Powerful demographic trends will cause higher inflation and interest rates, and a reduction in inequality as labor reclaims its bargaining power in the global economy, argue two British authors in a persuasive book.
That conclusion “caused a furor” when it came from the celebrated British economist and central banker Charles Goodhart, and Manoj Pradhan, a macroeconomist. It is the central prediction in their new book, The Great Demographic Reversal.
Why would these relatively anodyne forecasts cause a “furor”? What evidence do they present? And, most importantly, how will investors be affected if their predictions come true?
The controversy comes from the contrarian nature of their forecast. Mainstream thinking is that low inflation and interest rates are here to stay. This consensus is based on central bank statements of intent as well as the low-growth environment of an aging society with limited productivity gains.
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