Major Shift #1: Depopulation
What the Drop in Global Birthrates Means for Us, Our Futures, & Our Finances
Post Summary:
For the first time in recorded history, birthrates are dropping at alarming rates — this has never happened before. The US, along with the rest of the world, is about to experience life with less and less people in the following generations.
Key Theme: How to Grow with Fewer People
Financial Implication: Poor Investment Returns and Rising Costs.
On a muggy August day in Washington D.C., in the Cannon House office building, I picked up the bundled mail in my inbox and heard a thud as an object slammed onto my desk. The papers were sealed together like an old library book, but worse. It had the feel of a book baked on low and slow in grandma’s kitchen. For obvious reasons, the Capitol Hill police run all congressional mail through a scanner that detects and eliminates any biological agents, such as anthrax.
Congressional offices get thousands of these kinds political themed mail. And though scanned for safety, this crusty phone book sized packaged still presented a threat — its cover read “The Population Bomb.” I had never heard of this before, even as a staffer on the Hill, and the subject was too intriguing to stop unsticking the paper.
Reading it I learned the population boom was a major concern in the post WWII years. Fast forward to today and we find the population explosion was really an implosion. The over didn’t happen — but the under is happening right now before our eyes.
As mentioned in the Core Report (read there for a broad overview and specific steps to take now), the world birthrate has been in decline for decades, and we’re about to realize what that means. Listen to what geopolitical expert Peter Zeihan said about this in his recent book:
“Demographics tell us that the number and collective volume of mass consumption-driven economies has already peaked. In 2019 the Earth for the first time in history has more people aged sixty-five and over than five and under. By 2030 there will be twice as many retirees in relative terms.”1
Far sooner than expected, 2025 could be the first year the US has a net decline in population (more deaths than births). To just maintain a people group, the birth rate needs to be 2.1. In 2020, the US birth rate was 1.8. As of this writing, in 2025 it was 1.6. Even in traditional societies that embrace children, they’re also having less. A drop in population because of declining birth rates has never happened before. Declines due to wars, plagues, and other cataclysms, sure; but this is something we’ve never witnessed in recorded history, and certainly not on a global scale. How will it affect us?
Key Theme: How to Grow with Fewer People
How does a society grow or even continue with less and less people each year? At some point, AI will probably play a viable role, but in the near term it will likely be more automation centric (not AI whole cloth). But any technology that can step in to free a person and maximize their work will become a priority. It has to because the next generation of workers are too few, too valuable, and about to become too expensive to do what a machine could do.
There’s only one problem: many areas can’t be automated. The primary example is healthcare. AI can’t draw your blood. And the day it can is too far off for our present needs. Key areas lacking sufficient supply of people are creating chokepoints. We don’t have enough doctors, nurses, therapists, or health aides to fill the demands of the largest generation in American history (Baby Boomers), now and into the 2030s as they enter retirement. Any sector that can’t maximize the role of a human with automation will become a chokepoint. Healthcare will be the clearest example, but far from the only one.
Financial Implications: Poor Investment Returns & Rising Costs
Isn’t economic growth, thus investment growth, predicated on an ever growing population? How do my retirement savings grow with fewer people? There are examples of countries with a declining population that still grow (Japan has been in decline since the 90s and is still one of the largest economies). But growth with a declining population is not a given.
Depopulation will soon start to batter stock market returns from several directions, but especially before we can automate key parts of the economy (demand is about to outpace supply). Be prepared for slow to no growth for years — and even significant declines. A 40-50% drawdown in the market is a real possibility; and it could it stay down for several years. If you’re a Boomer and will need to start drawing on your retirement soon, make sure you have enough in bonds to withstand multiple down years, in a row. And if you can continue working a few more years, that will absolutely make a difference. The longer you can wait to touch your retirement savings over the next decade, the better your odds.
If you don’t need your funds for a decade or more—looking at you Gen X and my Millennial peeps—you MUST keep investing through this weird period. Why? Because Winter comes before Spring. The 2040s look like they could produce an economic boom similar to the 1960s or the 1990s — but we have to get there first. Keep saving, even when it looks dark. If you do, you’ll be investing at the most opportune time, the low point before a boom.
The biggest factor that will affect our daily lives very soon is inflation. There are multiple inflationary drivers over the next decade, but with fewer people, the demand for workers at those human chokepoints will spike. You can already see this at places like McDonalds. The former king of value and the dollar menu is no longer the cheapest fast food option, mainly because of the increasing wage costs to keep locations staffed. Be prepare for service costs to rise because of fewer workers.
For financial planners, inflation is the nightmare that stalks our waking dreams. From 1900 to 1999, the worst time to retire was not during the depths of the Great Depression, with its 25% unemployment rate. It was during the 1970s when inflation got wildly out of hand. Inflation is not just a hidden tax; it is the serial killer of fixed incomes. Until we can fill the worker gaps, inflation from wage spikes will be with us for years to come. Get ready: build up your savings, and keep buffer room in your budgets for ever increasing prices.
We’ve Endured Before
As we head into the back half of the decade, we’re starting to hit rougher waters. We’ve never faced a drop in population at this scale, as a nation or a species. Scary headlines are coming, and it will be easy to give in to despair. But do realize, from the very beginning of time right up to the present is an unbroken chain of people that, even in dark times, managed to pass on the spark of life, right down to you.
This isn’t the first hard thing we will go through as a nation or humanity itself. Nor the last. As heavy headlines scroll across your screens, ground yourself in the reality that we’ve endured before. We can do it now. We can and will figure out how to survive and thrive, even if our population doesn’t keep booming.
Keep your heart open, and watch the story of history unfold. We can do this. For in the end, all shall be well.
Hang on tight, because we ain’t there yet…not just yet…
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The End of the World Is Just The Beginning. (Zeihan, Peter - Pg. 73)