doesn't grow anymore. After today it's going to start shrinking, and that's an obvious result of the One-Child Policy where couples were instructed to have only one child, and they did. It was wildly successful. But if every two people have only one child and you do that generation after generation for a whole society, sooner or later the population falls. There's been news stories lately that this is the year that the population has actually fallen. Some of the Chinese authorities dispute that, but if not this year, it's certainly close, and by some reckoning, 2011 was the date that the working population began shrinking. 

The working population is the people between the ages of, let's say, 16 and 64 who are actually producing things for society. That number is what's really critical, because those are the people who are paying taxes to support all the other people, all the dependents. The young people and old people who can't work, they are called "dependents". And the people who work are the engine of society. The proportion of people who are dependent—the old and young—to the workers: That's called the “dependency ratio”, and that's just going up, up, up—meaning that there's more and more dependent people.

So what are the solutions? Well, we could just make retirement illegal. We could say, no, you can't retire at 65; you have to wait until 70—which Japan has done. I think you have to be 70 to earn your pension. But there's a limit to how much you can do that, because when people get old, they get sick. Their faculties wane, and that's something you can't negotiate with. Old age is a lot of failing systems all at once, and there's no magical elixir to make people live longer or to make people healthier.

It used to be, for example, that if you had a heart attack at age 60. You died. That's the way things worked for most of human history. It's only in the mid-20th Century that medical science learned to save people from heart attacks. So you save someone from a heart attack, and what happens? Well, they die of something else, but in the meantime you've got 20 or 30 more years of medical care you've got to spend on these people because they didn't die at age 60. 

So we've got a medical crisis where we simply have too many old people getting sick, getting cancer, having coronary problems, having all sorts of things that require doctors and hospitals, and fewer and fewer people paying into the system in their prime working years. So just raising the retirement age won't do anything. 

Someone has suggested robots. Robots will save us from our dwindling population. So what we do is we just build robots to replace all the workers who aren't working and we get just as much work done by having robots. That's great. That might solve any labor shortage, but there's one problem with robots, in that they don't pay taxes and they don't consume anything. An ordinary worker will work hard, make some money, pay that money to someone else to power the economy and pay taxes, but robots don't do any of that. Robots just build things, and it's really hard to tax them.

You could try to tax the corporations that build the robots, but that's been very difficult. Most of the US Government's tax revenue comes from individual wage earners. Corporations, as you might have guessed, don't pay many taxes, and it's really, really hard to get corporations to pay taxes, because they can always move things around, move things offshore, rearrange their profit structures so they don't have to pay taxes. So the people left paying taxes are the real workers, and right now there aren't enough real workers to come anywhere close to paying society's debts or the government's debts.

To look at the government: The US Government, as I said, is spending twice as much money in 2020 and 2021 as it is taking in in taxes. This is just like someone spending on their credit card twice as much money as they are earning in salary. There's all sorts of arguments that say, well, the government can get away with this because the government prints the money. Yeah, you can get away with it for a certain amount of time, but you can't produce value for a society by printing money. Sooner or later, something's gonna break, and when it breaks it's gonna be catastrophic.

In this moment when I'm recording this video, things don't look very bad. We're coming to the end of a pandemic. People are starting to poke their heads out into the real world. People are starting to travel and go to restaurants again, and things are beginning to look up.

And the stock market! You wouldn't believe the stock market in May [2021]—in fact, the stock market throughout the whole pandemic. At the beginning, in March of 2020, there was a stock market crash—as one would expect as news of the pandemic spread. But then the Federal Reserve lowered interest rates and pumped more money into the system, and stocks blew up. 

The great irony of the pandemic is stocks hit all-time highs. I mean the pandemic destroyed the economy, laid waste to the economy, vast swathes of the economy, yet the stock markets rose, and other asset markets like residential real estate rose, and it's just insane! It doesn't make sense. It's like the last gasp of a bubble economy. At some point the stocks are going to crash [and] bad things are going to happen.

I'd be a rich man today if I could predict when it will happen. I would have predicted it would have happened two years ago, three years ago. In fact, I was making videos about the coming economic collapse back in 2010 [Here’s one.], and it hasn't happened. That doesn't mean it won't happen. I just don't have enough knowledge of the timing to become a rich man over it. 

So back to the demographic part of things: We don't have enough babies, [and] it's a bad thing. If you don't believe me already—that not enough babies is a bad thing—I’ve got plenty of other podcasts about that. There's plenty of other writings about that—that not enough babies is a bad thing. If that's true, how do we bring the babies back? What's the solution to the baby bust? And my contention—and the reason I call this “Doom”—is that there is no solution. There's nothing a government can do to bring back the babies. Everything that you propose I can shoot down pretty quickly.

A tax credit? Let's give parents a tax credit for every baby that they have. Do you think that any parent gives a damn about a tax credit at the end of the year? No way! They're looking at the cost of having a baby, and the cost is just astronomical. Back in my day, back in the day when there were four or five kids in the family, the per child [cost] was not all that [high], because there [were] not so many rules to obey. Kids were just kind of let loose. They were cut loose to entertain themselves all day, and now you can't do that. 

There's all sorts of rules. You have to supervise your child at all times. You can't leave your child unattended. You got to have certain mandated car seats, and how many car seats can you fit in a car? In my day, everybody piled into the Cadillac—you know, six or seven kids all piled into the Cadillac, and we all went somewhere, and you can't do that anymore. You gotta have a government-approved child seat in every car for every child, which means you've got to have a mammoth SUV or minivan if you plan on having more than two kids. 

So child rearing has become extraordinarily expensive, and for parents the benefit is really emotional and nothing else. It used to be, in most of human history, that if you had a lot of kids, your kids were your retirement plan. They assured that you would be taken care of in your old age. Now we've replaced all that with pension systems, and kids are not expected to support their parents anymore.

So from a parent's standpoint, there's really no practical benefit in having a child. I mean there's an emotional benefit. Raising kids is fun, but, boy, is it labor intensive! And all those dreams you had, all those entertainments that you used to enjoy, like jetting off to the Caribbean, or, you know, doing things spontaneously with your spouse, you can't do that if you got kids. Kids are a huge drain in money and a huge drain in opportunities. It's called the “opportunity cost”. If you're raising kids, you can't be doing other things. 

And it's an absolutely huge risk. Not every baby comes out of the womb in perfect shape. There's a lot of things that can go wrong, and in maybe 10 or 20 percent of births, in the end there's something that goes seriously wrong with that child, and that child becomes a burden to their parents—potentially a burden to their parents for life. So if you were a potential parent, you say, “Yeah I'd like to have kids someday,” but when you crunch the numbers and look at the cost of this thing and look at how unstable your own income is—You don't have lifetime employment anywhere anymore. Your life is financially unstable. You can barely care for yourself. Who in their right mind would have a kid these days?

Any government program that proposes to solve that just doesn't understand the immensity of the problem. A tax credit at the end of the year is trivial. You can even pay parents a bounty for every child that they produce, but that's trivial compared to the true cost of parenting, and you wonder if you have that bounty… if you say, "You make a baby [and] I'll give you five thousand dollars," well, you wonder what kind of parents would fall for that. Is that the best and the finest parents? 

[How about] free child care? Is that going to solve it? Is that going to encourage people to have more babies? Free child care or more support for parents? There's evidence that this won't help either, and my evidence is the country of Sweden. Sweden offers all this stuff. The Nordic countries have a very strong parental support system with subsidized child care and all sorts of perks for families and parents, and their birth rates, their fertility rates are not much different from countries that don't offer any of that stuff like Romania or the United States. Just the fact that your government is supportive is not sufficient to encourage people to have more babies.

