1. Demography and Populism
Congres Grip op je Vermogen
Den Haag, 7 Oktober 2016

2. Menu of the day Secular stagnation and interest rates
… and the introduction of the pill
Implications for:
ECB policy and EU
Pensions
Your portfolio
World trade and populism

3. A quiz Five statements You know an example of a Bubbly Asset?
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?

5. Fall in real interest rates

6. What is the role of demography?

7. Savings and the life cycle
wealth
6 annual salaries 25 65 80
age
Large cohorts!
Small cohorts

8. Expected effect on German real interest rate

9. 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?

10. Japan’s real interest rate

11. Further analysis Taylor rule: hence, lower interest rates ZLB problem
Plea’s against ECB policy equivalent to a minimum wage on capital market
Monetary policy to its end, hence: fiscal
Large savings surplus: cheap funding!
No inflation: relatively cheap equity

12. House price in Britain

13. ... and France

14. What about Germany?

15. Remedies No regret: Structural reforms
Good for growth anyway
Boost investment, hence helpful for I = S
Higher inflation target ECB: 2% to 4%
Evidence shows higher inflation harmless (Barro)
Raise the retirement age! Reduces savings
Extend PAYG social security systems!

16. Discontinuity in world trade source: CPB, BCG

17. 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
Strongly related to city versus country side

18. Land rents versus level of education
Table 1 Contribution of various characteristics of the log construction index h
Land rents versus level of education

19. Possible responses Better distribute the benefits of globalisation
Remarkable:
Strong spatial seggregation, nevertheless
Netherlands only exception to increase divide
Better social security, in particular for elderly
Better access to education
Higher wages!
At the same: adjust to it