Sign up with your email address to be the first to know about new products, VIP offers, blog features & more.

Demographics, Destiny and Asset Markets

First published: Boeckh Investment Letter, 13/07/2010

The evolving financial crisis in the West and its long-term consequences has exposed deep-seated structural flaws in our economies, and in the global economic system. These span our susceptibility to deflation, the loss of traditional economic growth drivers, the integrity of public finance, the regulation of the banking system, weaknesses in labour markets, and the lack of discipline that obliges creditor countries, such as China, Japan and Germany to share the with a less visible and slow moving phenomenon that has a direct bearing on many of the structural problems we face, namely the onset of rapid aging.

Although demographic projections of population, life expectancy, and fertility are not free from error, the nature of aging means that for all intents and purposes, demographics are our destiny. A lively debate about rapid aging in richer economies has been going on for at least the last 30 years, and in its simplest form, it is about the essential question of “who’s going to look after grandma?”

A more contentious and neo-Malthusian form resides in the perceived threats of overpopulation, aided and abetted universally by longer life expectancy. The world’s existing population of 6.5 billion is expected to grow by a further 2.7 billion by 2050, almost all in emerging and developing nations. Although the populations of the U.S.,…more