There's no way to do it. There's no no way to bribe people. There's no way to threaten people. It was really easy to threaten people into not having kids. The Chinese were very good at it. There [were] forced sterilizations, and there were all sorts of substantial penalties for people who had more too many kids. That part was easy. They can't just reverse the system now and punish people into having children. There's just no mechanism to do it, short of kidnapping women and impregnating them and forcing them to have babies in child labor camps—which I wouldn't put past the Chinese authorities. Anything short of that will not encourage parents to have more children

[Pauses to view himself on the camera monitor.] So I’ve got these interesting stripes on my face. You see I got the sun coming in on me. You think I should move? Or maybe I should just keep going. Let's just keep going.... 

So mankind is facing an economic crisis of not enough workers and the government not being able to acknowledge that and reduce its spending. Instead, it's printing money. That's the immediate crisis that's going to cause everybody a lot of pain in the short term. And in the long term we have this lack of babies, which actually started way back in the 1960s, and there's no way we can make more babies or encourage more people to have babies—at least within our current system. 

This means that countries and institutions will collapse. I can't say how or when or why or exactly what will happen, but you can't sustain a country on a falling population. The Japanese have been pretty good at doing it so far, but even their system can't keep on. You can't keep producing 100-year-olds and 90-year-olds and not producing any babies without at some point running out of resources to take care of all those old people.

So I said there were a lot of other problems that branch off of this one core problem of not enough babies. We have too many babies in the underdeveloped world, so why can't we just take all those extra babies from Nigeria and bring them on over to Germany or the Netherlands? That only works when you're taking highly educated immigrants. 

So we have all the countries of the western world going to Nigeria and raiding Nigeria for all of its talent—all of its doctors and nurses and engineers and people with skills that Nigeria has spent money training. Those are all sucked up by the Western world, sucked up by North America and Europe, and what's left in Nigeria are people raised in harsh circumstances, raised in poverty, raised without much education. You just can't take an uneducated person from a very poor country and bring them to France and Germany and expect them to function. They have no clue how to get along in a developed country.

So if you were to open the floodgates and let every Nigerian into into France, they would develop enclaves of Nigeria within France—which they've already done—and this would cause great tensions in French society—as it is already done—and it would not solve the core problem of not having enough talented workers, not having enough people to power French society. They're producing a lot of babies in Nigeria, but you just can't import babies because what the developed countries are lacking is not babies, per se. Babies are easy. What developed countries are lacking is parent—people willing to raise a child for 20 years. If you don't have that, then there's no point in importing babies from Nigeria.

So there's no solution. The fact that some of the some of the world is still exploding while most of the world is shrinking, you can't just transfer one to the other—not without causing huge problems. So immigration is not a solution. Government incentives are not a solution. There is no solution to the the birth crisis—within our system. The only solutions I see are when our system collapses in some form. Maybe some people will be open to different ways of producing babies and different ways of addressing these problems. 

What has happened here is that we have neglected an infrastructure, and the infrastructure is our children. Countries of the western world have not invested adequately in the next generation. It's all been about profit right now, making as much money as possible right now, without any substantial investment in the future. What that means, just like neglecting any form of infrastructure, like not maintaining a bridge, it means eventually the infrastructure collapses and you've got to suffer the consequences.

So after that collapse, that inevitable collapse, then people might think about, “Well, what can we do to revitalize our communities and bring new children into our communities?” Knowing all of these barriers to it. And that's where I have my own solution. It's a theoretical solution. I'm not really sure I'm ever going to see it in my lifetime, but I have a solution.

My solution is called the “post-nuclear family”, and it's a system that allows more children to be raised at lower cost overall. My solution is actually pretty simple: I want to bring back the big family. Big families used to be the norm, especially in rural societies. You might have 8 kids in one family. I want to bring that back, but I want to start at 9 kids—9 kids evenly distributed—and perhaps as many as 18 kids all living in one in one household. 

But no parent can support that. No parent can afford that. No parent wants to give up all the rest of their lives to raise children. So if you're going to have a big family of between 9 and 18 kids, it's got to be a group effort. You have to have a group of adults to do this. Let's say you had 8 adults or 10 adults and you had 9 to 18 kids, well you could distribute the duties of parenthood. It might be that you only have to be a parent one day a week, and you're distributing the risk. So if you have 9 kids and one of them turns out to have some serious birth defects, if you've got a lot of adults to distribute that risk over, it's not so devastating. 

So the aim here would be a certain economy of scale by increasing the size of the family and increasing the number of parents. That's the core idea, and once I’ve proposed this core idea, there's all sorts of questions you're going to ask, and the bulk of my efforts right now are focusing on trying to answer those questions. How would you organize a group of parents to raise a bunch of kids? What is the organizational structure, and how well will it work? 

So I’ve covered this in other podcasts. I don't know if I should… I'll just give you a few of the highlights here....

I call it the “post-nuclear family” because it's what happens after the nuclear family. The nuclear family is wonderful. I grew up in a nuclear family. A mother, a father, several kids—that's the nuclear family. Nothing wrong with that, except that it's not doing the job. It's not producing enough kids, the nuclear family. 

What happens now is a couple, for emotional reasons, they want to have a kid, so they have a kid. They focus all their attention on that kid. That's it. They have one kid. They might have a second kid if they're really ambitious, [and] they stop at two. That's how the nuclear family works, and that's just not enough. It's not enough for all the people like me who have zero kids. So we've got to come up with some system to have more kids. 

Now when I talk about “we”, I'm not talking about society as a whole, because I think society as a whole is doomed. The United States as a country is doomed, but your community—whatever you regard as your community, a community of like-minded people or a geographical community—your community is not necessarily doomed because you can organize yourselves in some way to make more babies.

And I propose initially that, let's say, four couples, four ordinary couples like you see today, who want to have kids but don't feel that they can afford to raise them, they decide to pool their resources, and they decide to raise all of their kids in one household. So that's the starting point. And my project from here, my inquiry from here is, okay, if that happens, what are all the implications?

First of all, I'm proposing that the kids be distributed in age so if you have a household of 9 kids, they're evenly spaced from age zero to age 18. It would be every two years if there are 9 kids. If there are 18 kids in the family, they would be spaced every year. 

Where do the babies come from? Well, initially they would come from those four couples. Where they come from in the future, that's a big open question, but what I propose is that once a family is established with, say, 9 kids, it always has 9 kids forever. So as an 18-year-old graduates from the family, moves on, we bring in a new baby, and we keep the cycle moving. So this household—which is a physical house somewhere—always has between 9 and 18 kids. Always. And by doing that, what you're building is a sort of family culture, which we don't have today.

What we have today is a man and woman fall in love. They decide to have a baby, and they have one baby and stop, and they haven't had a chance to build a family culture, which is what you have in big families of 8 or 9 kids. You have this internal society where the older kids are doing a lot of the work of taking care of the younger kids, or watching the younger kids, or babysitting the younger kids, and you're developing systems that work.

There was a book, I think in the 1940s, called “Cheaper by the Dozen” about a couple that had a dozen or so children, and they talked about all the systems they use to manage this huge brood. These systems are sort of a software that you develop over time, and if you just have two kids or a handful of kids and you stop, every generation you've got to reproduce that culture. 

You wouldn't have to do that if you continuously raise children one after the other. Then the culture and the systems that you build to manage this brood, they're perpetuated, they're preserved, because each child teaches it [to other kids]. There's a certain way that our household works, and each child teaches that way to the younger children.

So that's one element. The other element is that none of the parents that sponsor this group should be living in the household. 

