Despite the unendingly grim economic news out of the euro zone, most major European stock markets have shown robust growth over the last year. The German DAX is up over 32 percent since June of 2012. The Swiss Exchange is close behind at almost 30 percent growth over the same time period, and the Euronext 100 and CAC 40 have both risen by almost 25 percent. Heck, even the Athens Stock Exchange seems to have temporarily risen from the dead. It’s up more than 77 percent in the last twelve months.
So is it time to put aside our fears and jump into this rally? I have three answers: no, hell no, and don’t you dare.
Europe is a dead-continent-walking. These short term gains notwithstanding, European stocks may very well be the biggest value trap in the history of capitalism–though the reasons why might surprise you. It’s not just because of the region’s low-to-no economic growth, crushingly high debt levels, and disastrous austerity policies. Europe is “going to zero” in a different, more fundamental area, as well.
It’s running out of people.
Two cultural factors are putting Europe in far more economic danger than its idiotic central bankers. First, Europeans aren’t having any kids.
From CNBC last month:
A birth rate of at least 2.1 children per woman is generally required to sustain the population of a developed country. The European average in 2011 of 1.58 could have a serious impact if it continues as Europeanslive longer and hope to rely on a younger workforce.
It’s awfully hard to grow an economy without people around to do the work and, more importantly, come up with new businesses and ideas. There also won’t be enough strapping young boys and girls to pay for the pensions and doctor bills of their parents and grandparents. What will that mean? More debt, of course.
We’ve got this same low birthrate problem here in the US, at least on our coasts. But the thing that separates us from the Old World, and always has, is that–as much as we pretend otherwise–we like immigrants. We always have. In Europe? Not so much:
The financial crisis in the Eurozone and the resulting austerity has triggered a rise in nationalist parties across Europe.
Despite the Treaty of Rome — the founding charter of the EU — promising to “preserve and strengthen peace and liberty”, from Germany to Greece the nationalists are on the march.
Anti-immigrant feeling is running high, and parties of the extreme right are scoring electoral victories, alongside a sharp rise in racist and anti-Semitic attacks.
So Europe’s already low birthrate has gotten even lower at the same time as more people are voting for nationalist, anti-immigrant politicians. That’s not just a vicious cycle. That’s a death spiral.