“The only economic “problem” with the rising median age is the dropping percentage of people working.”

Do you have ANY empirical evidence to support this statement? The empirical evidence on the other side is piling up daily.

I would say that the evidence I present from Larry Summers, working with a simple toy model in 1990 and predicting movements in the US CA balance just playing around with life ccycle moving median age possibilities is pretty impressive. But not to you evidently.

So could you give me just one fact to support your case?

“Continue to increase the retirement age to match the increase in the median age, and that problem is solved.”

Well, excuse me, but could you take a quick look at Germany and Japan, since they are doing exactly that. Japan now how 25% of the male population still working at 75 (something you can’t do in Latvia, since on average men die at 65). And yet the export dependency simply grows and grows. Or try Sweden.

We are in the midst of a huge crisis caused in part at least by these very same imbalances.

“Amazing to see such ignorant ideas propounded.”

Quite. So please, just one fact?

This is ludicrous nonsense, of course.

The only economic “problem” with the rising median age is the dropping percentage of people working. Continue to increase the retirement age to match the increase in the median age, and that problem is solved. If you can get as many people as possible working jobs they *enjoy*, you don’t even have to do that: they’ll keep working voluntarily.

Amazing to see such ignorant ideas propounded. We do not need to keep producing babies faster — that’s just lunacy.

Asking 20 year old their “ideal family size” is useless because they don’t get kids and have no influence and when they are 30 they will have changed their minds multiple times.

A bigger problem is that the optimal “ideal family size” from an economic point of view is 2 kids when your 30 if you’re in a couple and zero kids if you’re alone. Which leads when you consider the single, barren and kids who die young to a TFR of about 1.7

“So it seems to me that you are saying that the growth model, on which our economies are based, is good for times of population growth, but will fail us once (if) we stabalise global population. Or is there a way round this one?”

I’m afraid so. This would seem to be the conclusion. But the point I am trying to get across is that there are a number of different dynamics at work here. The problem you mention is a problem in the very long term, ie after 2050, or whenever. As you also point out, in the shorter run global population is rising sharply, so there is plenty of scope in the system to move the deckchairs around to everyone’s benefit.

What most concerns me at the moment, is that we try and understand the short term dynamics of these imbalances. If we don’t, and don’t take measures to correct them – and incidentally Jörg I am clear I don’t have all the answers here – then we are just headed into another – and even bigger – version of what we just experienced.

What we can see clearly is that surplus countries do risky lending, while deficit countries do risky borrowing, and in the end it all blows up. Now we can be sure that a lot more countries, including the US and the UK are now about to become surplus generating countries (ie net lenders). So who will be the deficit countries?

Well let’s try India and Brazil. Could you imagine what things might look like in 2020 if what just happened to Latvia and Iceland were to happen to India and Brazil? This danger exists I’m afraid. The first step to trying to avoid this kind of outcome would be to try and better understand the dynamics of the imbalances, and move away from simplistic ideas that countries like Japan, Sweden, Germany and China are simply “bad” becuase they run surpluses.

Or should that be the US, Spain, the UK, the Baltics, New Zealand etc are “bad” because they run deficits (according to your political preferences)?

Such thinking is entirely superficial, and misses the big picture completely. As Summers showed, it is quite possible to model what has been happening, and get results which are reasonably credible.

Basically, even if we need a new kind of growth (or non growth) model in the long run, we need to manage the transition from high growth to zero (or negative) growth reponsibly, and try top avoid the more dramatic boom bust components of the process.

In the long run, as Keynes so aptly said, we are all dead.

And yes, Jörg, I do favour central bankers targeting median ages, I think slowing down the *rate* of population ageing should be an objective, since allowing it to happening too fast will only crash welfare and pension systems, as we are about to see (unfortunately) in Germany and Japan. We are in the age of new monetary tools, than god for that, maybe as well as looking at what the longer term inflation expectations were, they could start giving equal importance to surveys on “ideal familiy size”, that would be a start.

Why is it that Atul Gawande’s recent healthcare story in the New Yorker couldn’t have been written in Japan or Germany? To recap: there is a place in Texas where healthcare costs per person run higher than personal incomes do. If ageing was as detrimental to the economic well-being of a country as the demographic school insists it is, equivalents of Gawande’s story would be something you’d expect German magazines to be filled with on a weekly basis. Yet they aren’t, because “systemically” healthcare is an economic, not a demographic issue that is handled sufficiently differently in Germany for that Texan scenario to have been avoided. Of course, if demographics is not the single most relevant factor with regard to healthcare, then this applies to all other sectors as well.
So what will happen? The answer: the relative difference between the (high) number of young people losing their jobs in the U.S. vs. the (lower) number of older workers becoming unemployed there is going to be higher than that same relative difference in Japan and Germany. The effect? Less of a consumption retrenchment in the ageing societies and more “affordable family formation” there (due to real estate prices that have been falling for far longer, e.g.).
“So everyone should be happy, I guess.” (At least, if demographics was everyone’s primary concern. Now let’s go back to being unhappy about real problems – like high unemployment per se.)