HSBC sees China and America leading global mega-boom

[ray245]

The greatest global boom of all time has barely begun. Over the next forty years, economic growth will quicken yet further as the rising powers of Asia, the Middle East, and Latin America reach their full stride

Crunching everything from fertility rates to schooling levels and the rule of law, HSBC (LSE: HSBA.L - news) predicts that the world's economic output will triple again by 2050, provided the major states can avoid conflict - trade wars, or worse - and defeat the Malthusian threat of food and water limits. Growth will rise to 3pc on average, up from 2pc over the last decade.

In a sweeping report entitled "The World in 2050" , the bank said China would snatch the top slot as expected, but only narrowly. China at $24.6 trillion (constant 2000 dollars) and the US at $22.3 trillion will together tower over the global economy in bipolar condominium - or simply the G2 - with India at $8.2 trillion far behind in third slot, and parts of Europe (news) slithering into oblivion.

Turkey will vault past Russia (OMXR.EX - news) , settling an Ottoman score. Egypt, Malaysia and Indonesia will all move into the top 20. Muslim societies may start to reassert an economic clout unseen since the late Caliphate. Yet Brazil may disappoint again, stalling at 7th place in 2050 as its birthrate slows sharply and bad schools exact their toll.

The surprise is how well the Anglo-Saxon states hold up under HSBC's model, which is based on the theoretical work of Harvard professor Robert Barro. America's high fertility rate (2.1) will allow it too keep adding manpower long after China's workforce has begun to contract in 2020s and as even India starts to age in the 2040s.

An eightfold jump in the per capita income of China and India will keep growth brisk despite demographic headwinds, but they will not come to close to matching US living standards. Americans will be three times richer than the Chinese in 2050.

Britain at $3.6 trillion also fares well, slipping one rank to sixth place but pulling far ahead of Italy and France, and almost displacing Germany as Europe's biggest economy. This is chiefly due to the UK's healthy fertility rate (1.9), although sceptics might question whether a birthrate inflated by the EU's highest share of unmarried teenager mothers is a good foundation for prosperity.

The low fertility of Korea (1.1), Singapore (1.2) Germany (1.3), Poland (1.3), Italy (1.4), Spain (1.4) and Russia (1.4), more or less dooms these countries to aging crises and population decline unless they open the floodgates to immigration.

Japan (NYSE: MCO - news) is already deep into this phase of atrophy, explaining why the country has had such trouble shaking off the effects of the Nikkei (news) bust. Its (Paris: FR0010370163 - news) total population began contracting outright since 2005. It shed a record 120,000 last year, and will shrink 37pc by 2050.

"Demography matters," said Karen Ward, the report's chief author. The "big losers" are the smaller states of Switzerland, Netherlands, Sweden, Belgium, and Austria, which will mostly drop out of the top 30. "They may struggle to maintain their influence in global policy forums," she said.

HSBC works from the assumption that mankind will avoid the energy crunch and overcome the eco-deficit, a term used to describe the world's depletion rate of non-renewable assets. It calls for $46 trillion of investments in alternative forms of energy to break out of the carbon trap, and head off a supply crisis that could derail growth.

Feeding the world may be harder. The UN expects food demand to rise 70pc by 2050, yet the yield growth of crops has slowed to 1.5pc a year from 3.2pc in the 1960s. The number of people living in areas experiencing "severe water stress" will double from a third of the world population to two thirds between 1995 and 2025. The water basins irrigating the crops of the North China plain are being exhausted at an alarming rate.

HSBC admits that it economic projections are based on a "rather rosy scenario". Yet one thing seems clear. As superpowers of world food output, the US and Canada are sitting pretty.

http://uk.finance.yahoo.com/news/HSBC-s ... 77277.html

It seems that this projection has focused too much attention on birth fertility rates, and neglected how fast the migrant population in countries like Singapore is set to expand. The same might apply to Germany as well.

[J]

HSBC works from the assumption that mankind will avoid the energy crunch and overcome the eco-deficit, a term used to describe the world's depletion rate of non-renewable assets. It calls for $46 trillion of investments in alternative forms of energy to break out of the carbon trap, and head off a supply crisis that could derail growth.

