Have financial models changed forever?
The above chart shows the fast dropping working age population of Europe. Paul Krugman of The New York Times recently suggested that these demographics - hugely different from the what the world has seen in the last few hundred years - mean we cannot expect our financial system to continue to behave in the same way it has before.
Interest rates have been very low in New Zealand, where I live, for some time. This was bad news when my husband and I were saving for our house deposit, but very good news when we bought a house. There have been suggestions here that interest rates will soon rise sharply as the New Zealand economy recovers and they have a little bit already. I am no financial analyst, but Krugman suggests that in fact lower interest rates might simply be a new normal because of a slower economy in the low term due to less workers.
Financial advisors are saying similar things. Closer to home, Australian financial advisor Jason Kim of investment management company Tyndall AM, suggests that Australia is set to follow the same path as the Japanese demographically and this will affect markets.
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