"China Will Lose 600 Million People..." - Jim Rickards

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I'd rather be the US than China China's

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in even worse shape for different

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reasons um it's not so much interest

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rate policy although they're they're

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subject to Global interest rate policy

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and exchange rates coming from the FED

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but uh you can see it in real estate

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it's a fullscale collapse uh there

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they're propping it up but um the the

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the buyers aren't interested in other

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words the the Chinese government is

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telling the banks to lend money to real

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estate developers who can't finish

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housing well that sounds good it's like

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okay here's some money finish the

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housing but the buyers are not flocking

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in the buyers have been burned they're

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shying away from that asset class they

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want to increase cash they're looking at

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other asset classes they don't have a

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lot of choices because China has very

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strict Capital controls they're trying

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to get their money out by means legal

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and illegal uh they're buying gold when

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they can um but uh as I said they may

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not have a lot of choices but even money

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in the bank looks pretty good compared

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to what's going on in real estate the

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problem is too big the bubble is too

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large it's going on for too long long we

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don't hear about it the same way we did

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about the Japanese real estate bubble in

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1989 1990 that was an epic crash uh

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Japan is still not recovered I remember

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in the 90s early 2000s they talked about

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the Lost decade well try three lost

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decades that's going into a fourth uh

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that's Japan you know eight or lost

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count actually eight or nine recessions

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since 1989 but it's really just one long

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depression that's the way to understand

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the Japanese economy China's going into

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something like that we don't hear much

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about it because they're not transparent

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they lie about their numbers you you

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need to look at private sources and

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other use other analytic tools to

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understand what's going on there uh but

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they've got um you know drops in

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consumption industrial output real

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estate's collapsing uh their price

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indices are collapsing all this in fear

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of inflation it's been around it's real

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but it's now turning around very quickly

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and you can see that in China China's

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going through something that the world

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has never seen uh it is a they're going

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to lose six 600 million people in the

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next 50 to 70 years this is a

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demographic implosion this is worse than

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the black death of course the Black

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Death uh killed somewhere between a

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third and half the population of Europe

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in the 14th century um uh it was a good

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time for uh for labor by the way uh the

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you know the labor was so scarce it

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returns to labor went up versus returns

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to Capital uh because there weren't

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enough workers uh but that's the only

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thing uh that can come close even the um

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you know the Spanish Flu of 1919 killed

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about no no one's certain of the number

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but but between 100 million and maybe

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over 200 million people the 30 Years War

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was certainly you know in the early 17th

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century was certainly highly destructive

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but what's going on in China now is is

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worse than any of those things um you

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know has to do with Ma you know simple

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demographic math the key number is 2.1

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two people have to produce 2.1 children

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a man and woman or you can say per woman

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if you if you want uh have to produce

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2.1 children to keep the population

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constant why not two why not two

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producing two the answer is infant

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mortality and those who don't make it to

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uh adulthood and can continue the uh

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repopulation of the planet uh if you

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will but they're not even close to that

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they're well below two and by the way so

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is so is the rest of the world so is

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Australia and the US and Western Europe

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a lot of other places this is a global

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phenomenon but it's particularly acute

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in China may be the case that China's uh

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replacement rate is uh or or birth rate

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is actually one uh it has to be 2.1 to

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maintain it could be one or lower uh

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this is a demographic implosion unlike

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anything ever seen anyone's ever seen it

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also has a dynamic you can't reverse it

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very quickly it it feeds on itself as I

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was talking about inflation earlier so

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uh this is going to continue for 50 to

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75 years uh they're going to lose 600

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million people there are a lot of

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definitions of GDP and a four or

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five-part definition they more complex

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calculations but there's one really

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simple definition only has two factors

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population and productivity how many

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people are working and how productive

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are they that's nominal GDP it's that's

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one definition of gross GDP uh or

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nominal GDP well if your population is

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dropping from 1.4 billion to 800 million

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you're losing 600 million people uh and

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then what about productivity well the

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other thing that's going on is China's

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population is aging very quickly so you

