Update No. 32 – 06/11/11

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I have been harping for a couple of months now that I don’t think the economic situation in the U.S. is nearly as bad as it is consistently being portrayed.  To this end, I found this article very interesting in the way it articulates a number of positive factors in the American story that are being overlooked.

I also consistently point out that the U.S is the world’s primary economic engine.  Although China is a large and increasingly important player on the world scale and will inevitably become the world’s largest economy, consistently overlooked (at least in mainstream media) are the demographic issues China will face, predominantly caused by the ‘One-child policy’, but exacerbated by a disproportionately high male population, evidently caused by selective abortions and female infanticide (however it has happened, there were apparently 118 males born for every 100 females in 2010).  Some interesting writings about these various demographic issues are available here, here and here.

This graph and the one in the third link above are particularly instructive; one doesn’t need a background in economics to picture the likely problems such a demographic set-up will create. In Europe, the elder share of the population passed 10 percent in the 1930s and will not reach 30 percent until the 2030s, a century later. China will traverse the same distance in a single generation.

The upshot of these demographic issues has basically been the fact that China has been in a ‘Demographic Sweet Spot’ for about 25 years, with an ever-increasing proportion of the population becoming ‘working-age’.  Evidently the peak of this has passed (most likely in 2010) and will probably lead to China having the shortest ever reign as the most powerful economy in the world (depending of course how they handle their ascent).

In any case, China will be extremely important to the world economy for the foreseeable future, I just think it should be borne in mind that the country will also face an unprecedented demographic challenge that will likely lead to severe and prolonged economic stagnation following almost immediately after an extraordinary and prolonged economic boom.  The next 10 or 20 years will likely be very good for China, although they should start to face a business cycle that more closely resembles Western cycles.  After that, it is much harder to tell, those that can correctly pick and time the turning points and their specific effects could do very well – Tony Hansen 06/11/11.

	April 1st 2011	July 1st 2011	Current Price	Current Period	Since Inception
EGP Fund No. 1	1.00000	1.08396	1.02024	(-5.88%)	2.02%
S&PASX200TR	35632.05	34200.68	32302.32	(-5.55%)	(-9.34%)
EGP 20	1000.00	883.67	808.92	(-8.46%)	(-19.11%)

EGP Fund No. 1 Pty Ltd. Down by 5.88%, lagging the benchmark by 0.33% since July 1^st. Since inception, EGP Fund No. 1 Pty Ltd is Up by 2.02%, leading the benchmark by 11.36% all-time (April 1^st 2011).

EGP 20.  The EGP20 index is Down by 8.46%, lagging the benchmark by 2.91% since July 1^st.  Since inception the EGP20 is Down by 19.11%, lagging the benchmark by 9.77% all-time (since April 1^st 2011).

S&PASX200TR  The benchmark index is Down by 5.55% since July 1^st. The benchmark is Down 9.34% all-time (since April 1^st 2011).

Full website: www.eternalgrowthpartners.com