The levee gonna break – Debt, demographics, productivity and financialization | The Cobden Centre

Increasing debt and leverage for an economy with a diminishing working age population is not sustainable. Without the demographic windfall of immigration or procreation, increasing productivity is the only way to sustain real economic growth. The short term financial wizardry of the share buy-back is a function of the artificially low price of credit.

images waveThe longer central bank sponsored largesse continues, the lower the trend rate of GDP growth will become. A combination of fiscal reform and gradual normalisation of monetary policy could redress the situation but I believe it is politically unachievable. Markets climb a wall of fear, even at these exalted levels, it still makes sense to be long bonds, stocks and real-estate but, once the limit of government intervention has been reached, the “levee gonna break”.

The levee gonna break Debt demographics productivity and financialization

Source: The levee gonna break – Debt, demographics, productivity and financialization | The Cobden Centre