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get a population set people in the 70s '

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80s and '90s uh with very large amounts

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of um cognitive decline dementia uh

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obviously there's no productivity there

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but it's worse than that because then

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you look at the shrinking population

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between the ages of 25 and 54 it's

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called their Prime working age more and

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more of those people are going to have

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to be involved in Elder Care they're

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going to have to be basically caretakers

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or Caregivers for the older population I

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describe very worthy job but not one

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that lends itself to productivity gains

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um bathing hasn't changed in about 5,000

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years robots don't do best um the only

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real innovation in bathing in between

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1870 and 1940 we did see the rise of

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indoor plumbing and hot water that's

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good um I I enjoy both but um but that's

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it we I can't think of any other bathing

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Innovations uh in in the last several

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Millennia so if you have a shrinking

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working age population a rising older

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population High degree of cognitive

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decline and a Big Slice of the working

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age population having to provide elder

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care or be Caregivers for the older

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population tell me where your industrial

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output is coming from tell me where your

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productivity is coming from and uh sorry

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if I mentioned this already but 50% of

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the water in China is poisoned uh

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because of you know just their

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industrial practices you know they they

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uh if you're a gold miner in Australia I

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invested gold mines around the world I

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know that places like Canada the US and

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uh Australia if you use cyanide to leech

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the gold and that's a very common

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technique you have to account for every

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you know microgram you you know whatever

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you put in you got to take out weigh it

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dispose of it properly in China they

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just dump it into the rivers and so the

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rivers are poison um so China is uh uh

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an economic demographic industrial moral

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religious uh Wasteland and uh will

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suffer it's it's already in a recession

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just just cut to the chase again they

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lie about their statistics so so here

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you have the two largest economies in

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the world us and China us is slowly

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going into what I expect will be a

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severe recession China is in a century

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long

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decline uh unlike one that the world has

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ever seen um that could eventually lead

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to social unrest and a regime change but

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let's not count on that in the short run

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just expect China to um to shrink and

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become more aaric decoupled from the

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Western world

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and certainly not be a source of growth

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Taiwan semiconductor Manufacturing

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Company the largest and most

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sophisticated semiconductor

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Manufacturing in the world and

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semiconductors are in everything it's

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not just computers there are 1,400

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semiconductors in an automobile there's

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a semiconductor or more in your your

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dishwasher refrigerator your washing

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machine they're everywhere Internet of

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Things We all understand that um So tsmc

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based in

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Taiwan uh the United States has a

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military Doctrine called the broken Nest

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Theory and what it says is that if China

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well it comes from a Chinese proverb

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ironically and it says if the nest is

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broken how can the eggs

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survive um and what it means is that if

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China invades Taiwan and I'm not

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forecasting Invasion Could Happen though

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um we or the Taiwanese will very quickly

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destroy all the semiconductor

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manufacturers in Taiwan we'll just blow

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them up and China won't get anything

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they'll have the broken nest Taiwan

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semiconductor knows this um they talk to

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the US intelligence and Military

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Community all the time they've just

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announced two separate 10 billion plus

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investments in Arizona for Semiconductor

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fabrication plant so-called Fabs um

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Intel did the same thing10 billion plus

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3 to fiveyear Horizon Fab they're

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building in um Oregon uh Oregon or

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Washington but in the Northwestern

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United States why are Intel and and tsmc

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putting over $30 billion hours into two

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Fabs in the United States can you get

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cheaper labor in China yeah these things

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are not going into Taiwan they're not

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going into China it's an example of the

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decoupling of the College of Nations I'm

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talking about they're building them in

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the United States a little more

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expensive yes but more robust you know

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shorten the shorten the supply chain

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shorten the transportation Lanes put it

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into a r of Law Society do everything

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you can everything you need to do to

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make it safe and that's that's what's

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going on uh and Australia be a big part

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of that uh it will have uh very

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important already does but it'll have

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more important relations and

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transportation channels to the United

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States not so much with China for for

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the reasons uh reasons I mentioned