Assume a miracle happens. I want a horsie for christmas.

Feeding the world may be harder. The UN expects food demand to rise 70pc by 2050, yet the yield growth of crops has slowed to 1.5pc a year from 3.2pc in the 1960s. The number of people living in areas experiencing "severe water stress" will double from a third of the world population to two thirds between 1995 and 2025. The water basins irrigating the crops of the North China plain are being exhausted at an alarming rate.

The Food and Agriculture Organisation's Food Outlook Report is...troubling.

Excerpt:

Attention is now turning to plantings for the next (2011/12) marketing season.
Given the expectation of falling global inventories, the size of next year’s crops
will be critical in setting the tone for stability in international markets. For
major cereals, production must expand substantially to meet utilization and to
reconstitute world reserves and farmers are likely to respond to the prevailing
strong prices by expanding plantings. Cereals, however, may not be the only
crops farmers will be trying to produce more of, as rising prices have also made
other commodities attractive to grow, from soybeans to sugar and cotton.
This could limit individual crop production responses to levels that would be
insufficient to alleviate market tightness. Against this backdrop, consumers may
have little choice but to pay higher prices for their food. With the pressure on
world prices of most commodities not abating, the international community
must remain vigilant against further supply shocks in 2011 and be prepared.

Then you add this:
http://www.tehelka.com/story_main47.asp ... _talks.asp
Excerpt:

Sixty per cent of the wheat samples and 33 per cent of the rice samples sent by the Food Corporation of India (FCI) from its warehouses to its Gurgaon laboratory were found unfit for human consumption. This information was brought out by a Right to Information (RTI) query by Kirit Somaiya, national secretary of Bharatiya Janta Party, according to details given by him.

Much of the foodgrain in the warehouses is supposed to be preserved and distributed among the poor. The wheat and rice provided for distribution under the Food Security Bill would have to come from such warehouses.

India has around 20% of the world's wheat stocks and if this report is correct over half of it is now unfit for human consumption. 10% of the world's wheat stocks, gone.

And this:
http://www.reuters.com/article/idUSL3E7C40CH20110104

REFILE-UPDATE 1-Australia wheat quality slumps in bitter-sweet harvest
Tue Jan 4, 2011 2:35am EST

By Bruce Hextall

SYDNEY, Jan 4 (Reuters) - Up to half of Australia's current wheat harvest could be downgraded to animal feed or low-grade milling grain, raising concerns for a severe global shortage of higher-quality wheat and marring the nation's biggest crop in eight years.

Crop analysts and farmers told Reuters that up to 50 percent of the 2010/11 crop would be downgraded to general purpose wheat or various grades of feed wheat.

That's another major exporter having half its crop downgraded. Bit of a problem, that.

HSBC admits that it economic projections are based on a "rather rosy scenario" a pipedream hallucination. Yet one thing seems clear. As superpowers of world food output, the US and Canada are sitting pretty.

There, that's better.

[Marcus Aurelius]

HSBC admits that it economic projections are based on a "rather rosy scenario" a pipedream hallucination. Yet one thing seems clear. As superpowers of world food output, the US and Canada are sitting pretty.

There, that's better.

In fact it's pretty standard cornucopian projection based on neoclassical economics and the magical principle of infinite and non-problematic resource substitution. It only needs magic to work. That someone would actually release such a scenario at this point is somewhat mind-boggling, though, and shows the disconnect that some economic circles still have from physical reality. You definitely do not have to be a doomer (like you J ) to disagree with such a prognosis.

[MKSheppard]

Assume a miracle happens. I want a horsie for christmas.

Here, have an atomic powered horsie, courtesy of the China Atomic Energy Authority (CAEA).

[Stark]

Nice +1, Shep.

I'm with Marcus; while this makes sense in a textbook way, its bizarre in the extreme that they would release it - particularly since the study itself highlights the weakness of the assumptions. Just fucking with expectations, I guess.

[bobalot]

I really don't see how any of these projections are useful.

1. It's 40 years. A lot can happen in 40 years, just look at the last 40.
2. It takes no account of physical limitations and resource constraints, as pointed out above, you don't have to be a "doomer" to see some serious problems with this.
3. It appears to be a very simple projection rather than a detailed analysis.

