Helping you navigate the new normal
Governments, financial markets and central banks all originally assumed the Covid-19 pandemic would be over in a few days or weeks. But it is now clear they were wrong. And unfortunately, there is little sign of a Plan B emerging. The idea was that consumers would have plenty of money in their pockets after the
Major paradigm shifts are occurring in the global economy, as I describe in a new analysis for ICIS Chemical Business Over the past 25 years, the budget process has tended to assume that the external environment will be relatively stable. 2008 was a shock at the time, of course, but many have now forgotten the
If a country doesn’t have any babies, then in time it won’t have an economy. But that’s not how the central banks see it. For the past 20 years, through subprime and now their stimulus policies, they have believed they could effectively “print babies”. Even today, they are still lining up to take global interest
Women in most parts of the world are not having enough children to replace our population. This is one of the great issues of our time, but is hardly ever discussed. Yet the issue is very topical, with Chinese births falling to a 60-year low last year. Only 15.23 million babies were born, the lowest
“The 1950-2000 period is like no other in human or financial history in terms of population growth, economic growth, inflation or asset prices.” This quote isn’t from ‘Boom, Gloom and the New Normal: How Western BabyBoomers are Changing Demand Patterns, Again‘, the very popular ebook that John Richardson and I published in 2011. Nor is […]
The post Boomer SuperCycle unique in human history – Deutsche Bank appeared first on Chemicals & The Economy.
It’s 10 years since my forecast of a global financial crisis came true, as Lehman Brothers collapsed. I had warned of this consistently here in the blog, and in the Letters column of the Financial Times. But, of course, nobody wanted to listen whilst the party was going strong. As the FT’s world trade editor wrote […]
The post Why everyone ignored my warnings ahead of the financial crisis appeared first on Chemicals & The Economy.
The Financial Times has kindly printed my letter as their lead letter, arguing that the rise of the populists emphasises the risk of continuing to deny the impact of today’s ageing populations on the economy. Sir, Martin Wolf’s sobering analysis of policymakers’ post-crisis decision to “go back to the past”, ( “Why so little has changed since […]
The post Financial crises and the five stages of loss appeared first on Chemicals & The Economy.
The blog has now been running for 14 years since the first post was written from Thailand at the end of June 2007. And quite a lot has happened since then: There was the 2008 financial crisis, one of the blog’s early forecasting successes This led to the publication of ‘Boom, Gloom and the New
The post The blog’s 14th birthday – and the New Normal world it predicted has arrived appeared first on Chemicals and the Economy.
The results of the central bankers’ great experiment with money printing are now in, and they are fairly depressing, as the charts above confirm: On the left are the IMF’s annual forecasts from 2010 – 2018 (dotted lines) and the actual result (black) Until recently, the Fund was convinced the world would soon see 5% […]
The post The tide of global debt has peaked: 8 charts suggest what may happen next, as the tide retreats appeared first on Chemicals & The Economy.
As promised last week, today’s post looks at the impact of the ageing of the BabyBoomers on the prospects for economic growth. The fact that people are living up to a third longer than in 1950 should be something to celebrate. But as I noted in my Financial Times letter, policymakers are in denial about the importance of […]
The post West’s household spending heads for decline as population ages and trade war looms appeared first on Chemicals & The Economy.
Rising life expectancy, and falling fertility rates, mean that a third of the Western population is now in the low spending 55-plus age group. Given that consumer spending is around two-thirds of the economy in developed countries, the above charts provide critically important information on the prospects for economic growth. They show official data for household […]
The post West faces “demographic deficit” as populations age appeared first on Chemicals & The Economy.
The Financial Times has kindly printed my letter arguing that we need new policies to help people adapt to their extra decade or more life expectancy. Sir, There is another angle to Janan Ganesh’s interesting exploration of whether “Liberals risk the charge of complacency” (February 20). This is the question of why the policy elite has […]
The post Older workers are looking for something more appeared first on Chemicals & The Economy.
