Recently the Economist and almost every other news organisation and politician has begun to despair at birth rates. In almost every country fertility rates have fallen to new lows, and even nations like Hungary that are held up as pro-natal leaders still have below replacement rate fertility rate. This week’s Economist put the problem with fertility as a crisis of loneliness - where people want to meet someone, but cannot. If I had to summarise the article it would be, either men need to raise their standards (do more housework), or women need to lower theirs (give short kings a chance).

One idea I have had is that the fall in fertility has been driven by women becoming mothers later in life, which has reduced the ability to have multiple children. If we look at workforce participation by women, it took off in the 80s. In the UK, female participation rate was 50% in 1970, and is now closer to 70%.

UK Total Fertility rate has been below replacement ever since.

One option would be go “Handmaids Tale” style and ban women from work. I feel this is somewhat extreme. A much better method would be to use technology to extend the period over which women can give birth. Looking at UK IVF data, this option seems to be coming into view. IVF births now make up slightly more than 3% of all births in the UK, bouncing back after a Covid slump.

This by itself is not that impressive. But hidden in the data from HFEA is some very interesting shifts. The majority of UK IVF births comes from frozen embryos. If we do a HUGE generalisation here, lets say the majority of fresh IVF was by mothers who needed help conceiving (that is they want to be pregnant now). And frozen embryos are from mothers who decided to freeze eggs until the time is right (that is they want to be pregnant in the future). It is more complicated than that, and also driven by huge improvements in freezing and thawing technology - but as a generalisations go its okay.

US data has shown that its the age of the embryo that is more important than the age of the mother. Improvement in thawing and freezing technology should mean that giving births in your late 30s and 40s more successful using IVF. Plainly mothers have gotten the message. Freeze your eggs when you are below 30 is a good insurance policy.

The question then is how many eggs are getting frozen, and how many are getting thawed. HFEA gives us that data as well. It is the frozen number that is getting me excited. I knew that freezing eggs is becoming more common, but to see some hard numbers is exciting.

Eyeballing these numbers, there seems to 6 to 7 year lag between freezing and then thawing. I have no proof that this relationship will hold, but just for argument’s sake, I will assume it holds. Using rough numbers, this would imply about 60,000 IVF births from frozen embryos in 2030. That would move IVF to 10% of all births in the UK (around Japanese levels today). But what it would also mean is that the effective age at which mothers could stop becoming pregnant would also be pushed back. If 10% of mothers have their first child with IVF, and if those mothers have eggs frozen, should we also begin to see an exponential rise in older mothers. There already signs of this, but if we look at eggs being frozen only really taking off in the 2020s, we should only see a surge in the 2030s.

It seems like the technology is in place for the baby boom, and with young women freezing eggs in ever greater numbers, then the intention is there. The only last ingredient is to get cost of living down - which requires housing prices to moderate. My reading is that both left wing and right wing politicians agree on building more homes, so this is a policy that should come to fruition.

If this analysis is correct, then it will prove Russell Clark’s third iron law of politics: “If everyone is worried about something, then the chances of it happening are close to zero”. Everyone is worried about steeply declining populations - I see this as unlikely. Populations will flatten out at worst I think.

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It is always hard to get back into writing in the new year - this year in particular. As a family we stayed in London - and over the last few years, with my oldest doing motorsport and my youngest at a football academy, as family we are rarely together for long periods of time. Hanging out at home has allowed me to try and make a dent in my massive tsundoku that has accumulated on my bed side table. One book I managed to finish is Ultra-Processed People by Chris van Tulleken - a Christmas present from 2023! There was nothing too radical in the book, the idea of processed food not being good for you is not particularly mind blowing. There was one very interesting idea I took from Ultra-Processed Food. While humans basically need a certain amount of calories, we also need various other macro nutrients, which turn up in various random foods. I know that I occasionally will have a craving for steak, grapes, pineapples and apples, that will disappear after a day or two of gorging on these foods. In Ultra-Processed Food, the author points out that these macronutrients do not really appear in processed foods, or if they do in very small quantities. Your body will need them, so you end up eating much more processed food to try and get that macronutrient. You end up in the perverse situation of being obese and malnourished at the same time.

The fact of the matter is that general starvation and lack of food during and after World War II drove the industrialisation of food production. And in the post War Period was wildly successful at ending hunger in the industrialised world. Capitalism did what it does best - it was provided a profit motive to supply food to the world- and it solved it. The profit motive had a downside of course. Competition and profit seeking saw industrialised food emphasise addictive foods (high in sugar and salt) and food that lasts a long time to reduce costs (artificial preservatives). And lo and behold, in a single generation we have gone from a food crisis to a weight crisis. So does changing food production techniques have anything to do with falling fertility rate? In the UK fertility rates started dropping in the 1960s, after spiking after World War II. That fertility rates are at levels today seen during periods of war I find telling.

My original thoughts was that in the 1980s, the world turned pro-labour, and real wages starting falling. With less money, people had less babies was the line of thinking. I thought that a pro-labour turn in politics would also lead to a turn in fertility rates. You can frame the argument in many different ways, but I thought the increased job security of the pro-labour world would allow families to have more children. I had also assumed improving Artificial Reproductive Technology (ART) would also help to cause fertility rates to surge. To my disappointment, Denmark, which publishes up to date birth statistics, and has very relaxed and supportive rules on ART has seen recent birth rates fall back to lows. In 2021, the surge in babies made me very excited that this theory was correct, but it now looks like an aberration.

