The Great Demographic Reversal: Ageing Societies, Waning Inequality, and an Inflation Revival

The underlying forces of demography and globalization will shortly reverse three multi-decade global trends; they will raise inflation and interest rates, but lead to a pullback in inequality. Whatever the future holds, it will be nothing like the past. Deflationary headwinds over the last three decades have been primarily due to an enormous surge in the worlds available labor supply, owing to very favorable demographic trends and the entry of China and Eastern Europe into the worlds trading system. This demographic trends are on the point of reversing sharply, coinciding with a retreat from globalization. As the result, ageing can be expected to raise inflation and interest rates, bringing a slew of problems for an over-indebted world economy. Ageing is also anticipated to increase the share of labor, so that inequality will fall.