So picture a big house. It could be a mcmansion. There are plenty of unsold mcmansions in America. Let's turn that into a big Brady Bunch house. "The Brady Bunch", if you don't know, was a TV series of the 1960s or 1970s, where a divorced couple were raising 6 kids. [CORRECTION: In the show, whether the parents were divorced or widowed is never stated.] In my system I'm proposing raising 9 kids, maybe more, so it's not that too far off. You raise all these kids in one household, but the parents don't live there. The parents live in their own apartments, houses, just as they normally would, and they come into the household for scheduled duties. So if there are 8 parents, one of them can be on duty one day a week, something like that. There's some sort of division of labor. You come in to serve certain needs, to perform your duties, but you do not live there.

The reason for this is it preserves the integrity of the family, because the way adults live should not be the way that children live. If you're an adult and you collect fine china, well, you don't want kids running around in your house, because this hobby of collecting fine china is incompatible with kids. A lot of the things that adults do are things that you don't want kids to be exposed to. Adults can watch movies that you don't want kids watching and if you don't have any adults living in the household, then you can preserve the household as you want it to be—as a sort of protected environment where you control the inputs and the outputs. You control what comes in. 

For example, the household can have an electronics policy that concerns how you use computers, what sort of electronics and online services you have access to. You can control that if it's a household just of kids. If you have a mix of parents and kids, it wouldn't work. So parents come in for scheduled duties, scheduled responsibilities and then they leave, and they go back to their own homes. 

The analogy I use is a church—like the kind of church that I grew up in. All sorts of different members of the community come in to support the church. They turn up for church functions. They help maintain the church, but they do not live at the church. It's sort of a congregation. This is a family of kids being supported by a congregation of adults, who only become a congregation because they already believe in certain aspects of parenting. They agree on certain principles of how children should be raised.

This is something that requires no government intervention. In fact, you really don't want the government meddling in something like this. This is just 8 adults deciding, “We gotta do something. Our culture is being lost. Our community, everything that we value, is being lost. We gotta do something. We also gotta do something because there's no one to take care of us when we get old”—which is another aspect of my post-nuclear family. I propose that no adults live in the household except the elderly adults who need care.

So imagine a big house, big McMansion. The kids occupy most of the house, but there's a little wing where the old people live, the people who need care. What this allows is the children [can] provide a lot of that care, a lot of that routine care. Let's say you have an invalid grandmother. Well, the kids can at least bring the bringing the grandmother food. 

I propose that the kids do as much as they possibly can of the parenting tasks themselves, which is another radical aspect of my system. Today, what happens is you have two parents. They're raising one or two kids. They wait on their one or two kids hand and foot. They make all the meals. They do all the cleaning. They change all the diapers of these one or two kids, and these kids grow up pampered, with high expectations, a high sense of entitlement, which is unhealthy in itself.

What I propose is if you've got a household of 9 to 18 kids, you can now start using the labor of older kids to care for younger kids. That's the way big families have all always worked. If you're a 16-year-old, there's an awful lot of things that you can do to take care of your younger siblings. You're legally capable of babysitting them, but you can also change diapers. And you can also spend all that time teaching a young child language and playing with a young child, which is now entirely falling upon the adults.

So if you grew up grow up in this family, from the moment you're conscious, you're aware that you have a lot of brothers and sisters, a lot of people hovering around you. And most of the people who are taking care of you turn out to be not that much older than you. They could be teenagers. A teenager can do almost everything that an adult can do in terms of the routine care for infants. 

Kids can prepare meals. You don't need an adult to prepare meals. You need an adult to bring food into the house. You need an adult to pay the rent, but you don't need an adult to prepare meals. There should be a system among the kids to do that. And you don't need an adult to change diapers, because an eight-year-old can learn to change diapers. And an eight-year-old can learn to talk baby talk to a baby. You don't need a PhD in child development to talk baby talk to a baby. 

So I propose that this family system is deeply focused on caring for one another. It's a system that trains children from the very beginning to care for one another. The care you provide to your siblings is dependent on your maturity, depends upon your age and your ability. So you don't have 8-year-olds doing things that they're not capable of doing, but you do want them to do everything that they are capable of doing. 8-year-olds can change diapers just as well as a 32 -year-old can change diapers. 

If you're going to develop the system, you've got to have an educational plan. [If] you bring all these kids into your household, it's because you really want to program them. You're creating a household because you want to program kids in your way of life and your way of thinking, so there has to be an education plan. There has to be school. 

This is all open as to what school will look like. I see it as homeschooling. The way I would do it is I would hire a professional teacher. If you've got a lot of adults supporting this this family, then maybe you can hire a professional teacher to come in Monday through Friday, 9-to-5, and manage the educational plan of these children—which doesn't necessarily mean teaching. It could be assigning resources. So if you want to teach a toddler how to sing his alphabet, you don't need an adult to do that. You could assign an 8-year-old to do that. You [say], “Johnny, can you can Susie her alphabet.” And you can monitor that situation to make sure it's getting done and to make sure certain benchmarks are met, but a teacher in this system it is more of a resource manager who is assigning resources and not really doing much teaching of their own.

Part of the educational system is formal teaching. You have a curriculum that all the adults have settled on—things that should be learned, books that should be read—and then you have the inherent education of training people to care for each other. So childhood is a training program where we should be training children to care for other children, other people. We should be training children to care for their younger siblings and for those old people who need care. So in this giant household of 9 to 18 kids, there's babies that need to be cared for, and there's also old people that needed to be cared for, and your job as a kid in the middle years is to care for all these people, is to care for one another. This is part of your culture that this family would be inculcating. 

At some point, kids get old. They age out of the system. They turn 18. What happens to them? If this is a warm family with lots of interconnections, [I don't think] kids will be raging at the bit to get out. I mean, they want to go out and see the world, but they should also be closely connected to their family even after they turn 18. Part of the job of childhood is to build family loyalty, so that kids, when they're free to leave, to just walk away, that they do stay close and they do stay loyal to the family.

I propose that these children who graduate from the system are expected to support the family in very concrete ways. One of the ways they support the family is through family taxes. If you're a member of a family—either one of the founding adults or a graduate of the family—you are expected to pay a certain proportion of your income as family taxes to support the family back home. You can go and travel. You can take a job in a far distant country, as long as you're sending your family taxes back home. And you're expected to keep in touch with your family, and that's not a big thing. If the family really works in childhood, then people will always be coming back to their families.

And they'll definitely come back to their families when they get too old to take care of themselves. It should be natural that, after you've gone out and made a living and sent money back to your family and done your family proud, eventually you'll come back to your family and care for your family, because people who are in their 60s or 70s can make excellent parents. They're very experienced by then. They can serve their duty as parents in this family [because] they have a lot more time than someone would have in the middle years. Eventually when you get too old, where you need care, where you need assistance, that assistance should happen right there in the same household where you were raised. So obviously I'm talking about long-term thing here. Going from birth to old age, that's a span of 80 years.

I don't see this plan happening anytime soon—not before the collapse, not before the Armageddon, the economic Armageddon—because people aren't motivated enough. People don't see any problems.

You know, there's only a few people who really grasp the problems of underpopulation. Most people think we're still in a population explosion. A remarkable number of people think that we have a population crisis. They're still producing videos about that. This started back in the 1960s with a book called “The Population Bomb” by Paul Ehrlich, about how populations are exploding, that we're all going to starve because of it.

Well, it turns out we didn't starve. Most of us didn't starve, and populations fixed themselves all by themselves. They were already doing it by the 1970s, because we already had birth control. People were deciding to have babies instead of just having them. So we do not have a population explosion except in those selected African countries. It's almost exclusively limited in Africa now. Africa and India and a few countries around India are still producing more babies than they need, but that's slowing down, especially in India. Africa remains a crisis, but outside of Africa, we have an underpopulation problem, not an overpopulation problem.