Thinking about obesity as a sign of a deficient diet allowed me to think about falling fertility rates in a different way. Obesity in the UK took off at around the same time that fertility rates fell. I never really saw any reason to tie falling fertility rates to rising obesity. If anything, birth rates have tended to fall during periods of food insecurity, such as during war and famine. But using the observation from Ultra-Processed People - obesity could be a sign of lack of macro-nutrients? That is excess calorie consumption in the search of vital minerals? That obesity is a sign of a lack of nutrition needed for baby making?

Circumstantial evidence is easy to find. Mexico used to have a far higher fertility rate than the US. But the success of Coca Cola in Mexico is hard to understate - a former Coca Cola salesmen was President for awhile, and per capita consumption in Mexico is far higher than elsewhere.

And Mexican fertility rates are now below that of the United States.

Of course, correlation is not causation. And there is a big problem with this analysis. Japanese fertility rates have also fallen in this period, and this is a country that works hard at avoiding processed food. Japan is also a problem in thinking high house prices may affect the decision to have children. Japan has had falling house prices for most of the past 30 years with no effect on fertility. But one thing Japan has had in line with the rest of the world is rising urbanisation rates. Is city living non-conducive to having kids?

Does big city living destroy the desire to have children? Are obesity, infertility and urbanisation all measure of the same thing - modernity? Could the possibility of telecommuting that seemed so real during Covid be the answer? Should governments mandate that all companies that can work remotely should work remotely? Is that the answer to the fertility crisis? It seems like a good idea to me - what harm can it do?

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No one needs yes men in their lives. Or as the Japanese say, if two people always agree, one of them is redundant. Over the last two weeks I have friends tell me, “Yes Russell, GLT/TLT has worked well, but all your other stocks idea are crap”, or words to that effect. And its true. For the first 15 to 16 years, matching up stock picks with macro views worked very well for me, but no longer. To generalise greatly, I usually associate a surging gold price with not good outcomes in equity investing. Gold is surging, but the S&P 500 is at all time highs. More fool me.

Or if we look at gold versus treasuries on a long term chart, I thought the trend change we have seen in the last few years would also mark a trend change in equity leadership.

For that reason, I have been reluctant to suggest US stock picks. This was even the case when they fitted in with my ideas on fertility. Unless you have been living under a rock, the key to outperformance for years now is to be overweight the US, and large cap US stocks in particular - not necessarily the magnificent seven.

As a fund manager, I always tried to match up what I say with what I actually do (You would be surprised how often fund managers often do the exact opposite). As I thought the changes in bond yields and gold prices were going to be negative for US equities, I did not recommend two possible fertility trades, as they were large cap US stocks. While I can’t change the past, I do feel like I should at least share those stock ideas with you now, and if you think US stocks will stay in a bull market forever, then you can look at them yourself.

The blue sky thinking I had when researching the fertility trade is that one future growth business for the healthcare industry is not just IVF. As mentioned in my fertility updated, I think young women have understood the importance of freezing eggs. As the data shows, its the age of the egg that determines the success of IVF - not the age of the mother.

This has led to more eggs being frozen. UK NHS data shows that egg freezing is now the more common that getting eggs to use straight away (fresh).

So fertility is moving from an entirely natural process to a much more controlled process. Some fear designer babies, or sex imbalances as parents choose boys over girls. But what I see is the beginning of a new industry.

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I like my sci-fi films. Tiktoks about the best sci-fi films of all times often recommend 2006 film Children of Men . I didn't remember it as a truly great film when I first watched it - so decided to watch it again. On rewatching - I do think it's a masterpiece. The long takes are mind-boggling. And I think the finale and the theme of movie was more moving now that I am a father myself. Recommended. If you have not seen it - it imagines a future where a world-wide pandemic has rendered the world infertile. Strangely prescient, and yet also wrong. In “Children of Men” the collapsing fertility leads to a collapsing society. Japan has been the poster child of falling population, and yet societal collapse has yet to happen. Unsurprisingly, older societies tend to prefer order to chaos.

The IMF population numbers above assume fertility rates continue to remain low. One theme of “Children of Men” is that we as a species, want to procreate. That there are 8 billion of us pretty much proves that we are genetically predisposed to having children. While I understand the arguments that some people make that the world is overpopulated and not having children is a logical choice -again by definition within a generation or two groups that choose to have children should dominate the population. We have seen this in action in Israel, where the ultra-orthodox Jews now make up much higher proportion of children in Israel than their total share of the population, and are the most rapidly growing part of Israel’s population.

All of this makes me think that rising populations, and higher fertility rates are a secular theme, while the low fertility rates we have seen later are a “cyclical” story. So what could be driving this cyclical story? First of all - capitalism is not good for fertility. The shift right wards in global politics that happened in the 1970s marked the end of the baby boom. For countries in Eastern Europe that moved rapidly from Socialism to capitalism in 1990s have seen even more dramatic falls in fertility even as incomes have soared. It seems to me falling incomes relative to asset prices encourages falling fertility rates. Or if you can’t feed them, don't breed them. But the fact of capitalism is that the owners of capital will constantly seek to pay the least amount possible for labour. What we have seen from 1970s to 2010, was that unemployment in the US was higher that it was in the 1960s. In recent years, initial jobless claims have remained remarkably low. If the average worker begins to feel more secure about the future, expect fertility rates to rise.

