Unlike interest rates or the weather, long-run demographic trends are highly predictable. Today, we are facing a demographic storm that will have far-reaching impacts on the economy and geopolitics.
Labour markets will be tight for years to come, which will fuel inflation. With falling national saving rates, the saving glut and low real interest rates that have spurred investment will disappear. Like Japan in recent years, GDP growth will stall in many high- and middle-income countries, as more people leave the workforce. Unless productivity remarkably improves, annual GDP growth will fall below 1.5 per cent in many large countries, half the typical post-Second World War rate of three per cent.
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