Part 2: Dr. Dave Kohl’s Global Economic Outlook

Jan 16, 2024 | Macro Insights, No Bull Economics

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According to Dr. Kohl: the U.S. must have an economic heart attack before it will fix out-of-control debt; China’s population will shrink -25% by 2050; India is on its way to surpass China as the world’s largest economy; and green energy is moving into the disillusionment stage.

U.S. Economic Headwinds

  • Federal debt has grown from $20 trillion in 2020 to $34 trillion currently & now the interest on the national debt is larger than the military budget, Medicare & social security. This is not sustainable & Dr. Kohl expects that the country must have an economic heart attack before this will be fixed.
  • While the job market looks strong, many people have 2-3 jobs.
  • The University of Michigan’s consumer sentiment index, which has been under 75 since 2022, was 69 last month. While the consumer is confident in the short run, low housing starts show a lack of long-term confidence. Given the current median price of a home & a 20% down payment, new homeowners would have to contribute 44% of their income toward occupancy costs & this explains why some consumers have 2 or 3 jobs.
  • The reinstatement of student debt represents an average of a $349/month increase in expenses for millennials who are engaging in “doom spending” because they can’t afford to buy a home. As an example, Dr. Kohl referenced some millennials from Michigan who spent between $4k to $14k to attend the national soccer championship in Europe.
  • It will be difficult to return core inflation to 2% because 33% of that component is made up of housing.
  • Further, inflation could heat up with supply chain disruptions caused by conflicts in Panama, Suez, Red Sea & South China Sea.
  • In any case, Dr. Kohl expects that the Fed will be cautious about dropping interest rates because there’s a lot of noise in the labor data.
  • The Fed was able to avoid a recession so far because of the wealth effect it created during covid. For every $1 created in the stock market, consumer spending increases by $0.04 to $0.09.
  • A steep recession would require: $100 a barrel for 2 or 3 months; 5% to 6% unemployment; a sharp drop in housing starts; and double-digit interest rates.

China Continues to Shrink

  • During the 2000 to 2010 commodity super cycle, China’s economy grew +10%/year which fueled substantial infrastructure investments. China’s economic growth slowed to +6.2%/year from 2010 to 2020 with annual growth expected to slow further to +2% to +4% from 2024 to 2030. This dynamic is expected to pressure domestic export demand as China is our largest ag export market.
  • China’s slowing growth is primarily a function of demographics & after 35 years with its one-child policy, the country does not have enough young people. Because of this policy, the country’s population could shrink -25% from 1.3 to 1.4 billion to under 1 billion by 2050.
  • Further, there is a high youth unemployment rate in China and it is notable that young people who attend U.S., Canadian, European & Australian universities for a tech education return to China where this often a lack of tech jobs.
  • China’s 3-year covid lockdown, which ended in May 2023, drove a collapse in its housing market. Also, China’s economy is being hit by a -14% y/y decline in its global exports during 2023, including a -40% reduction to the U.S. & -44% to Europe. In turn, Chinese consumers are slowing their domestic spending as their economy slows.

India is Headed Higher

  • Many believe that India is on its way to surpass China as the world’s largest economy. Currently, India has the largest population & the 5th largest economy, recently surpassing the U.K. & India is expected to surpass Germany by 2029 to become the 3rd largest economy in the world.
  • Notably, 55% of India’s population are subsistence farmers & 23% of its workforce is female.
  • As India’s current leader will be re-elected (given a 77% approval rating), the country is likely to continue a heavy subsidy for its agricultural industry while continuing to curtail its exports of rice, sugar, onions, & wheat.


  • The world is moving from an infatuation stage of green energy into the disillusionment stage (i.e. greenlash). The Europeans have become disillusioned that they have all these expensive green energy initiatives while China & India are putting coal-fired plants online.
  • Notably, one Canadian operating an 8,000-acre farm had to pay a $500k carbon tax to the government. This is fueling a greenlash movement that is expected to soon reach the U.S.

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