The second part of the argument is technological. Families are choosing to start having families later in life. This naturally reduces the window when it is possible to have children, leading to a falling fertility rate. My argument is that technology is improving to allow women to have healthy babies later in life. The biggest factor driving this is that realisation that the success of IVF is not tied to the age of the mother, but the age of the eggs and embryos.

As more and more women realise that freezing eggs before the age of 30, can give the opportunity to have a successful birth in your 40s, technology is increasing the window where women can have children. That’s the theory, but is it happening? The evidence so far is mixed. Denmark has by far the most liberal and supportive policies on IVF. When policy was changed a few years ago, there was a significant uplift in births, but recent data is showing that coming off again.

The problem is that the process of pregnancy is quite long, especially if you are using IVF. From deciding to undertake IVF, through to actually giving birth can be three or four year process. Another country I look at is Australia. Australia has universal healthcare, and published good statistics. Despite being a nation built on immigration, Australian fertility rates have been falling steadily.

As can be seen below, Australian mothers are becoming older. You can also see that the baby boom was driven by mothers suddenly becoming younger after World War II - a trend that has more than completely reversed. Baby boomers was a demographic aberration that is now passing through the system.

Australia combines its statistics on IVF (or Assisted Reproductive Technology - ART) with New Zealand. ART births have continued to climb, and are now nearly 6% of all live births.

But as mentioned, live births are at the tail end of a decision made two or three years earlier. Fortunately we can get statistics in Australia on the number of IVF cycles. These do not necessary correlate to births in a year or two, as cycles to freeze eggs could be far into the future. But it does show the intention to have children. As in the UK, freezing cycles are becoming more and more common.

So do we face a fertility crisis? I doubt it very much. In fact if was to right a sci-fi film about the future, the story would be more along the lines of as the baby boomer generation died out, demand for labour soared, as the working population declined. Rising political power saw government direct more spending to the young, which raised disposable incomes. Families could start to afford to have more children, and many women who froze the eggs in their 20s take the opportunity to have one more child in the late 30s and early 40s. Populations shifted younger again, and political parties actively courted the votes of the young and families, creating a virtuous cycle of pro-natal policies. This makes far more sense to me than predictions that Japanese, Korean populations will fall by half. Extrapolation without analysis is the bane of modern economics - it is such simplistic thinking. Mentally, it makes economists children, not men.

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I had my first impostor for this substack this weekend - that must mean I am bigtime! Apologies for any inconvenience, and now I know I am a potential target, I will be extra vigilant.

Long time readers will know I have a strong interest in fertility trends. It fits in with my interest in attacking consensus positions. And the Economist is very consensus on this topic. Basically, they make two points. The drop in fertility comes from ending teenage pregnancies and that attempts by governments to pay women to have more babies have failed. Following this logic, unless we adopt Handmaiden-style fertility policies, we will inevitably see falling populations. To simplify, they see the world becoming more Korean, than Israeli.

The Economist finds falling birth rates a structural issue, which no amount of government spending can change. I think this analysis is flawed. First of all, as you can see above, Israel has managed to achieve high birth rates. Politics in Israel is strongly pro-natal, with government committed to helping any woman achieve at least two pregnancies. That is rather than offering a fixed sum to try and promote pregnancies, the government makes an open ended commitment. That is Israel ends up spending less than other nations shows how effective this policy can be.

Looking at US data, birth rates for young women have collapsed, while older women have maintained fertility rates. A trend to being an older mother limits fertility rates is the argument, again making declining fertility a structural issue.

Getting rid of teenage pregnancies is a good thing. But what is unusual is how relatively recent this phenomenon is. Using UK data, which goes back to before World War II, we can see that the age at which women first became mothers dramatically dropped after World War II, before rising again. Given improvements in general health and medicine, a three year increase in when women first become mother between 1939 and 2020 does not seem to me to explain declining fertility. A good question to ask is why women became mothers earlier after World War II. At that time, like Israel today, the nation became very pro-natal, and the roll out of universal healthcare, and other pro-labour policies offered the support young families needed.

Another feature of a pro-labour policy is making it easier for families to grow. If we take the UK, and my own personal experience and that of my friends, having a family means contemplating the expense of a larger home. When government policy is to supply homes that makes having a family easier, then expect more kids. When policy is to reduce supply of homes, and drive up housing prices, falling birth rates seem a likely outcome. If Labour win the next UK election, they are targeting a substantial increase in home building.

Political trends, which are pro-labour, should also be pro-fertility in my view are turning. On top of this change, technological change is beginning to turn pro-fertility. First of all, women are realising that its not the age of the woman that determines whether IVF is successful or not, but the age of the egg. Donor eggs will almost always be from a women aged 30 or below.

In the UK, we have seen a sea change in IVF, with frozen eggs become the main way that IVF births are realised. That is technology is catching up with the needs of women that wish to have children later.

We can also see that generational change in attitudes to child birth are beginning to move pro-natal. Using Swedish data, we can see that mothers born in 1972, tended to have children earlier. Mother born in 1982, tend to have children later, which would naturally push down fertility rates. Mother born in 1992, are following the trend of mothers born in 1982. This means the fertility headwind is at least turning neutral, and potentially turning to a tailwind.

In some ways, the Economist is right - paying cash for kids will not work. But a policy that favours workers, giving better healthcare, affordable housing and more job security would likely lead to higher fertility rates. Governments just need to move away from pro-capital policies that lead to high property prices, threadbare public health systems, and employment policies that favour corporates. That is happening in my view, and best lead indicator for me is frozen embryos and eggs. It is a strong indication of the intention to have children, its just requires the financial security of pro-labour policies to turn intention to reality.