“Average UK wages in 2022 could still be lower than in 2008” UK Office for Budget Responsibility While Western stock markets boom under the influence of central bank money-printing, wages for ordinary people are not doing so well. So it is no wonder that Populism is rising, as voters worry their children will be worse […]
The post Central banks’ reliance on defunct economic theory makes people worry their children will be worse off than themselves appeared first on Chemicals & The Economy.
No country in the world now has a top quality pension system. That’s the conclusion from the latest Report by pensions consultants Melbourne Mercer. As the chart above shows: Denmark and The Netherlands have fallen out of the top category In the G7 wealthy nations: Canada is in category B; Germany and UK in C+; […]
The post US tax cuts will fail as Trump’s demographic deficit replaces Reagan’s demographic dividend appeared first on Chemicals & The Economy.
Next week, I will publish my annual Budget Outlook, covering the 2018-2020 period. The aim, as always, will be to challenge conventional wisdom when this seems to be heading in the wrong direction. Before publishing the new Outlook each year, I always like to review my previous forecast. Past performance may not be a perfect […]
The post The Great Reckoning for policymakers’ failures has begun appeared first on Chemicals & The Economy.
The Financial Times has kindly printed my letter below, wondering why the US Federal Reserve still fails to appreciate the impact of the ageing BabyBoomers on the economy Sir, It was surprising to read that the US Federal Reserve is still puzzled by today’s persistently low levels of inflation, given that the impact of the ageing […]
It was almost exactly 10 years ago that then Citibank boss, Chuck Prince, unintentionally highlighted the approach of the subprime crisis with his comment that: ‘We are not scared. We are not panicked. We are not rattled. Our team has been through this before.’ We are ’still dancing’.” On Friday JP Morgan’s CEO, Jamie Dimon, […]
Stock markets used to be a reliable indicator for the global economy, and for national economies. But that was before the central banks started targeting them as part of their stimulus programmes. They have increased debt levels by around $30tn since the start of the Crisis in 2008, and much of this money has gone […]
Unsurprisingly, Friday’s US GDP report showed Q1 growth was just 0.7%, as the New York Times reported: “The U.S. economy turned in the weakest performance in three years in the January-March quarter as consumers sharply slowed their spending. The result fell far short of President Donald Trump’s ambitious growth targets and underscores the challenges of […]
The Financial Times has kindly printed my letter below, suggesting that President Trump’s focus on tax cuts is misplaced, given the headwinds created for spending and economic growth by today’s ageing US BabyBoomers. Sir, Gillian Tett provides an excellent analysis of the wishful thinking that seems to dominate US economic policy today (“Trump tested as […]
US GDP growth is slowing, again, as the chart of the Atlanta Federal Reserve’s “GDP Now” forecast shows: Forecast Q1 growth has slipped to just 0.6% from an initial 3.4% at the end of January Consensus economic forecasts are still much higher, but even they have fallen to 1.7% from 2.2% […]
It is hard to be optimistic about the outlook for 2017. The good news is that policymakers are finally giving up on the idea that stimulus can somehow return us to the growth levels seen when the Baby Boomers were young. As the Bank of England note in a new Report: ”Economic theory suggests that a […]
The bond market vigilantes are back. And they clearly don’t like what they are seeing. That is the clear message from the charts above, showing movements in 10 year government bond interest rates for the major economies, plus their exchange rate against the US$ and the value of the US$ Index: As I warned […]
An amazing development is taking place in the world today. For the first time in human history, more people are joining the 55+ age group than the 25 – 54 age group: 600m people will be joining the New Old 55+ cohort between now and 2030, taking their numbers to 1.8bn This is twice the […]
Should it really matter that the US Federal Reserve might raise US interest rates by 0.25% tomorrow? Surely the IMF/World Bank should not need to argue that such a small increase could really be critical for the world economy? The fact that such a debate has been taking place at all, highlights the damage done by stimulus […]
“Central banks have created a debt-fuelled ‘Ring of Fire’, and we will no doubt have felt many tremors (large and small) as a result, by the time my next 6-monthly update appears in September“. That was my forecast for world stock markets back in March, and I imagine few would argue with it today, as we review developments […]