The majority of world citizens just don't get that, just don't understand that [the population explosion] was last century. It's not this century. So only a few people really grasp how serious this is, and it will take a huge economic crisis for anyone to change, anyone to be so motivated that they would want to get together, want to find some like-minded people to raise children with. That could take 10 years or 20 years or 50 years. 

Once you embark on this kind of adventure, you're in it for the long term. You want to not just create a family, not just raise kids together, but to create a system where you can continually raise kids, continually produce kids and sustain whatever way of life you believe is important.

———

Written, recorded and edited by Glenn Campbell. For annotations, links and corrections, see the description on the video version of this podcast. You can also leave comments there. See here for all my podcast scripts on this blog.

---

INTERNAL USE

{Transcript reconciled with actual: No.

{Transcript backed up to email: 16 May 2021

{Visual version of this script backed up to Twitter on: 16 May 2021

{Video posted on FB album/DD page: 16 May 2021

{Video Description backed up by email: 

{Video description backed up on Twitter: 

{Video/audio copied to permanent backup: 

56. The Zero-Inflation Theory: New Insight on a Collapsing Economy

This is the transcript for my Demographic Doom Podcast episode #56, released on 30 March 2021. The "home page" for this episode—with annotations, links, corrections and a place for comments—is the YouTube version (39 minutes). The audio version is housed at Podbean and is available on most major podcast platforms, including iTunes and Google Podcasts. The main website for this project is DemographicDoom.com. Twitter: @DemographicDoom. Glenn's home page: Glenn-Campbell.com

This is the original script, written before recording, corrected after release to reflect the final version. 

I'm Glenn Campbell. I call myself a demographic philosopher. I'm looking at life and trying to predict the future through the lens of demography, or the study of human populations. I'm trying to view humanity from a distance, like aliens would see us from space.

In this episode, I'm looking at the giant elephant in the room that threatens us all: That's a massive monetary collapse caused by rampant government debt and money printing. I have a new theory about why there is no consumer inflation in spite of all this created money, and it suggests a mechanism for the final collapse.

My inspiration for this episode is the recent Biden Administration Coronavirus Package, which is supposed to provide aid to the most vulnerable Americans after the economic devastation of the Covid-19 pandemic. I'm not going to analyze the contents of the package except to note that it involves sending direct payments of $1400 to most US taxpayers and the fact that it costs $1.9 trillion. I'm mainly concerned about that cost. How it's going to be paid for, and the bottom line is: It won't be paid for—not now or ever. 

This $1.9 Trillion is borrowed money that can never, ever be repaid. It is physically impossible, because the government hasn't balanced its budget in 20 years, let alone paying down its debt. 

There was a time, around the turn of this century, when the government did balance its budget, albeit briefly, during the Clinton Administration, but it can't do it again due to our deteriorating demographics. Twenty years ago, the Baby Boomers were at the peak of their earning power and their taxpaying power, and today they're just a drain on us all, paying less tax and drawing on more government services, so the idea of a balanced budget just isn't possible anymore. This condition is destined to persist indefinitely: that is, there are going to be too many old people and not enough young people to replace them, and as long as that's true, the government can't balance its budget and the debt just grows and grows.

Official government debt has grown from about $22 trillion before the pandemic [correction: ~$24T] —already an unsupportable amount—to something like $27 trillion now and certainly well over $30 trillion by the end of 2021. In addition, there’s unofficial debt, called “unfunded obligations”, which is debt that we know is coming down the line at us but that isn't on the books right now. By some accounts, the US government is $50-100 trillion in the hole, with that debt growing rapidly, and its income is only about $3 trillion—that's the [annual] amount it collects in taxes. In the end, all this debt will be funded by money printing—that is, the government or Federal reserve just inventing money out of thin air.

Every government that issues its own currency is tempted to print more money to pay its bills. This sin dates back to the Roman era, when the currency was silver coins called the Denarius. Back then, the government cheated the system by progressively reducing the silver content in the Denarius, replacing it with base metal—in other words, a physical debasement of the currency. 20th Century governments did the same by simply printing more paper currency to pay their bills, and in modern governments, money is created electronically without the inconvenience of actual paper.

Historically, this has always resulted in inflation, even hyperinflation, as happened in Venezuela, in Zimbabwe and Weimar Germany and countless other banana republics. In our banana republic, inflation hasn't really happened yet, at least in consumer staples, and it has been a bit of a mystery why not, since the US government is printing money on similar scales.

That's where my theory comes in. I call it the "Zero Inflation Theory" because it proposes that large amounts of money can be printed without inflation. Now I'm not talking about Modern Monetary Theory here, which seems to propose endless amounts of money can be printed with no negative consequences. I am suggesting disastrous consequences for money printing, but it doesn't have to involve consumer inflation.

The alternative would be a massive asset crash. Imagine stocks, bonds, real estate and other assets all collapsing at once or in rapid succession—I mean like falling 60% or more in dollar terms. This would be devastating for the people who own the assets, but it would not result in the debasement of the currency. On the contrary, it could result in the strengthening of the currency as investors desperate to get out of the market scramble for cash instead.

Under this theory, all the new money the government has printed has flowed into assets markets—like stocks, bonds and real estate—creating these huge asset bubbles instead of consumer inflation. The end game is that all those asset bubbles is that they simply pop. Markets will collapse just like they did at the beginning of the Great Depression.

Now this isn't a new prediction. I've been making the same prediction on this podcast since the beginning a year and a half ago, and many experienced investors have been doing the same. Due to policies of the Federal Reserve—including both money printing and artificially low interest rates—stocks and other assets are vastly overvalued right now, at least by any traditional metric. Whenever assets are overpriced, there's going to be a reckoning—a crash of some kind—where prices return to reasonable and supportable levels.

My only new insight came to me about a week ago. I'd like to say I was in my bathtub when it happened and I jumped up and cried, "Eureka!" but I don't know where I was, and I haven’t taken a bath in a bathtub for ages now.

My insight was, "Eureka! That's where the money is going to die: in the stock market!" So what will happen is that everybody and his brother will put all of their money into the stock market, as they are doing now, and all of a sudden prices crash and everybody's money goes away. It's like—Poof!—by magic, all that money that the Federal Reserve printed suddenly goes away. It vanishes.

So in other words, to avoid inflation, you have to have a balance of the creation and destruction of money. If something creates money, then some other process has to destroy money, or you get inflation, because you've got more money chasing fewer goods.

Now we know that the government and Federal Reserve create new money, but they generally don't destroy it. The Federal Reserve is capable of destroying money, by selling bonds it already owns, but the Fed isn't the only entity capable of [it]. And you and I can destroy money simply by burning it. Let's say you take all the paper money in your wallet, crumple it up, set fire to it, and—Violá!—you've done your good deed for the day by reducing the money supply.

Of course, people won't burn their own money voluntarily, so the markets have to do it for them. Another way you can destroy money is to put it into stock markets just before the markets crash. I had friends who did this just before the Dot-Com bubble and the Global Financial Crisis. I remember trying to warn various friends when they talked about the hot stock market they were into, and I don't think they heard me. The Siren's call of a rising stock is too powerful for the average investor to resist. 

Traditionally, what's bad for one asset is good for another, but I think it's possible for all assetsto crash all at once. Imagine stocks, bonds, real estate, gold and even bitcoin all collapsing simultaneously or in rapid succession. Given all the creation of money, a corresponding destruction of money needs to happen to restore stability to the monetary system, and this is how it could occur. If the Federal Reserve doesn’t have the discipline to to it, then Nature will step in and an asset crash to take care of things neatly.

In the sort of broad-based crash I’m proposing, nearly all investors lose, but the buying power of the US dollar holds steady, because the fall in assets would effect remove from circulation all the new money the government has created.

