For the past month, we’ve been spotlighting different nations and examining their age demographics and likely economic trends. When I say that out loud, “fun stuff” doesn’t immediately come to mind, but we’ll do our best to make it interesting.

We’ve been covering how the population is in decline in Japan and Russia, while it is currently peaking in China and Germany. Last week, we looked at the US age demographics, and this week we'll attempt to put it all together in a way that gives us some insight into the future. We aren’t clairvoyant, but if we can light the path forward even a little, it might make the journey an easier one.

From the end of WW2 to when Covid struck marks a special time in all of history. In all human existence, there was never a time like the past 80 years. While it is easy to think of the last 80 years as normal, it was anything but.

When Covid struck, the whole world changed, but it wasn’t just because of Covid. That was merely the straw that broke the camel’s back. Let’s dive in.

The more we research, the more we fear normalcy may return… the real normal where there isn’t just in time delivery and efficient world trade. Where people become more territorial and hostile to free trade. We are starting to see signs of this taking place, and the pace of change is dramatic.

First, let’s look at what was so different about the past 80 years, and why that might change. Following the world wars, the US had no equal in terms of power and wealth. Since the war wasn’t on US soil, we didn’t suffer the destruction that war brings to a region. We lost lives, which is the biggest tragedy, but our home life was mostly spared from the ravages of war.

That left us as an empire that could have taken all kinds of territory for itself. Instead, it allowed nations to remain autonomous, and with the help of the most powerful Navy in the world, it made the oceans safe for transporting things by sea.

Yada yada yada, container ships were created, piracy was largely eliminated, and the waterways were kept open for free trade. Once transport was safe and efficient, specialization took place like never before.

This specialization of labor developed at a dizzying speed. In just a generation, we went from nations being largely self-sufficient and located where natural resources exist to large populations existing in arid deserts where natural food and water are scarce. We went from canning our vegetables to just in time organic leafy vegetables available on demand at the local supermarket. Civilization made centuries worth of progress… in decades.

It’s pretty profound if you think about it. For example, there isn’t any gardening or farming in Manhattan, yet you can get fresh food from around the world on demand there. Trade has become that efficient. 

Entire populations remain warm and fed thanks to an intricate system of trade that connects the whole world together so that one region can specialize in producing the world’s wheat, while another focuses on oil.

Reliably being able to import what a nation needs and export what they have surpluses of shrunk the entire world. Ships became bigger, containers became more efficient, and more nations took advantage of something that hadn’t existed before—safe seas.

It got even better. Standards were set for commodities so that a manufacturer in China could order a specific blend of steel from Australia, and craft it into a widget that then gets shipped to the US, where it is purchased for a fraction of what it would cost to manufacture it locally. 

The steel can peacefully be shipped to China, and then shipped again to the USA thanks in part to what we alluded to earlier—safe seas enforced by the world’s most powerful navy.

Before the US Navy ruled the waterways, fear of piracy or hostile nations demanding tolls for passage kept business local. There was of course trade, but nothing on the scale of what took place after WW2.

That means things can be made and grown where they are most efficiently made, and shipped to where they aren’t.

All that cooperation between nations had the world running like a Swiss watch. The quality of life was as high as it’s ever been. Stores were stocked full of inventory; Americans didn’t even know what shortages meant. We didn’t have to experience them.

Then, Covid struck. In just months, relationships that took decades to build were severed. Supply lines snapped, and supply chains had links give way. And it couldn’t have come at a worse time.

A chain is only as strong as its weakest link, and the lines connecting China with the US were already under heavy stress. Covid made it MUCH worse. Suddenly, political tensions had a conduit, and in the name of safety, borders between nations suddenly grew trade barriers. Trade became neither fair nor free… In many things, it ground to a halt.

We don’t think it’s coming back. In fact, the conditions present are set to make things worse.

The political tension is heating up between China and the USA. The nations are now growing apart rather than together. That means corporations that utilized China’s efficient manufacturing prowess are in a high-risk area now. Companies like Samsung and Apple are scouting alternative locations for their smartphone assembly.

As companies bring manufacturing home, the cost rises. The reason manufacturing left was because of cost, so to bring it back either means we agree to work for less, or cost-push inflation will persist longer than we think.

With less reliance on trade, we don’t need as heavy of a military presence as we currently have. Without our presence, it could only be a matter of time before regional conflicts make shipping less efficient. It would only take a few acts of piracy for shipping insurance to become untenable.

On top of trade breaking down, we have the retiring baby boomers, rising military conflict, record debt levels, outright deflation of the money supply, and leading indicators that are screaming recession.

In other words, buckle up, it looks to be a bumpy ride.