[J]

Here, have an atomic powered horsie, courtesy of the China Atomic Energy Authority (CAEA).

Note how GDP is well correlated to energy production. China's GDP is currently just under $5 trillion, the article claims it will quintuple in 40 years which implies energy production must also rise by the same multiple. China currently produces around 80 quadrillion BTUs of energy per year, you do the math on how many nuke plants they'll need to build.

[Traveller]

Canada and US may be 'sitting pretty' according to this hopeless report, but that too may not last. The heavily subsidized fossil-fueled US system is literally carpet bombing the soil with chemicals and FF to maintain production. The resulting 'food' american industrial factories produce is of dubious quality and nutrition at best. The US may be able to keep growing food production incrementally in the future, but only at the cost of greater enviromental degradation, more subsidies to agri-giants and even lower-quality food than they produce now. Water stress in parts of the US is allready happening. Canada may not be quite as bad as the US, but many of the same dynamics are at work here as well. Fly over Alberta and anything not paved or being striped-mined for dirty toxic tar-sand oil is basically one big farm. While going hungry may not be an imediate problem here in N.A. we are anything but secure and our industrial farm system is far more brittle than these guys realize. The rest of it is just depressing, countries that keep up endless growth capitalism BAU come of as being ideal to HSBC while countries with stable or declineing population , well according to these guys thats just not how the game is played.

How Britian and the US are supposed to come out sitting pretty is never really explained either. Both the US and Britian have led the world if off-loading industrial production to anywhere they could, and subsituted 'finanical services'(legalized fraud) for real production. Here is my prediction, by 2050, the only thing the US and Britain will lead the world in, is the production and consumption of food substitues, welfare cases, and reality TV.

[J]

In fact it's pretty standard cornucopian projection based on neoclassical economics and the magical principle of infinite and non-problematic resource substitution. It only needs magic to work. That someone would actually release such a scenario at this point is somewhat mind-boggling, though, and shows the disconnect that some economic circles still have from physical reality.

Hey now, at least they're not claiming $123 trillion by 2040.

[Phantasee]

" Fly over Alberta and anything not paved or being striped-mined for dirty toxic tar-sand oil is basically one big farm."

Have you ever actually been to Alberta? The area affected by oilsands development isn't as big as you think it is. As for the rest of the province being one big farm, it's good farm land. What did you expect people were going to do with it? Where land is suitable for farming, people farm. Where it's suitable to raise animals, you find ranches. It's not like they're trying to farm in the California desert or something.

Why single Alberta out?

[cosmicalstorm]

I recall flipping through a Readers Digest from the late 70's last summer, it had an article written by an "expert" who among other things considered every US high school student who didn't plan to learn Japanese "ignorant of the future to come"...

What will happen in the next four decades?
Likely: Eco-disaster, peak oil and general misery.
Hopefully: Some nice singularity-ish scenario.

[[R_H]]

" Fly over Alberta and anything not paved or being striped-mined for dirty toxic tar-sand oil is basically one big farm."

Have you ever actually been to Alberta? The area affected by oilsands development isn't as big as you think it is. As for the rest of the province being one big farm, it's good farm land. What did you expect people were going to do with it? Where land is suitable for farming, people farm. Where it's suitable to raise animals, you find ranches. It's not like they're trying to farm in the California desert or something.

Why single Alberta out?

Because it's cool to do so, Phant.

I thought Alberta was pretty shitty for farming, with the exception of raising cattle.

[Phantasee]

I dunno, Peace Country folk seem to be doing pretty well at it. It's further south towards your end where the farming isn't that great, but that's where you'll find all the ranchers. Up here it's better, and like I said, Peace Country up north is supposedly pretty good for it.

[[R_H]]

I dunno, Peace Country folk seem to be doing pretty well at it. It's further south towards your end where the farming isn't that great, but that's where you'll find all the ranchers. Up here it's better, and like I said, Peace Country up north is supposedly pretty good for it.

Ah, ok. If I'm remembering correctly, there's canola and mustard in the South too.