How would a crash happen? All you really need for it is a stock investors lose faith, which can happen in an instant. There may be precipitating events—some sort of world crisis—but that main thing that fuels financial collapses is shift in thinking by investors—from greed to fear, so to speak—and this can happen rapidly and without warning. I could even happen in a period that looks optimistic on the future, like the one we're in now.

Right now, in late March 2021, it appears that the pandemic is drawing to a close, with vaccines being widely distributed. I got mine about a month ago as a former cancer patient, and soon everyone will be eligible. This ought to be good news, right? The assumption now is that life will go back to normal—but only in the sense of the animals returning to the forest after the forest fire. The Covid Relief Bill is supposed to help get the country back on its feet by providing various forms of direct and indirect aid to Americans. 

For example, most Americans and their dependents are getting $1400 direct payments—added to their bank account or sent to them in a check. This is what economists call "helicopter money", where money is dropped from figurative helicopters to try to stimulate the economy. The most important issue to me is the fact that the $1.9 trillion is completely unfunded. None of it is coming from collected taxes. It is 100% borrowed, and that money theoretically has to be paid back by future generations.

So how much is $1.9 trillion? First of all, let's be honest call is $2 trillion, which is close enough for government work. No government program even comes in under budget, so $2 trillion is the minimum the government can be expected to spend, above and beyond what it normally spends in a pre-pandemic year.

For perspective, before the pandemic, the US Federal government spent roughly $4 trillion every year while collecting $3 trillion in taxes. That means that the government has been borrowing $1 trillion every year, even in supposedly good times. In 2021, as in 2020, the government is on track to spend roughly twice as much money it collects in taxes—that is, spending about $6 trillion on a tax income that's barely $3 trillion, and the entire shortfall is borrowed and ultimately printed.

The mechanism for this is that the government issues bonds—or pieces of paper promising to pay in the future—and investors buy those bonds, giving the government cash in return. Sometimes, the Federal Reserve will buy the bonds itself and issue new currency in exchange, and this is formal money printing, but to me this final step is inconsequential. In my view, the money is created the moment the bonds are issued [see caveats in video description], because investors trade these bonds among themselves as though they were cash—like $10,000 bills. You hardly get any interest on them, so that's all that bonds are nowadays: $10,000 bills where you can store your cash in a supposedly "safe" form.

Since the government had been spending more money than it makes for two decades now, a mystery among experienced investors and economists is why there hasn't been any consumer inflation, and that’s the question I’ve been pondering for months now.

Now in my own little world, my own gauge for inflation is the Dollar Tree stores that I visit every few days while traveling. Everything in the store is one dollar—absolutely everything—and these stores have been selling roughly the same products since the 1980s. If there were significant consumer inflation, they'd have to change their pricing model, which they haven't had to do so far. In fact, Dollar Tree stores seem to be prospering. There's more of them now in America than McDonald's restaurants, and they are especially well patronized in bad economic times like these. 

My latest theory says that Dollar Tree will NOT have to change its pricing plan anytime soon. Eventually it might have to, but not on the near term. Although the government is printing money at breakneck speed, an asset crash will soon take care of the excess, and dollars themselves—at least the paper kind—will hold their value.

Now I remember inflation from my own youth, when I saw the price of a standard candy bar, like a Snickers, go from 5 cents to 7 cents to 10 cents to 25 cents, and eventually stabilize at about $1 at the checkout, or a lot less if you buy in bulk. That's where prices have stayed for consumer goods since the 1980s, as long as you shop at Walmart and not some high-priced neighborhood supermarket.

On that other hand, there has been substantial inflation in things like rent, health care, higher education and assets like stocks and bonds. The cost of buying a house or renting an apartment has gone through the roof, at least in the most desirable cities, so it isn't accurate to say there's been no inflation, just no inflation in mass-produced consumer goods.

And this is a key distinction. Consumer goods have held steady, while anything that you might buy and hold for investment purposes has inflated. Assets like stocks, bonds, real estate, fine art, gold and bitcoin have all exploded, and rents are high mainly because landlords have had to pay huge prices for their properties. All of these investable assets have gone up, commensurate with what you'd expect with all the money creation. Asset prices are in Zimbabwe territory, even if Dollar Tree prices haven't changed. 

Symbolic of asset inflation is stock prices. As I speak, US stock indexes like the S&P, remain near all-time highs, in spite of the pandemic that has severely depressed the underlying businesses that the prices are supposed to reflect. Of course, that may not be true by the time you listen to this podcast, sometime in the future, but it's true as I speak. 

So the economic disaster of the pandemic has led to the counterintuitive rise in stock prices, which I never would have predicted when the pandemic began. When stocks first dipped in March 2020, I was thinking, "This is it—this is the crash I was expecting," but the rout didn't last. Stocks didn't just rebound from their lows but surged to all-time highs. It was utterly insane.

So why has there been inflation in assets but little in consumer goods? I think I finally have a mechanistic theory to explain it, and to explain my theory to you, I want to go back to those $1400 checks that the US government is sending out to people.

The theory of helicopter money is that once people receive it, they're going to go out and spend it in the consumer economy, thereby stimulating it and putting people back to work. As a side effect of all this spending is supposed to be moderate inflation, since more moneywould be chasing fewer goods. 

But I believe that's not how real people are spending their $1400 checks. Most people are doing one of two things with their $1400: either they're paying down existing debt, or they're investing money in assets like stocks and bitcoin, neither of which simulates the economy or generates inflation.

Now for the sake of this argument, either you're rich or you're poor, and I define rich and poor in this context by how you use your stimulus check. Poor people have stayed alive during the pandemic by going deeply into debt. They've charged food to their credit cards, or they've paid for food by delaying on mortgage or rent. When their $1400 comes through, they're not going to buy more food. They're going to use their money to pay down back rent or pay down their credit cards. In fact, that's what I'm going to do, because I charged up my own credit cards during my cancer treatment last year. The $1400 is not going to change my buying habits, which remain pretty frugal.

Now this is something that has changed since the Great Depression. During the Great Depression, consumers did not have access to credit. If they didn't make any money, they starved. They didn't have credit cards to charge the food onto. They didn't have mortgages to a large extent. They had rent, and if they couldn't pay the rent, they got thrown out in the street. 

Today, what is different is everyone has credit, so in hard times everyone spends up their credit cards, and things don't work like traditional economists think they should. You've got this credit card buffer. So when the government sends out $1400, people just apply it to their credit cards and it doesn't stimulate the economy.

Now if you happen to be rich, you don't need the $1400 check, but it comes in anyway. Your credit cards are already paid, so what are you going to do with the money? You could spend it on something frivolous, like a vacation, but people are still hunkered down now and aren't taking many vacations yet. Spending even among the rich is pretty conservative right now. So what are these people going to do with the extra money?

Well, they're going to invest it, of course. "Investment" is seen to be a good word, because it implies that you are being sensible with your money and saving it for a rainy day. Today, it actually implies the opposite. It implies speculation: You're putting even more money into markets that are already in bubble territory.

These investments can take various forms: You can put your money into the stock market, which is easier than ever thanks to idiot-friendly apps like RobinHood. You can buy gold or bitcoin or some other vehicle that is supposed to preserve value—although it's still only the perception of value, since you can't eat gold or bitcoin or do much else with them. Even if you just leave your money in a bank account, you're making a speculative investment of sorts, because you're really loaning money to the bank so they can speculate with it.

Alternatively, you could take your $1400 out of the bank, turn it into 14 crisp $100 bills and store them under your mattress. Even this might seem like a speculative investment because you're gambling that $100 holds its value and will continue to buy you the things that it always bought you, but I'm actually beginning to believe that's the safest place for your money, as crisp $100 bills stored under your mattress.