Just as the world (and the Economist) was caught out by the effectiveness of policies to reduce birth rates in the 1980s and 1990s, I suspect they will be caught out by policies to promote birth rates in 2020s and 2030s. Here comes the baby boom!

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During the long dark days of the Covid lockdown, I thought the stars were aligning for a post-Covid baby boom. Working from home made child care much easier, and I believed the trauma of Covid would make more people seek out a family life (being home alone during Covid seemed far worse that spending it with kids, even if you did have to educate them yourself). If that was the social rationale, I also saw a number of technical reasons. First of all, where available, the data seemed to point to at least a stabilisation in the age when women first become mothers. The trend to becoming a mother at ever older ages makes it more and more difficult to have that third child that pushes fertility rates above replacement levels. Using Australian data, mothers born in 1992 seemed to be having babies at the same age as mother born in 1982, while both were having children later than mothers born in 1972. We saw similar trends in Swedish data.

Looking at Medicare (Australian healthcare system data) showed continued growth in IVF cycles. My working assumption is that IVF allows older women to have children, which counteracts the fertility drag of starting families later. That is if the age that women start having babies is not getting older, and IVF treatments are rising, then we should begin to see a reversal in fertility rates.

In 2022, I got very excited that fertility rates were about to go much higher when we saw Danish births spike. However recent data has seen birth rates fall off. Denmark should be one of the first nations to see and ART/IVF led boom, as they have very liberal laws on IVF. Denmark essentially offers ART to any woman under the age of 40.

So signs of a baby boom have been disappointing. But how can we have boom in IVF, but falling births? A recent UK report shows an interesting change in behaviour. First there has been a sharp increase in egg and embryo storage. This is in line with Australian data on IVF treatments.

This has happened despite a share drop in NHS funding of IVF treatments. In particular younger women (18-34) are opting to privately fund IVF cycles.

Why is this? I think there are two factors at play. First of all, it is becoming more widely understood that its not the age of the mother than reduces the likelihood of having a baby, but the age of the egg. The younger the egg, the better chance of having a baby, almost regardless of the mother’s age.

This has led to a births from frozen embryos now being more common that from fresh embryos, even though there are more fresh embryo cycles. This is suggestive of a change in behaviour from mothers. Rather than trying to have a baby, and when that does not work, resorting to IVF, mothers are now being far more forward looking in planning their families.

The baby boom thesis looks intact to me. I believe we are in are in a handover phase with ART. ART was originally seen as an answer to couples with fertility problems. I think ART is now increasingly seen as a technology to empower women and couples to choose when to have healthy babies at the time of their choosing. I think assumptions that Japanese population will fall by half this century will be very far from the mark. And in a big change, birth rates in trich countries will begin to overtake that over poor countries. Better living through technology.

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The Economist have dedicated the Technology Quarterly in this week’s edition to IVF. I would recommend reading it. My focus has been on using technology to bring about a change in demographics, while the Economist looks at the more practical, health and emotional side of IVF. It also looks at potential new technologies which would revolutionise assisted reproductive technology (ART). One of my findings on ART to change demographics is that it requires political support. Israel, for many reasons, is an extremely pro-natal nation. It dominates in cycles per million people.

With a focus on pro-natal policies unseen anywhere else (and matched by general acceptance) has fertility rates unseen in other rich nations. Israel covers all costs until a mother has two “take home” babies.

In the US, the old relationship between income and number of children has broken down. In part because IVF is expensive.

One excellent point from the Economist is that people often focus on the 25% success rate of embryo transfer leading to a full pregnancy for women aged 35 - 37. The reality is that many women aged 35-37 who conceive naturally probably also suffered a number of lost embryos as well, but as these were never known about and are not considered. It is possible that IVF has similar success rates to natural conceived births. Either way, the trend for improvements in IVF treatments have been very strong over the last 20 years.

Is IVF going to change fertility rates in other rich nations? Well recently released data in the UK shows that 2021 saw record cycles in the UK.

Although that same data release shows that NHS funded IVF treatment is falling. Without government funding, it is hard to see birth rates changing dramatically.

Data to May of 2023 shows that cycles in Australia are slowing after a post-Covid spike. Australian government covers around half the cost of IVF.

Perhaps even more depressingly, Denmark, which has the most liberal IVF policies in Europe, has seen live births drop back. This is suggestive that rule changes to allow any woman to receive IVF treatment only caused a one time boost from women that had previously been denied IVF treatment. Denmark has the technology and the funding, but births are falling again. It seems to me that the population also needs to be pro-natal, as in Israel, to change demographic trends.

Perhaps the most exciting part of the Economist article was to talk about in vitro gametogenesis, which open the way to potentially creating eggs from skin cells. This would solve the biggest problem in IVF, the cultivation of eggs. More interestingly is that Japanese research is leading in this area, making me more certain that predictions of a collapsing Japanese population by 2100 will likely be very wrong.

