Transcript PowerPoint-presentatie

University of Cambridge
Demography and Populism
Congres Grip op je Vermogen
Den Haag, 7 Oktober 2016
Menu of the day
1.
Secular stagnation and interest rates
2.
… and the introduction of the pill
3.
Implications for:
1.
2.
3.
4.
ECB policy and EU
Pensions
Your portfolio
World trade and populism
A quiz
◼
Five statements
1.
2.
3.
4.
5.
◼
ECB policy is doomed
Interest rates will soon get back to normal
Lower Sovereign Debt solves the Debt Crisis
Ageing societies need funded pensions
Bubbles are bad
You know an example of a Bubbly Asset?
Fall in real interest rates
What is the role of demography?
Savings and the life cycle
wealth
6 annual salaries
25
65
80
age
Small
cohorts
Large
cohorts!
Expected effect on German real interest rate
Japan preceding the Euro-zone?
◼
1970’s: fastest growing economy in world
◼
◼
Would it overtake the US?
Real estate crisis in 1990
Deflation and low interest rates
◼ Bankruptcy life insurance companies
◼ Low growth
◼ Response: very high sovereign debt
◼
◼
Was Japanese policy response a success?
Japan’s real interest rate
http://angrybearblog.com/wp-content/uploads/2014/04/japan-real-int.png
Further analysis
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Taylor rule: hence, lower interest rates
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ZLB problem
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Plea’s against ECB policy equivalent to a
minimum wage on capital market
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Monetary policy to its end, hence: fiscal
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Large savings surplus: cheap funding!
◼
No inflation: relatively cheap equity
House price in Britain
... and France
What about Germany?
Remedies
◼
No regret: Structural reforms
Good for growth anyway
◼ Boost investment, hence helpful for I = S
◼
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Higher inflation target ECB: 2% to 4%
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Evidence shows higher inflation harmless (Barro)
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Raise the retirement age! Reduces savings
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Extend PAYG social security systems!
Source: CPB, BCG
Discontinuity in world trade
source: CPB, BCG
Declining support for globalisatioin
◼
Article Summers in FT
◼
Strong evidence: it is the economy, stupid!
Autor for US
◼ Brexit
◼ Early on: Schram/Van Riel: Germany in 1930s
◼ Trump, Le Pen, AFD, Wilders
◼
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Strongly related to city versus country side
Land rents versus level of education
Possible responses
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Better distribute the benefits of globalisation
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Remarkable:
Strong spatial seggregation, nevertheless
◼ Netherlands only exception to increase divide
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Better social security, in particular for elderly
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Better access to education
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Higher wages!
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At the same: adjust to it