There's a risk that inflation will diminish the value of those bills, but I think an even greater risk is that the institution you trust with your money simply collapses and you don't get your money back. This isn't supposed to happen with regular bank accounts, because they're insured by the government, but what if the government fails and can't fulfill its obligation? I say that's not out of the question, and failure is certainly certainly possible for any kind of investment fund, which has no insurance by the government.

I think the mindset of the average citizen right now is to put their money into stocks. They see the huge recent price gains and think, "I want a piece of that!" In theory, stocks are a hedge against inflation, because as the price of consumer goods goes up, so should stock prices. I can't give you a percentage, but many of the so-called rich people who don't need the $1400 are going to be putting it into stocks or bitcoin or something else ridiculous. Even some no-so-rich people are going to do it because of the huge apparent gains of recent months. It seems so much sexier to put your money in places where it can earn huge returns, rather than just pay off your debt. Some people are even borrowing money to play the stock market, and we all know where that usually leads.

So what will all this new investment do to the stock market? I say it's going to inflate it even more! In the next few weeks, as the $1400 hits people's bank accounts, I'm expecting even more stock market highs. The simple fact is, there are only so many marketable assets you can buy, and if there's more money chasing those assets, naturally prices are going to rise.

The destination of those $1400 checks gives me insight into why government money printing causes asset inflation but not consumer inflation. Money printing over the past decade has put more cheap cash into the hands of the investor class, who are tempted to speculate with it, while artificially low interest rates have pushed people out of so-called "safe" investments like bonds and into more speculative ones. The money gets plowed into various assets markets, from stocks to Bitcoin. So the speculative mania has been going on for several years, and now the government is making things even worse by sending out these $1400 checks.

I don't think there's any mystery about where manias end: They always end in tragedy. You just don't know when. Could be tomorrow. Could be months from now. Certainly the rise in stock markets in 2020 was something I never expected, and it has delayed the timeline, but it's still going to happen. Now in the past year, I've learned my lesson and now refrain from predicting when assets will crash, only that they will. As the old adage goes: "Markets can stay irrational longer than you can stay solvent."

My only insight lately is that now I see how a market crash—when it happens—can neutralize inflation by destroying money. The government creates money and asset markets will soon destroy it. We certainly have plenty of things to worry about when markets collapse, but I don't think inflation is one of them—at least at the beginning. Now after markets crash, if the government keeps printing, then there could be inflation, but during a panic, cash will be king.

And I have a related prediction: I'm thinking that there could be a shortage of paper currency coming soon, coinciding with the crash in markets. In fact, there was a shortage of coins a few months ago, near the start of the lockdowns, and many stores were asking people to use exact change or credit cards. That shortage seems to have been abated lately, perhaps as people get out more and start spending coins from their piggy banks. In any case, I don't see signs in the stores anymore asking for exact change.

What I'm looking ahead to is a time when paper bills—especially $100 bills—are in temporary short supply. This would happen when some store or other entity offers to give you more than $100 in value for your $100 in bills. For example, stores might charge one price if you pay by credit card but give you a substantial discount if you pay with paper cash. Some gas stations have been doing this for years, because it helps them avoid credit card fees, but if there's crisis, this policy could become a lot more widespread.

The reason I'm thinking this way is that when there's a panic, there's a race by investors to redeem their assets and turn them into cash, and if you’re really scared [and] you don't even trust your bank, you're going to want cash-cash, or paper money you can hold in your hands. That's when the $1400 you saved under your mattress might command a premium.

That's not deflation, per se, because eventually the Bureau of Engraving and Printing will crank up the physical printing presses and produce more $100 bills, but there could be short-term shortage of paper currency in a time of panic.

So what kind of panic am I predicting? An 80% drop in stock prices is not implausible. It has happened before—from the Roaring 20s to the midst of the Depression—and it can happen again. The key issue to me is that there is far more perceived wealth in the world than actual wealth.

I've discussed this in earlier podcasts—like Episodes 52, 40, 20, 7... If you think you're wealthy, it's because you own virtual title to money-producing assets, like rental property or ownership in a company or a government bond. And these things realistically cannot produce the future income that the current price implies. It's like a stock selling for 40 times annual profits when 10-20 times is more the norm. Sooner or later, markets have to settle back to a rational price, and it typically happens in a disorderly way—in other words, in a panic.

One of the factors that could help accelerate the panic is the ascendency of index funds—also known as passive investing—where people put their money in a single fund that buys all the stocks of a certain index, like the S&P 500.

These funds are supposed to mirror the performance of the index—which might have been true when they were a tiny portion of the market. Today, roughly 50% of stock market investments are now held in these kinds of vehicles. [See correction in video comments.] I repeat: roughly 50% or half of all investments in the stock markets are held in index funds. That's a huge amount. That means these funds aren't mirroring the market anymore. They are driving the market.. Their presence greatly amplifies any shift in prices—for better or worse. Index funds helped inflate the market during the past boom, and they will help sink the markets in the coming bust.

So if you don't know about index funds, let me give you a little primer. They hold only the stocks that constitute a market index, like the S&P 500 or the Dow Jones Industrial Average. If you put your money into these funds, the fund managers have no discretion. They have to go out and buy the underlying stocks, regardless of the price. Presumably, they do this on a daily basis, based on the cumulative inflows and redemptions on that day. Their demand for stocks in the index has nothing to do with how well each of the individual companies are doing. It's strictly a function of new investments comin into the fund. That's why it's called "passive" investing. No one is making any decisions—compared to active investing where a fund manager is looking at the actual performance and prospects of the company they are buying.

In the past few years, passive funds have vastly outperformed active ones. I think it's because active managers see how irrational current markets are and are sitting on the sidelines while passive funds are completely blind. The index funds form a self-reinforcing loop. As long as these funds go up, small-time investors keep putting money into them, forcing these funds to buy more stocks, which continues to inflate the prices of those stocks far beyond any normal valuation.

This is great for index fund investors in the upward side of the roller coaster, who experience these huge gains on paper. They don't realize that the same thing can happen in reverse: As soon as investors get a scared and start pulling money out of index funds, these funds will be forced to sell, which will accelerate the downward trend. As the market falls, more investors get scared and pull their money out, which forces more sales and further depress prices. It will be a self-reinforcing cycle that could really, truly end in a 80% collapse.

So that's what I confidently predict will happen. I just can't tell you when. One scenario says it will be soon. The pandemic generated a paradoxical asset boom, and solving the pandemic could do the opposite: triggering a massive bust in all asset classes. Huge amounts of wealth will be wiped off the face of the Earth, but in the process, a semblance of equilibrium will be restored to the monetary system.

What this would mean, in effect, is that all the past deficits of the US government will eventually be funded by the investor class, in the form of loss of wealth. All the rich people with asset investments will suddenly become a lot less rich—maybe 80% less rich. In effect, this will be their involuntary contribution to the US deficit.

There may seem to be some poetic justice in this—seeing the rich get their just desserts—but there will be plenty of collateral damage among the poor and the nation as a whole. First of all, asset markets aren't just funded by the rich. Your parents and grandparents probably have their retirement savings tied up in asset markets, mainly stocks and bonds but also the house they're living in. Think of the terrible position they'll be in if all of their investments crash by 80%. 

Even bonds will not be immune. As I speak, bond markets are also in a bubble. This is represented in ridiculously low yields for both government and corporate bonds. For example, the interest rate you might expect to earn on a 10-year government bond in times of low inflation is 5-6%. Today, it's less than 2%, or right around the official inflation rate. In other words, if you loan the money to the US government, you're getting virtually no return on it, despite the substantial risk of inflation sometime in the future.