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Everywhere I look is talking about fertility - a sign I think. The Economist has a leader on the collapse in global fertility. I needed a couple of books to read on my recent travels, and picked up Aldous Huxley’s Brave New World and Margaret Atwood’s The Handmaid’s Tale, both books that deal with the future of fertility. The former, published in 1931, sees a future dystopia (in sci-fi, like in financial newsletters, dystopia sells better than utopia), where motherhood is seen as barbaric, and all people are born via a production process. Inevitable some classes are born to rule, and some to serve. One of my favourite sci-fi films, Gattaca, has many of the same themes. In this world, population growth is exponential. In Handmaid’s Tale, falling fertility rates brings about a political response, where fertile women are essentially forced to breed. Both books see a world where a woman’s choice over having children is somehow curtailed. I think this is the wrong analysis. First of all, if we look at the causes of the baby boom, we can then understand the current baby bust, and how policy can be changed. One of the first things to understand is that the baby boom was in many way driven by the desire for women to start families earlier. In both the UK and Australia the average age of mother dropped in the years after world war II, and continued falling until 1970.

There are two different (but related) reasons that I can think of why we saw a sudden decline in the age that women became mothers. The first, which fits in with my pro-labour argument is that in a world of very low unemployment, and rising wages, families felt secure enough to have children. This makes sense in terms of the two world wars and a great depression where then followed by two decades of low unemployment. Looking at Australian employment data, average mother’s age began to rise when unemployment rose in the mid 1970s.

I like this argument as it implies pro-labour policies create a self fulfilling virtuous cycle, leading to ever more growth, and ever more inflation, as we saw in the 1970s. It also implies that pure capitalism is anti-natal, and that socialism is pro-natal. Certainly the experience of eastern European nations that went through a sudden change from socialist to capitalist does not make an argument that capitalism is pro-natal. The problem with this argument is that the one rich country that has very high fertility rates is an extremely capitalist country - Israel.

Typically, Israel is left out of demographic analysis, as was the case with the Economist article. The reasons are that high fertility rates in Israel are driven by Haredi (ultra-orthodox) Jews, and so is not really comparable to other nations. While it is true that Haredi have extremely high fertility rates, even non-religious Jews in Israel have much higher fertility rates than other rich nations. Using data from Israel’s Central Bureau of Statistics, we can look at the fertility of “Jewish Women - Not Religious” exclusively. Non-religious Jewish women have followed the same trends seen in all rich countries, they have been having children at an older age.

But unlike other countries, the total fertility rates has stayed very stable.

What is particularly striking about this is that Jewish people in the US have below average fertility rate. This number for the US includes both Haredi and non-religious Jews, so the implication would be non-religious Jews fertility rates are well below replacement levels in the US.

One thing that Jewish people in Israel have access to, that American based Jews do not, is an extremely progressive policy toward Assisted Reproductive Technology (ART), which includes IVF. The Israeli government pays for all costs for ART until a woman in 45, or has two take home babies. Israel has a unique history that makes it extremely pro-natal. But the idea of government policy driving birth rates is a recurring theme after World War II. One study highlighted that countries that were neutral during World War II saw a much more muted or non-existent baby boom. Many countries felt a desire to repopulate after the trials of two world wars.

So while the Economist highlights the upcoming fertility crisis, and there a certainly an expanding number of governments that wish to boost fertility rates, I am not sure that the average person on the street feels that there is a pressing need for more babies. You don’t have to go far to find someone who thinks the world is overpopulated. The point of all of this is to show that demographics is not destiny. If society and governments decide more babies (populate or perish) is necessary, then the technology exists to make that happen. Population is politics. Demographics is a decision. And we can have more births without resorting to the methods used in either A Brave New World, or Handmaid’s Tale. In fact, contrary to public opinion, modern technology is leading to a better world as far as baby making is concerned, where women can have babies later in life, at a time of their choosing. More utopia than dystopia in my view.

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Japanese demographics is often cited in the secular stagnation story, and particularly by bond bulls. The UN’s Population Division has a forecast for Japanese population to fall below 80m by the end of the century.

I think it is unlikely that Japanese population falls that far, but first of all you need to understand how unusual Japan is demographically. Japan only has a land mass 50% greater than the UK. In arable land terms, the UK has 50% more than Japan, reflecting the far more mountainous terrain in Japan. 120 years ago, Japan and the UK had similar sized populations, but then Japanese population grew rapidly, while the UK stagnated. If you ever visit Japan, you will notice on train trips between cities that ever single bit of flat land is used. This really gives the impression that Japanese overpopulated their island, and now need to see their population fall.

I can get Japanese population and birth statistics back to 1900, and assuming relatively low (to none) immigration, work out births and deaths by year. A few surprising features is how Japanese births peaked soon after WWII. While there was another rise in the 1970s, it was very low compared to number births before WWII. Intriguingly, 1947 and 1972 show negative deaths. This is reflecting the repatriation of 6 million Japanese citizens from former colonies in Taiwan, Korea and Manchuria, and the return of Okinawa respectively. So after the trauma of World War II, mainland Japanese population actually grew at the end of World War II due to repatriation.

For comparison, the UK saw peak births, in 1901. If there is a demographic crisis, its has been brewing for a very long time. The rise in the UK population is mainly due to net migration. Both Japan and UK saw a countertrend rise in the 1960s and 1970s, which I think was due to pro-labour policies - but I will leave that aside for the moment.

The first part of my argument for a change in birth rates is that changes in technology means that women can have children later. In this area, Japan is a leader. In the last available data I have, 6% of all Japanese births, which is far higher than any other large country.

For me ART births take away age as a constraint on fertility rates. Technology means that women well into their 40s and even 50s can now have children if they want and can afford it. And here we see another positive trend in Japanese fertility rates. Working mothers are having more children are having more children than non-working mothers, after being the minority for years.

