{"id":4094,"date":"2026-07-24T08:10:54","date_gmt":"2026-07-24T08:10:54","guid":{"rendered":"https:\/\/crosscountrymovingteams.com\/?p=4094"},"modified":"2026-07-24T08:10:54","modified_gmt":"2026-07-24T08:10:54","slug":"the-demographic-dividend-of-the-last-40-years-is-ending-j-p-morgan-says-the-world-is-running-out-of-the-two-things-that-kept-interest-rates-down","status":"publish","type":"post","link":"https:\/\/crosscountrymovingteams.com\/?p=4094","title":{"rendered":"\u2018The demographic dividend of the last 40 years is ending\u2019: J.P. Morgan says the world is running out of the two things that kept interest rates down"},"content":{"rendered":"
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Turning first to deficits, JPM\u2019s research team wrote that \u201ca global breakdown in fiscal discipline is occurring in all corners of the world, and fiscal dominance is eclipsing monetary policy.\u00a0Global public debt has reached $100 trillion, reducing fiscal space, while elevated deficits are driving up interest rates.\u201d <\/p>\n

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Among economists, there is some debate as to the extent to which deficits drive interest rates. The theory is that an expanding national debt may spark fears that the government is less creditworthy, and the Federal Reserve would then increase the money supply to reduce the value of the debt, therefore creating inflation.<\/p>\n

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Governments have leaned on fiscal stimulus (via increased spending or tax cuts) heavily during the Iran crisis, the IMF reported in its .<\/p>\n

These increases to deficits\u2014or reductions in government revenue\u2014have been without \u201cwell-identified offsets, with few signs of rebuilding fiscal space,\u201d JPM wrote. \u201cFiscal space\u201d refers to a government\u2019s ability to increase spending or lower taxes without jeopardizing its financial stability.<\/p>\n

\u201cIn the U.S., a larger stock of debt and higher interest rates, along with no political will to achieve fiscal consolidation anytime soon, point to higher term premium,\u201d JPM adds, referring to the return lenders expect for holding long-term bonds, demanding higher rates as a result. \u201cThe unsustainable U.S. fiscal deficit has not yet caused much damage to the U.S. economy, since the U.S. has much more fiscal space than other countries,\u201d Chang\u2019s team added.<\/p>\n

The U.S. remains the safest and strongest country in a time of geopolitical upheaval, the note adds, suggesting risk to the debt outlook will come from \u201cany dramatic military, political, energy security, or economic setbacks that make the U.S. no longer the safest and strongest.\u201d<\/p>\n

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The population problem <\/h2>\n

Advanced economies are also facing declining birth rates and aging populations. Simply put, these economies will have a smaller labor supply to pay for goods and services needed by an older, non-working population.<\/p>\n

Demand for pension and healthcare expenditures will rise in many countries, notes JPM, while demand for public investments\u2014such as defense, renewable energy, and infrastructure\u2014is also intensifying. \u201cWithout offsetting measures such as higher government revenues, other public spending cuts or changes in the interest rate-growth differential, these spending pressures imply a substantial increase in public debt across jurisdictions beyond 2031,\u201d the research adds.<\/p>\n

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Currently, the Committee for a Responsible Federal Budget\u2019s Social Security Countdown\u2014the point at which benefits will have to be cut\u2014stands at seven years and 10 months, and \u201cneither political party is expected to act\u201d until that cliff is met, America\u2019s largest bank continues. <\/p>\n

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\u201cNeither political party is expected to act until the Social Security cliff approaches in 2032,\u201d the note from America\u2019s largest bank continues. It adds that some ~$600bn in debt would need to be issued to address the shortfall, and potentially further spending cuts and higher taxes. <\/p>\n

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\u201cWe also note the demographic challenges that will lower savings and highlight the risk that aging populations and longevity could drive down equilibrium returns, with even funded systems struggling,\u201d the team adds. \u201cThe demographic dividend that characterized the last 40 years is ending, and we view de-population as an underappreciated risk that will reduce savings and contribute to higher interest rates.\u201d<\/p>\n

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