Thread by @VMRConstancio

Thoughtful @ErikFossing on the Goodhart/Pradhan book. In my blurb, in the book, I recalled that “demography is destiny” but there is no determinism. It is a “great thought-provoking book” that deals with many deep trends, from labour supply, inflation, and the “debt trap”.1/6

Other drivers, besides declining demography, affect future labour supply and wages, so that future high inflation is not a certainty. I ask “Will AI be enough to counter the labour shortage?” There is also later retirement and Japan. The book discusses it, but doubts remain 2/6

Ageing and health & retirement costs imply higher taxation or more debt. A future clash between fiscal and monetary policy is possible due to the “debt trap” problem, questioning CBs independence. The present policy cooperation may not last 3/6

We need more equity and less debt, from housing to corporate financing, a theme that Goodhart has addressed many times. Reforming housing finance towards more equity e.g.Mian and Sufi “shared responsibility mortgages”.Levelling interest and equity taxation in corporate taxes 4/6

The declining working-age population will worse secular stagnation: “ Japan growth has averaged 0.87% since 1999. Other advanced countries will do well if they can match this record over the next twenty years until 2040” (p. 51). This is a big challenge to our institutions 5/6

The pandemic adds de- globalisation and a supply shock that can create price spikes but not necessarily inflation as a sustained phenomenon. Still, ceteris paribus, demography and de-globalisation may increase inflation prospects. The book is a must-read: amazon.co.uk/Great-Demograp…