A bond is little more than a $10,000 bill that you can store under your mattress, yet it's even less secure than a $100 bill, because the market value of a bond can fall. For example, you can buy a $10,000 from the government for $10,000 today but if the market yield subsequently goes up—say to 5%—the book value of the bond you already hold will go down to something below $10,000. So if Grandma and Grandpa are invested in government bonds instead of stocks, they could still lose money in a crash, just not as fast. And if they're invested in corporate bonds, the issuer could default altogether, and Grandma and Grandpa lose everything.

Once the crash begins, the end game is also hard to predict, but I'd say that a good reference point is the historical bond yields and asset prices of a fairly sane period, like the mid 1990s. Back then, yield for a 10-year bond was about 5-6% and stocks were trading at normal PE ratios—let's say between 15 and 20 times earning compared to about 35 or 40 times earnings today. That's what we can expect in a "rational" world, and it is not unreasonable to expect markets to eventually revert to that rationals level, and that means today at least a 40-50% drop in stock markets.

The trouble is, a rational world has simply become unsupportable now. For example, the current level of Federal debt is sustainable only if interest rates remain 2% or below. If the rate the government pays rose to the historical norm of 5-6%, most of the government budget would go to interest payments alone—dwarfing other expenditures like the military or social spending. Personally, I think the government should be paying even more than 5-6%, because it's a dodgy creditor. It's not that the government would default, because it can always print money to pay off creditors, but eventually there will be inflation, enough to wipe out at 5-6% interest rate.

My Zero Inflation Theory only suggests that there may be little inflation during a crash. There could be inflation after the crash, if the government keeps printing money, because it has no other way to fund itself. When all confidence in the government is lost, that's when you're in Zimbabwe territory.

The key issue is what happens to the US government if it doesn't have access to dirt-cheap credit. How will the government survive if it can't borrow affordably anymore? What happens if investors begin to realize what a dodgy creditor the government is? In that case, the government won't be able to rescue anyone anymore, and it won't even have the money for its normal operations. 

Governments have gone through crises like that before, and it hasn't been pretty. There's Weimar Germany before the rise of Hitler. There's Argentina, Venezuela and most of the countries in Africa at some point. Right now, the prospect of a government debt crisis is a little too much for my overloaded brain—and maybe yours, too—so I'll put it off to another episode. What happens to ordinary Americans and society at large if a government truly can't pay its bills and can't borrow money anymore.

The only thing I can say right now is, that according to my Zero-Inflation Theory, rising prices may not be an immediate crisis. Inflation is always possible, but I would bet that the Dollar Tree stores will continue to sell the same range of products for only a dollar, at least for as long as assets markets are crashing. Once everyone is wiped, then inflation might be along to finish us all off.

———

Written, recorded and edited by Glenn Campbell. For annotations, links and corrections, see the description on the video version of this podcast. You can also leave comments there. See here for all my podcast scripts on this blog.

---

INTERNAL USE

{Transcript reconciled with actual: 4/3/2021}

{Transcript backed up to email: 4/3/2021}

{Visual version of this script backed up to Twitter on: 4/3/2021}

{Posted on FB: 3/31/2021}

{Video Description backed up by email: 4/3/2021}

{Images of video description posted on Twitter: 4/3/2021}

{Video/audio copied to permanent backup: 4/4/21}

55. Jim Rogers on the Next Economic Crisis — Demographic Doom Podcast Transcript

This is the transcript for my Demographic Doom Podcast episode #55, released on 19 February 2021. The definitive version of this episode, with annotations, is housed on YouTube (19 minutes), with the audio-only version at Podbean. Available on most major podcast platforms, including iTunes and Google Podcasts. See the description on the YouTube version for extensive annotations, links and corrections. You can also comment on this episode there. The main website for this project is DemographicDoom.com

This is the original script, written before recording, corrected after the recording to reflect what was actually said.

I'm Glenn Campbell. I call myself a demographic philosopher. I'm looking at life and trying to predict the future through the lens of demography, or the study of human populations. I'm trying to view humanity from a distance, like aliens would see us from space.

In this episode, I'm going to return once again the dire monetary collapse that is heading our way. I probably won't be saying anything new in this episode, just repeating what I've said before, but this time I'm going to give you someone else's perspective—that of Jim Rogers, a well-known investor.

Why do I keep harping on this? It's like I'm on the Titanic after it hit the iceberg. I know the ship is sinking, even if most of the other people haven't caught on. I have countless interests on board the ship, but my attention keeps coming back again and again to the fact that the ship is sinking and all my interests are going to be swamped.

And it's not like I'm even trying to warn people, because there's not a lot anyone can do. My audience right now is miniscule, but even if I had a million listeners who all agreed with me, there's little we can do to stop this. You can't negotiate with a sinking ship. It's still going down.

We've been in a pandemic for about a year now, and we're still recovering from the trauma of the Trump Administration, but all of that pales in comparison to the freight train that's coming down the track at us. It's a massive monetary collapse that will change everything. It will totally disrupt society and will make the pandemic look like a mere appetizer of disaster.

But don't just take my word for it. I'm going to start off by playing a 4-minute clip from Jim Rogers, a well-known 78-year-old investor. I don't know where the interview comes from, but it was apparently recorded in mid-2020, when the pandemic was less than 6 months old. I've done some editing to to it make it more compact.

So here is Jim Rogers...

This certainly has been the worst in my lifetime. We've had a huge rally because governments everywhere have printed and spent staggering amounts of money. But it just means the next time it's going to be worse still. You know, unless you think we'll never have economic problems and market problems again, the next one's going to be worse because [of] the debt. 

In 2008, we had a problem because of debt. Since then the debt has skyrocketed—skyrocketed!— everywhere in the world. So unless you think we're not ever going to have problems again, then the next one is going to be worse. People say it cannot get [worse]. It can get worse!

The printing presses are running at unbelievable speed. Every day, the Bank of Japan goes to work and cranks up the printing presses, and as he said, we will print unlimited—that's his word “unlimited”—amounts of money. That's happening all over the world.

I mean if you get into trouble, you just call up and say, “Help me, help me, help me, save me!” And somebody comes along and saves you. No, we haven't had any gigantic problems yet, but the debt is building up everywhere. 

Maybe I'm wrong. Maybe this time is different. Maybe the world has learned a solution so that it’s different this time, but I doubt it.

Six months ago [probably late 2019], the United States was the largest debtor nation in the history of the world. Never had anybody been so deep in debt. Since then, the U.S. has increased its debt by trillions—with a “t” trillions—more.

You know if you give me a few trillion dollars, I will show you a very, very good time. We will all have a wonderful time with a few trillion dollars, but somebody eventually has to pay the price, because somebody has to worry about paying it back. You know, these days are not good for old people. They are not at all good for young people. I have young children. Oh my gosh, America is leaving them a terrible, terrible legacy which they're going to struggle with all their lives. 

Whenever there's a problem in the world, people look around for an easy way to solve the problem. Once upon a time, there was a guy named “Marx”, Mr. Marx. Mr. Marx had a wonderful theory, and many people accepted it and tried it for a long time. Nobody believes in Mr. Marx anymore. We found that it didn't work.

But right now, there's another one called “More Money Today”—MMT. Give me some money. More money, free money. Well, everybody loves it, so many people are starting to try it. Nobody's saying it out loud, but the British are doing it, some people [in] China, the Japanese are doing them. So we're going to find easy ways. Politicians always find easy ways. Will it work in the long term? As I said, being a young person in America right now is not a good thing to be. All of us peasants know. We may not have studied economics at an Ivy League university, but we know that when you print money and borrow money, subconsciously, we know this leads to problems. 

