Aging Nations Like Low Prices Over High Income: Cutting Research … An elderly woman walks through a shopping street in Okayama, Japan. Wealth effects differ the world over as consumers in Europe and Japan are less affected by changes in equity and home prices than those in the U.S. The older a country's population, the lower its inflation rate, posing a challenge for central banks in the world's industrial nations, according to a UBS AG (UBSN) report. – Bloomberg
Dominant Social Theme: A great analysis of aging nations.
Free-Market Analysis: What is a nation anyway and why should different age groups be pitted against each other? That seems to be the fashion, however, when it comes to analyzing retirements and how they operate.
We've commented on this before because the Baby Boomer generation has been set up by Obamacare to compete for rationed medical services. And this is going on all over the world where nations run healthcare instead of private markets.
Singapore-based economist Andrew Cates of the Swiss bank's global macro team plotted average inflation levels over the last five years against changes in the dependency ratio, which compares the very old and very young to the working-age population. The resulting chart showed nations that have aged in recent years typically faced very low inflation and, in the case of Japan, deflation.
By contrast, those that have been getting younger, such as India, Turkey and Brazil, have relatively strong price pressures. "Since aging demographics will now start to feature more prominently in the outlook for many major developed and developing countries this is clearly of some significance for how inflation might evolve," said Cates in a May 30 report.
The finding clashes with the view of economics textbooks, according to Cates, which tend to say a slowdown in population growth should put upward pressure on wages – and therefore inflation – as labor supply shrinks. Still, this ignores how demographics influence demand for durable goods and property, Cates said.
He cited a Federal Reserve Bank of St. Louis study that says because the young initially don't have many assets, wages are their main source of income. The young are therefore comfortable with relatively high wages and the resulting inflation. By contrast, because older generations work less and prefer higher rates of returns on their savings, they are averse to inflation eating away at their assets. "Whichever group predominates in any economy will therefore have more ability to control policy and more ability to control economic outcomes," said Cates.
This analysis is organized around generations competing with each other for scarce resources but why does it have to be that way? What is so valuable about healthcare and elderly care in particular? In fact, this sort of analysis seems to us to be a kind of dominant social theme, one that creates medical scarcity where there need be none.
It is hard to predict exactly what Obamacare is going to do but the meme of continued and expanded scarcity is obviously established in healthcare and now it is taking over the US as well.
The US takeover happened in stages, beginning with companies offering healthcare packages during the Second World War. Medicare and Medicaid further intruded on the marketplace by generating specific treatments and pricing them as well.
European countries and various countries in developing nations are even worse off when it comes to market-based healthcare. In these countries and regions, healthcare has been fully nationalized. The market is no longer operative and all that is left, therefore, is sterile analyses over what groups will gain and what groups will lose when it comes to medical services.
This article is extremely complex and theoretical. Someone not versed in free-market analysis would likely conclude it provides a fairly comprehensive perspective. But it doesn't ever get to the heart of the current healthcare problem, which has little to do with generations and a lot to do with mispricing, government regulation and subsequent, inevitable rationing.