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How will exponentially advancing technology impact the economy in the future? Our Economy is Collapsing Due to Our Membership in the WTO. By outsourcing our manufacturing we are not only giving our competitors the keys to our factories, we are. NAFTA\'s Economic Impact; Connect With Us: CFR Backgrounders. Browse by facebook twitter linkedin email print. Thus while Mexico was hard hit (PDF). Foot famously quipped. And according to Charles Goodhart, professor at the London School of Economics and senior economic consultant to Morgan Stanley, demographics explain the vast majority of three major trends that have shaped the socioeconomic and political environments across advanced economies over the past few decades. Those three would be declining real interest rates, shrinking real wages, and increasing inequality. Goodhart & Co. At the same time, globalization provided multinational companies the ability to tap into this new pool of labor. This positive supply shock was a negative for established workers, forcing down the price of labor as capital flowed to these areas. Morgan Stanley. This, in turn, entailed that inflationary pressures were benign, as best depicted by the concept of the Great Moderation, or the idea that central bankers were better able to stabilize the business cycle. As companies were encouraged to boost capacity with workers rather than capital equipment, this put downward pressure on the cost of the latter. A garment company, for example, could choose to build a highly automated, capital- intensive factory in the U. S. This was conducive to asset price appreciation. The wealthiest segment of the populace own a the vast majority of financial assets, and saw the value of their portfolios rise at a rate far faster than wages at the lowest end of the scale. This exacerbated income and wealth inequality within advanced economies. And if demographics can explain two- thirds of these phenomena, then the particular policy mix instituted by China\'s authorities surely explains the remainder.
Treasuries, and put downward pressure on real interest rates. As such, the abundance of cheaper labor was only one avenue by which the world\'s second- largest economy contributed to these global trends. So what now, as the conditions that fostered these long- decades- defining demographic trends dissipate? As dependency ratios rise, with a greater share of retirees relative to workers, ? Well, his thesis may have reached its best- before date - - if it was even on the mark to begin with. Goodhart sees income inequality falling in both cases going forward. A shrinking labor force relative to dependents in advanced economies will work to quell income inequality within countries, while a stretch of stronger growth from emerging economies versus the Western World will continue to help income equality increase between nations. Perhaps most importantly, Goodhart and his predecessors\' works offer a compelling rebuttal to the theory of secular stagnation - - essentially that we\'ll need negative real interest rates to achieve subpar growth and full employment. Unlike many other economists, Goodhart does not believe the demographic backdrop of an aging population is inherently deflationary. The pool of labor around the globe that kept wages suppressed domestically on the island nation has nearly run dry; Japan, in other words, was a victim of circumstance. More generally, in order to meet the obligations of the state, the shrinking pool of workers will be forced to pay higher taxes at the same time that they\'ll be in a position to haggle for better wages..
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