August 27, 2010

Demographics

Persuasive account of why lean times will be semi-permanent - because there are not enough young people.
“The rise in ‘prime age’ savers globally may also have played an important role in the story of the ‘savings glut’, putting downward pressure on global real interest rates. Here too, the demographic underpinnings of that story could intensify in the next 10-15 years.”

These elements conspire to keep America in a vicious cycle: the imbalance of savers (prospective retirees) and borrowers (young families and entrepreneurs) keeps returns on assets low, and low asset returns force the prospective retirees to save more, which increases the imbalance. That is just what happened in Japan during the 1990s...

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