Global economic growth has slowed over the past few years. Economists such as Larry Summers are talking about secular stagnation. If this is happening, then demography may be the best explanation for it. The post-war baby boom generation is in their 50s and early 60s. People are living longer everywhere and burdening government budgets with social welfare spending on their senior citizens. The resulting budget deficits are financed with credit that is a growing liability for younger generations without creating any offsetting income-producing or productivity-enhancing assets.
Demography can account for the dramatic decline in both inflation and bond yields in the US. Indeed, there has been a very close fit among the Age Wave (i.e., the percentage of the labor force that is 16-34 years old), the inflation trend, and the U.S. 10-Year Treasury yield.
Today's Morning Briefing: A Dozen Lessons. (1) Doing our homework. (2) A dozen lessons. (3) Central bankers are know-it-alls who don’t. (4) Deflation may be a monetary phenomenon too. (5) Bond vigilantes go on a European vacation. (6) Yellen admits she is guessing about slack. (7) Could it be that low price inflation is driving low wage inflation? (8) Europe and Japan going down same dirt road. (9) US remains outstanding. (10) Corporations are managed to be profitable. (11) Time to pull out reasons why P/Es have more upside. (12) Demography can explain a lot. (13) Hillary vs. Mitt. (14) Jihadists on a deadly crusade. (15) “The November Man” (+ +).