• Today’s world is safer and richer than it has ever been, but this is of little comfort to those whose expectations are repeatedly disappointed. When one starts connecting the economic, geopolitical, societal and environmental dots, reasons to worry are mounting. In the realm of economics, the bond markets foresee very weak economies at best, and possibly deflation, for years to come. They read into the more unconventional policies adopted by central banks as a sign that they’ve run out of ammunition.
•  The fact that Japan just implemented a Negative Interest Rate Policy (NIRP) is a leading indicator of central banks’ impotence. Monetary policies’ various attempts to offset deflationary forces and to revive sustained economic growth via conventional measures (cuts in interest rates) and unconventional ones (QE and now NIRP) have not yet succeeded in lifting aggregate demand. “Helicopter money” (“monetary finance” in the economists’ jargon) is next.
•  If ultra-low or negative interest rates persist for too long, they will devastate the portfolios of pensioners, insurance companies and endowments, forcing a large majority of people to reconsider things hitherto taken for granted (such as the right to retire with a permanent stream of income). Pension plans continue to assume that the future will resemble the past and to anticipate unrealistic future returns of 7-9%. CALPERS, one of the world’s largest pension funds, just provoked an outcry when it decided to reduce its base forecast from 7.5 to 7%. This is just the beginning…

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