Around US$13 trillion of government bonds now trade at negative yields. Many of these are in Europe, which tells a compelling story about growth prospects in that ageing part of the world. In his final months in office as president of the European Central Bank (ECB), Mario Draghi seems determined to unleash additional stimulus in the eurozone – perhaps further quantitative easing or even a more negative ECB deposit rate. What a sad story when an economy the size of the eurozone requires its central bank to purchase over two trillion euros of government debt and corporate bonds (so far) and sets its key interest rate below zero. And does it provide a tangible and enduring benefit? History will be the judge of that, but we remain healthily sceptical.
Amongst the plethora of statistics churned out by the UN publication referred to above, one of the most interesting is its forecast of countries that will experience declining populations over the next several decades. This amplifies the growth challenge facing Europe as many are in that part of the world. Here is a selection of those facing declines of more than 10% over the next 30 years: Lithuania, Bulgaria, Latvia, Ukraine, Serbia, Croatia, Romania, Albania, Greece, Hungary, Poland, Portugal and Italy. Many, as can be seen, were part of the old Soviet bloc. Outside of Europe, the most significant “biggie” facing a decline of more than 10% is Japan.
Declines in population of between 2% and 10% over the same period include Slovakia, South Korea, Russia, Slovenia, Spain, Taiwan, Thailand, Germany and China. Added up, that’s a chunky percentage of the world’s population that will have to run very hard to stand still.