Economic long term Stagflation
Economy is bothered about demography, although ageing and shrinking of the population across the world is a striking and a new phenomenon on the human history.
Demographic and globalisation will reverse three multi-decade global trends and will raise inflation and interest rate, but lead to a pullback in equality.
Whatever the future holds it is nothing like the past” according to the authors.
Deflationary headwinds over the last three decades have been mostly due to an enormous surge in world’s available labour supply, owing to very favourable demographic trends and the entry of China and Eastern Europe into the world’s trading system.
Italy last year recorded the smallest annual number of births since the Risorgimento of the mid-19thcentury and nearly a third of the population is over 60. There has been absolute decline in the number of people in Italy since 2015, even after accounting for the inward migration, and the rest of the West, Eastern Europe and china will follow.
In economics humans are abstracted as labour input replaced by machines.
Former Bundesbank President
Axel Weber said “Future gemeration deciding not to be born”.
The Great Demographic Reversal by respected academic Charles Goodhart and Manoj Pradhan, a former managing director at Morgan Stanley, makes some strong predictions , the old at their later stage in their life cycle did not save, but spend, so saving gults of the kind thought to have paved way for today’s low interest rates vanish as population age. Nomizal interes rates will rise and so will inflation primarily because of labour shortages and wage pressures. The world economy will experience secular stagflation as productivity and real growth will continue to be much slower than in the past yet with prices rising faster. So living standards will continue to grow slowly and for many will be eroded by further inflation.
The Great Demographic Reversal: Ageing societies, Waning Inequality, and an Inflation Revival by respected academic Charles Goodhart and Manoj Pradhan, Palmgrave Macmilan £29.99, 260 pages.