The Financial Times has kindly today printed my letter below, commenting on the change taking place in demand patterns as a result of ageing populations. Sir, It was interesting to see the UK’s employment and pension ministers reminding FT readers that “by 2022, there will be 3.7m more people aged between 50 and state pension […]
200 years ago, most blog readers would have been dead at their current age. Life expectancy in the West was just 34 years in 1820, and averaged only 24 years everywhere else. Today, as the chart shows, Western life expectancy has risen to 79 years (red area). In the the emerging economies, it has nearly […]
My new post for the Financial Times FT Data blog discusses how the ageing of the US population is creating major headwinds for the economy. Guest post by Paul Hodges| May 06 13:45 | Demographic change is creating major headwinds for the US economy, as confirmed by its disappointing first quarter GDP growth of 0.2 […]
Too many policymakers, companies and investors are continuing to ignore the dramatic changes taking place in the age profile of the global population. Yet common sense tells us these must have a major impact on the economy. The impact comes from 2 equally important developments: One is the rise in the number of people in the New […]
China’s reported 7.4% GDP growth for 2014 was the lowest in 25 years. But even so, it probably still overstates the true economic position. How could China possibly produce a final fiigure for GDP within just 20 days of 2015? Electricity consumption, as Premier Li has advised in the past, is a far more reliable guide to the actual […]
The global economy really isn’t getting any better. That’s the key conclusion from the blog’s quarterly survey of company results for Q2. Of course, some companies are doing well – either because of shale gas economics, or their own market positioning. But consumer giant Unilever summarised the general picture very well: “Market growth continued to slow in emerging […]
The Cycle of Deflation has taken another lurch forward. The reason was India’s decision to veto last year’s Bali deal to streamline customs procedures. Almost certainly, this will prove the dying effort of the World Trade Organisation, which sponsored the proposal. The blog is particularly sad at this outcome. It has always believed that free […]
Markets appear to be continuing to move, slowly but surely, into their expected ‘scary phase’. The reason is the massive distortions that have been created in financial markets, and in China’s housing market, by the $35tn+ of stimulus from governments and central banks since 2009. Unwinding these distortions will not be simple. The stimulus has not returned us […]
Just as forecast in March, world cotton prices have crashed. Prices peaked at 97.35c/lb on 24 March, just 3 days after the post was published. Since then, they have fallen by a third to 65c/lb. They have now fallen for 11 straight weeks – the longest slump in 55 years, according to Bloomberg. There is no need to repeat […]
A year ago, European policymakers and central bankers were dismissive when the blog suggested deflation was a far bigger threat than inflation – when it was speaking at the world’s major conference for bond investors. Later this month, the blog expects a different response when returning to speak at the same conference. Last week, the European Central Bank (ECB) was forced to […]
The blog first learnt about the network effect in the late 1990s, during the successful launch of the eBusiness platforms CheMatch and then ChemConnect. Its Silicon Valley colleagues patiently explained that markets tended to move in predictable stages, once a new concept or product was launched: Everyone would initially jump on the bandwagon, not wanting […]
A new article by an IMF economist makes the point that in April 2008, not a single one of the mainstream economic forecasts covered by ‘Consensus Economics’ was forecasting a recession in 2009. The IMF itself expected growth to continue, as did the World Bank and the Organisation for Economic Co-Operation and Development. Even by […]
Government bonds in the larger, wealthy countries of the West have traditionally been regarded as being “risk-free”. Most countries have failed to pay their debts at some time in the past, but it hasn’t happened in the post-War period for the major economies, and so investors have forgotten this can happen. This situation may well change […]
Monday’s Interesting Quotes post highlighted how China’s leadership clearly recognise they have a massive debt problem, as detailed in the blog’s recent Research Note. Further evidence for this was provided by yesterday’s bank lending figures, which showed total lending down 19% versus March 2013 at Rmb2.07tn ($333bn), and the lowest increase in money supply since 2001. This makes […]