Source: Fortune
Summary
J.P. Morgan warns that interest rates will spike due to dwindling populations and diminishing fiscal discipline, with global debt reaching $251 trillion. The “six D’s” – Deficits, deregulation, de-carbonization, de-population, de-globalization, and de-dollarization – will shape the global economy, with Deficits and de-population putting upward pressure on borrowing rates. Governments have leaned on fiscal stimulus, increasing deficits, and reducing fiscal space.
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The numbers tell one story.
JPMorgan’s Joyce Chang and team highlight the unsustainable U.S. fiscal deficit, with no political will to achieve fiscal consolidation. The U.S. remains the safest and strongest country, but risk to the debt outlook comes from dramatic military, political, energy security, or economic setbacks.
The population problem looms, with advanced economies facing declining birth rates and aging populations, leading to a smaller labor supply and increased demand for pension and healthcare expenditures.
The Committee for a Responsible Federal Budget’s Social Security Countdown stands at seven years and 10 months, with neither political party expected to act until the cliff is met.
The demographic dividend is ending, and de-population is an underappreciated risk that will reduce savings and contribute to higher interest rates.
The calm before the storm is a familiar phase.
Author: Evan Null