Another possible pro-labour shift that could reverse fertility trends is the work-from-home shift. I speak from personal experience that working from home is far more conducive to raising children than office based working. I also know that childcare in Japan is both expensive, and culturally women were expected to quit work to have children, as the above chart shows (at least until relatively recently). As we have seen with recent government actions on green energy, once a crisis is declared, governments can quickly accelerate trends. At some point, fertility rates in Japan will be declared a “real crisis”, and policies of free IVF, and free childcare will transform fertility rates. I very much doubt Japanese population will fall below 100 million people.

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My fertility series is trying to explore whether declining fertility rates are our demographic destiny, and are unlikely to change, or whether they are an outcome driven by policy choices. The conclusion of the other notes was that voters and governments needed to be both pro-labour and pro-natal in policy making to achieve a “reproduction revolution”. Pro labour policies are about raising wages relative to asset prices. If your average person is struggling to feed themselves, how can they be expected to feed others. The second part is that advances in technology is pushing back the age at which women can give birth. I see both sides of this argument being progressed in Australia. First of all we should note that Australia has seen a falling total fertility rate like the rest of the western world.

What is noticeable is that the fertility rate really collapsed in the 1970s, and has basically stayed at a low level ever since. My super simplistic view is in part driven by the collapsing real wages and more uncertainty in unemployment has driven falling fertility. For some reason, I cannot get the hard numbers on unemployment, but this graph below shows the trends, with the 1950s and 1960s having extremely low unemployment rates.

Recent trends in unemployment in Australia have driven us back to very close to the levels we saw in the 1960s. Hence we should start to see some mothers having children younger, as wages and employment conditions improve.

We are already seeing some signs of that, with mothers born in 1992 having similar number of births to mothers born in 1982, although both having less children in their 20s than women born in 1972. The trend is improving, and pro-labour policies should improve this trend. We are still using 2020 data here, but will update when I have newer data.

There are two parts to my “baby boom” argument. The second part of the argument is that is getting easier to have children as an older mother. When I say easier, many mothers will need to use assisted reproductive technology (ART) or often called in vitro fertilisation (IVF). This technology puts an upward bias to average age of becoming a mother.

The second part of the argument is that reproductive technology is improving, and governments that adopt more pro-natal policies will see birth rates improve. Australia has been a world leader in ART (assisted reproductive technology) and in 2020 saw an increase in ART births, while total births fell. ART births now make up 5% of all births in Australia and New Zealand.

What is great about ART births is that the number of cycles that is being conducted tend to predict births. That is more cycles will lead to more births, nine months down the track. While about data is both dated, and related to births, if we look at cycles we can get an idea of what birth rates for “older” mothers are likely to be in a years time. Australia has a government supplied healthcare program called Medicare. Unlike the NHS, this program stipulates an amount the government will pay for an operation, but allows individuals to top up this amount if they so wish. Under my understanding, this should mean that some but not all treatments will be covered by Medicare. However listed IVF providers in Australia use Medicare data to track market size, and Medicare numbers seem to match up with the ART numbers used elsewhere. The good news about Medicare data is that we have data up to December 2022, so quite timely. This data shows that cycles in Australia continue to rise at a much faster rate than pre-Covid. The time periods here are financial years to June, so the 2022 number is a half year number doubled.

What is very interesting about the Australian data is that it can be generalised to most other developed nations. Years of higher unemployment and stagnant real wages have been a feature of Japan, Korea, Germany, USA and even China. All of these countries have the healthcare systems to allow older mothers to have more children, while politics in all these places are moving pro-labour in my mind. If I had to bet on a big surprise for markets, a baby boom would be one them. Why does this matter? A baby boom is a massive inflationary shock, particularly if it goes some way to reversing the aging trend in the west. A baby boom makes long date bonds look even more unattractive in my mind.

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National Bureau of Economic Research has just released some fascinating research on US fertility rates (Covid-19 Baby Bump - thanks to my subscribers for pointing it out). There are lots of interesting things in the research. First of all, I am massively surprised by the number of US births by mothers that do not actually live in the United States. It has been well known that mother’s that were not born in the US (i.e. immigrants) have higher birth rates, but the NBER data shows that when Covid-19 disrupted travel, birth from mother’s not born in the US collapsed more than native born mothers. For a foreign-born mother, living in the US, Covid should not have effected birth rates, but for mothers looking to travel to the US to give birth, this would have naturally stopped this from occurring.

A large part of the drop in births can be put down to the collapse in birth of mothers who were born in China. The birth rate collapsed before other regions due to travel restriction on China, and unlike other regions have yet to recover. California was a popular choice for Chinese women to travel to give birth. Births by foreign mothers in California in 2018 was 163,303 and this fell to 138,972 in 2020. California alone made up 33% of the fall in foreign born mothers. Texas only saw foreign mother births fall by 8,000 over the same period.

So Covid-19 caused births in the US to fall, but only because it stopped some mothers from going to the US to give birth. When we look at fertility rates for just US born women, there is a dip 9 months after Covid-19 hit, but then a bounce back above trend (stuck at home with nothing to do always struck me as perfect conditions for baby making).

In my posts, I have thought there are three policies that governments could adopt to promote fertility rates. First is to give more money to lower earners, second is free childcare, and the third is free IVF. Covid-19 response in the US did the first two of these policies, but not the third. The third policy should boost birth rates for older women, while the first two should boost birth rates for all women, which is what the NBER data shows. All ages groups showed a sizable increase in birth rates although skewed to younger mothers.