As I said, watch Kitko news. You will see that the world is really doing strange, unusual things. Never before in the history of the world have interest rates been negative. Never before has a major bank like the Bank of Japan said: “We will print unlimited amounts of money.” Sure, Zimbabwe prints unlimited amounts of money. Countries have done it, but now you have major people doing it. So, yeah, this could turn into a huge bubble.

So I like his folksy manner, but it's entirely calculated. This is a guy who was educated at Yale and Oxford, so I think that whole "peasant" bit is a bit contrived. But a folksy manner is just what you need right now to explain this thing because it's really quite simple. The US government and others around the world have been spending far more money than they're taking in. This was true before the pandemic and it's doubly true now.

The only way governments can cover this shortfall is by printing money. They effectively print it simply by issuing bonds. Some of those bonds are purchased by central banks like the Federal Reserve, which creates new currency in return, but to me, whether it's bonds or cash is immaterial. As soon as a government issues a bond, money is effectively created, because investors trade bonds among themselves as though they were cash.

As Jim Rogers points out, this money printing just can't go on. You can construct all sorts of fantastic theories like Modern Monetary Theory—which he calls "More Money Today"—but you can't defy the laws of physics for very long. If you keep printing money, bad things are going to happen that put a stop to it.

In Zimbabwe or Weimar Germany, the bad things were pretty straightforward: If you keep printing money, the value of each unit of that currency will fall, leading to hyperinflation. You can't get something for nothing. There's no such thing as a perpetual motion machine, even though they've tried to do it again and again. Some of really look good, these perpetual motion machines, but they always fail in the end.

And the question comes up again and again: If the government can just print unlimited amounts of money with no ill effects, then why does anyone pay taxes? Logically, that's where things are leading: No one pays taxes and the government just prints money to give out to people. You know, intuitively, that cannot work, so the system has to break somewhere along the line.

In the case of the US dollar, the dynamic is much more complicated and unpredictable than it was for Zimbabwe. For example, I would have never predicted that a worldwide pandemic would lead to an all-time high in stock markets. Economic historians will be dissecting that for ages, writing books and papers trying to explain why it happened, but it's just not normal. It's not a healthy response to an obvious economic injury. What is feels like, anecdotally, is the government has printed all this new money, and it's all going into asset inflation rather than into consumer inflation.

It's easy to get sucked into the rabbit hole of trying to figure out what is happening right now, but I'd rather look at the end result. The end result of runaway money printing is that your currency is debased, devalued, and that process is going to cause a lot of other bad things to happen all thoughout society and the economy. I'm not willing to predict what will happen and when, because I've been burned too many times by that. I'm only predicting "bad things". When things blow up, they can blow up in unpredictable ways. 

Think of the Trump administration. That Trump would get elected in 2016 was entirely unpredictable and outrageous two years earlier, and lots of events come out of the blue like that. They will eventually seem to make sense in the hands of any competent historian, but they couldn't have been predicted before they happened. The fabric of history is like that: In a complex system, you don't know the exact ways things are going to interact.

What you can predict with some certainty is what happens to packages of things. Take Planet Earth. I have no idea what human society will look like in 500 years. I can't predict the news stories or the human events 500 years from now, but I can predict—or at least astronomers can—exactly where in space Earth will be 500 years from now. It's a very simple calculation, even though life on Earth is very complex. 

Likewise, I can't predict how the economy will evolve over the coming months or what world events will happen. What I can predict is that the current economic model is unsustainable and has to collapse is some dramatic fashion. Whether you're a government or an individual, you can't keep spending more money than you make. You know the end result: a debased currency and a gutted government. You just don't know what sort of crazy things humans on board the ship are going to be doing as it is going down.

Stock markets right now are a reflection more of human sentiment than a reflection of fundamental value. In the end, fundamentals will win, but in the short term, stock markets can do some crazy things, as they've been doing over the past few weeks. Even today, as I'm recording this, the S&P 500 is near its all-time high, even as the pandemic continues. This bubble may have popped by the time you listen to this episode, but it's inflated now, and I would have never predicted that a year ago.

One thing you can predict about money printing is that the government will eventually lose the ability to borrow. Either the government will default on its bonds, or inflation will erode their value, in which case no one will want to loan money to the government at affordable rates. The end-game for the US government it that either will collapse altogether, or it will have to find some way to live within its means, spending only the taxes it actually takes in. That sounds like a good idea, but it's far messier than it seems, because you can't just cut the government budget in half without major political upheaval. 

The other thing that you can reasonably predict is a massive evaporation of wealth. Essentially, wealth consists of paper promises, as I described in Episode 52. For example, you could have pieces of paper that are redeemable for chickens, and those pieces of paper are only perceived wealth. It is only perceived wealth, not realized wealth, because you don't actually have the chickens in hand. You only have a promise of chickens.

The general state of the world right now is that there are far more promises outstanding than can possibly be redeemed. That's what Jim Rogers means by too much debt. For example, there are far more government bonds than the government can ever pay off. That's simple mathematical reality, especially if there is no more significant population growth to fuel the economy.  

Wealth evaporation happens when markets realize that all those pieces of paper aren't worth nearly as much as people think they are. If you thought you had a piece of paper that promised you a thousands chickens, but it's really only good for a hundred chickens, then you've lose wealth as soon as that fact becomes known. Until that time, you can trade your piece of paper as though it was worth a thousand chickens, but once we know it's not possible, then wealth evaporates.

And I think that's what's coming down the line for anyone with assets, be it a house or fine art or a 401K plan invested in the stock market. Suddenly, during some unspecified future crisis, people are going to discover that they're not nearly as wealthy as they thought they were. Vast amounts of wealth can vanish almost overnight and have done so in the past—for example when a stock market crashes. All it takes is a change of attitude from investors, shifting from greed to fear. In a panic, people's portfolios of promises can be devalued in an instant.

Not just wealthy investors are affected, but anyone with an IRA or a bank account. And onnce people start losing this wealth, they're going to stop buying things, especially those things they don't really need, as I describe in Episode 41. This passes the crisis along to people who do not have any assets, who are living paycheck-to-paycheck, because they'll lose their job in these non-essential businesses.

The late 20th Century was a period of globalization, where the world become increasingly integrated. I predict the 21st Century will be a period of localization, or fragmentation, where all sorts of big systems like governments break down and people have to rely more and more on local solutions. The pandemic has already started the ball rolling, confining everyone to their own country. Even if all those restrictions are lifted tomorrow, people have become more localized now and more conservative in their spending and may not want to travel. In any case, we will never again have the same level of global integration we had in the 2010s. Increasingly, it will be every country and region for itself, trying to find solutions to its problems within its own borders.

I take the Fall of Rome analogy very seriously. At its peak, the Western Roman Empire linked most of Europe together into a unified system. But it was an economically unsustainable system that eventually collapsed on itself. It took a lot longer to collapse than I would have predicted at the time, but it did collapse. What emerged in its place was a lot of independent fiefdoms fending for themselves.

When the big collapse comes, in whatever form it takes, humans will continue to survive, just as they survived after the Fall of Rome, but they are going to do it in ways we can't predict right now. There will be a lot of compromises on the road to survival that we aren't willing to make today. They will be forced upon us.

But we will survive. Humans always do. We're clever. We're resourceful. When pushed to the wall, we'll figure things out and come up with new ways to organize ourselves. It's just going to be a very painful journey getting there.

———

Written, recorded and edited by Glenn Campbell. For annotations, links and corrections, see the description on the video version of this podcast. You can also leave comments there. See here for all my podcast scripts on this blog.

{Above reconciled with actual: 2/19/21}

{This script backed up to Email on: 2/19/21}

{Visual version of this script backed up to Twitter on: 2/19/21}