The US did not offer free childcare but work from home culture would have benefited childcare conditions for college-educated women, or white-collar workers more than blue- collar workers. Again, the boost in birth rates was concentrated in while-collar workers.

We have shown that Israel and Denmark which have extremely pro-natal policies towards IVF have higher birth rates. And when governments give workers more money, and the ability to care for children, either through childcare or work from home policies, birth rates increase. For government wanting to boost birth rates, the policy choices are clear. Demographics is not destiny, its policy.

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Finance is a funny business. Generally speaking people will praise innovative and original thinking, but the real trick is to be about 6 months earlier than everyone else. Any earlier, and you are wrong for too long, and if you are too late, then you are just part of the crowd. So it was with great pleasure I read an Economist article questioning received wisdom on fertility rates (September 15, “Richer societies mean fewer babies. Right?”). The main point of the article was that the relationship between income and fertility was changing. The Economist article quoted two articles. I have gone to the source data and provide the best bits below.

One publication it quotes from is “Why did rich families increase their fertility? Inequality and marketization of child care” by Michael Bar, Moshe Hazan, Oksana Leukhina, David Weiss and Hosny Zoabi 

The key charts from the publication are below. In essence it shows that in 1980 there was a strong relationship between income and fertility rates. This is something that also occurs on an international scale, with richer countries also have lower fertility rates than poorer countries. The argument is that higher levels of education, and higher levels of female participation in the workforce leads to women have less babies. But what the chart shows below is that by 2010, that relationship was already changing in the US (for white, non-hispanic married women at least)

To further prove the point, the relationship between education and fertility rates were also changing in the US.

Matthew Doepke with other authors published a thorough review of the data in his recent publication “ The Economics of Fertility: A New Era”. Again, I show the key charts (in my view). One interesting chart was showing that World War II drove a big increase in female earnings and participation, which then reversed during the baby boom period.

And the baby boom was a response to lost population during World War II - as counties that remained neutral during the war saw no increase in fertility after the War.

The key issue, which the above charts on the baby boom show is that fertility rates is a directly driven by policy. After World War II, women were forced out of the workplace to make room for returning soldiers, and governments had very pro-natal policies. As these policies were relaxed, women have entered the workforce and have chosen to start families at a later date, leaving less time to have children.

So one option is to revert to post War policies of forcing women out of the workforce - but that would unquestionably be a bad policy. The other option is that society as a whole works together to boost fertility rates. We can see that societies where men do more house work, tend to have higher fertility rates.

So what does this mean? I think the Economist are wrong to think that the relationship of income to fertility is changing. This implies as societies get richer, then they will become more fertile. What I think it is picking up is that wealthy women can afford the childcare, and the IVF that all women need to boost fertility rates. If governments decide to act on the “fertility crisis” then the policy actions are obvious - universal child care and universal IVF.

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When I have looked at IVF, I have tried to look at the leading countries to see what they are doing. So which countries are leading? The metric I was most interested in was IVF cycles per million head of population. On this measure, Israel was by far the most active country in the world in terms of IVF.

Why did I skip Israel from the original analysis? Well when I went to look up birth statistics in Israel, they presented a breakdown by religion. The good news is that it is showing that total births are surging. The bad news is that it is only for Jews in Israel. One very plausible reason for rising birth rates in Israel is that very religious Jews tend to have more babies for many religion specific reasons. Hence it makes it very hard to argue that IVF is driving higher birth rates in Israel.

However a recent article in The Economist, show the average number of births broken down not just by the major religious groups, but adds in Haredi Jews, Religious Jews and Secular Jews. Haredi Jews could be characterised as extremely religious.

What I found so fascinating about this data is not that more religious Jews have more babies. This is well known. What I found so interesting was the “Secular Jews” also have so many babies. Israel these days is in the midst of a high tech boom, with surging property prices, and almost every second person seemingly a venture capitalist, and yet birth rates remain above two. In comparison, in the US, American Jews are below 2, which includes both religious and secular Jews.

So why do Israelis have so many children, regardless of religious beliefs. Israeli government policy is to subsidize treatment of all women regardless of marital status under the age of 45 until they have 2 children, regardless of the number of treatments they need. This liberal support of IVF means that has 1m frozen embryos, the same number as the US, despite a population of only 9m compared to 330m in the US. As far as I can tell the budget commitment required is minimal.

What does this all mean? Countries like Japan that face a meaningful collapse in population should emulate the policies of Israel. Population decline is not destiny, its a policy choice.

One of the many lessons I have learnt from the market over the years is that if everyone is worried about a problem, it is a) likely already priced into markets and b) someone out there is already working on solving it. A good example is the Malthusians in the 1970s. The Malthusian believed that we were about to enter of cycle of mass famine. There were two main drivers. One was that world population was growing so quickly, that it would outstrip the ability to produce food. One of the drivers of this fear was that most arable land was already been used to grow crops, which meant that ratio of people to land was moving in and unsustainable way. The big mistake that this analysis made was that the yield (amount of cereal produced on a hectare of land) had increased from 13,500 hg/ha in 1861 to 40,000 hg/ha in 2020 (data taken from UNFAO). The irony of the Malthusian analysis was that crop yields were already rising in the 1960s, but they chose to ignore that data point.

Contrary to expectations, grain and food was typically in excess. As recently as 2020, wheat was still trading at USD4 a bushel - a price first seen in 1972.

Now the world is gripped by fears of collapsing populations. The principal driver of this fear is collapsing total fertility rate. Any number below 2 implies a long term decline. The UK population has not declined yet, as it has been supplemented by immigration, but nations like Japan with limited immigration have already seen their population decline.

One thing the UK data makes clear is that the baby boom, and subsequent baby bust are effected mainly by the age a woman becomes a mother. After World War II the median age of a mother fell from 28 to 25, and today is nearing 32.

If we look at data from the UK regulator of IVF and other fertilisation treatments (Human Fertilisation and Embryology Authority - www.hfea.gov.uk) which has been collecting data on IVF since treatments began, we can see that birth rates using IVF have improved for all ages, but having success with IVF over the age of 40 is still slim.

This seems to imply the necessity of a “Handmaid’s Tail” style revolution is needed to boost fertility rates. However, the HFEA provide very interesting data on birth rate using donor eggs. When a woman uses a donor egg, IVF birth rates are above 30% for all ages, including 45 to 50.

What is this data point saying? It is not the age of the woman that reduces the chances of pregnancy, it is the age of the egg. This makes a lot of sense, as women carry all their eggs through their entire life, and from 35 onwards the quality of the average egg declines. IF the decline in fertility rates is solely driven by women beginning motherhood later, and the obvious answer is to freeze eggs when young, and use then when older. HFEA data shows that trend is already taking hold.

So if the UK government decided the “baby bust” was a crisis on par with climate change, then one obvious policy would be the NHS to fund the freezing of eggs for any women between the age of 30 and 35, and to agree to freeze them for up to 20 years. How much would this cost? I estimate there are around 2m women aged 30 to 35. I am guessing take up at 30%. Even if its free, it still an invasive operation, and if you already had say 2 children you may see no need. HFEA estimates a cost of £6000 to freeze and then unfreeze eggs. Assuming 600,000 women take it up, we are looking at start up cost of roughly £4bn, and running costs of £1bn a year. This compares to a NHS budget forecast at £199bn this year.

I have used the UK, as its data is very good, but there is no reason this data does not extend to other countries. The main point, is that for a motivated government, they could remove the physical constraints on increasing fertility rates. There will remain financial constraints, but I feel that the move to work from home culture may well help, with parents able to do more childcare while working.

Finally, I feel that we are moving to an age of confrontation between China and the US. Could we enter an age of “birth wars”? Where both countries try and boost their population? For those who remember the US and USSR competing at the Olympics to try and prove the superiority of their systems, this is not that far fetched. I am pretty sure long term fears of a baby bust, will be as correct at the Malthusian fear of mass starvation - that is totally wrong.

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One of the core arguments for a deflation has been demographics. Declining population, or an increasing number of over-65s is tied to slowing growth and deflation. However, the more I research it, the more complicated it becomes. As I have been talking about a potential baby boom, I thought I should lay out some of the complicating data, so you can at least be aware of the issues I am trying to deal with. One of the first things I discovered was that the post-war baby boom, was driven by women starting to give birth much younger than previously, and that the reversal of this was driving a baby-bust. I found evidence that this preference for becoming a mother later made we think we could be at a turning point in fertility rates.

However, I recently found that Scotland has even better birth statistics than the UK has a whole. In fact they have birth data going back to 1855. Amazingly total number of births peaked in 1900 (if we ignore a post World War I boom). The Scottish data still shows a post World War II boom, but in the longer term context, it is apparent that the number of children been born in Scotland has been on a downward shift for well over a 100 years. That is, the baby bust is not necessarily a modern phenomenon. In fact, it does suggest industrialisation and falling birth rates do go hand in hand.

Scotland’s population has been boosted by immigration from within the UK and from elsewhere, but saw a sizable decline in the 1970s, a period marked by inflation. I originally was approaching the demographics as an argument for much higher inflation going forward. That is if I could prove a baby boom was going to happen, then bonds would remain a short. The data I am looking at seems to argue that inflation and birth rates may have no relationship at all.

The second part of the argument was that improvements in IVF (or ART - Assisted Reproductive Technology) were going to drive a boom in births by older women. I got very excited by data from Australia that showed a surge in treatments.

However UK data from the Human Fertilisation and Embryology Authority (hfea.gov.uk) is not showing a similar surge, even with a Covid catch-up, IVF cycles are running at levels seen in 2019

Even more disconcerting is that 2017 saw a peak in total cycles.

One area that the HFEA data is interesting is that success of IVF with donor eggs is now at 30%, even for women aged 45 to 50. What this does suggest is that countries with liberal laws towards the use of egg donors, and who can receive free IVF treatments (single women, same sex couples etc) are likely to see higher birth rates. Denmark is such a country, and with similar population to Scotland, has seen an increase in birth rates recently (63,000 for Denmark compared to 48,000 for Scotland). It should be noted that Denmark introduced free IVF for any woman under 40 in 2018.

I still think a baby boom is possible, but it will need to be driven by governments policy making. A combination of higher wages, easier work conditions (working from home make child care much easier and affordable), liberalised IVF regime, and liberal attitudes to IVF would create an environment that could reverse much of the baby bust. One country I think that could surprise the most on birth rates is China. How easy would it be for the government to set policies to benefits families with three children? China also is a leader in IVF cycles. I am less sure we are about to have a baby boom, but I am more convinced government policy could lead to a baby boom if they chose to implement them.

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