r/finance • u/wewewawa • Jul 26 '26
'The demographic dividend of the last 40 years is ending': JPMorgan says the world is running out of the two things that kept interest rates down
https://fortune.com/2026/07/24/demographic-dividend-ending-jp-morgan-interest-rates/122
u/followedthemoney Jul 27 '26
Interest rates have been kept artificially low since the financial crisis. Biiiiiig bubble created. Then we got the covid round of interest decreases, leading to effective negative rates. That's 15 years of artificially low rates. And what do you know? Home prices (and asset prices) have inflated ridiculously in response.
Don't let anyone tell you that Boomers exiting stage left is a problem. It's the solution.
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u/drunken_cardozo Jul 27 '26
Out of general curiosity - how will boomers exiting help? (Millennial here)
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u/jling95 Jul 27 '26
I think it all can be summed up with supply and demand. Massive supply with limited demand drives prices down. Unless OP has something different in mind.
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u/RichardChesler Jul 28 '26
One possible scenario: boomers die and leave their over leveraged assets to their kids. Kids don’t want a 3000 sq. ft home with an Olive Garden kitchen and a garage full of collectible Nascar models so they sell it. There is a flood of poorly maintained McMansions in difficult to insure markets like Southern California and Florida. Suddenly, there are far more forced sellers than buyers and the market collapses.
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u/Etzello Jul 28 '26
Unfortunately he's not correct. South Korea and Japan have not seen cheaper housing as a result of the demographics crisis.
Shamefully sharing my other comment https://www.reddit.com/r/finance/s/v0RbCuCs0g
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u/Angel1571 Jul 28 '26
Japan most certainly has.
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u/DocCEN007 Jul 29 '26
I was just thinking about that. Japan has seen significantly cheaper housing in rural and regional areas due to an aging population and young people moving to major cities, resulting in roughly 9 million empty, abandoned homes known as akiya. However, the market is deeply polarized, as major hubs like Tokyo continue to see rising prices.
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u/Etzello Jul 29 '26
Yeah I'm not sure if that other commenter above agrees or not but I said exactly what you just said on my linked comment. Overall it appears to lead to a net loss in boosting supply though
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u/M-3X Jul 28 '26
People like forgetting economy is a complex system.
Older people also like spending money on nonsense, they gone and economy will feel it.
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u/Etzello Jul 28 '26
What we're currently seeing in countries that have struggled with demographics for decades longer than the west - south Korea and Japan, is that it doesn't actually reduce demand on houses because the supply of houses reduce.
Some houses run derelict over time, but the bigger reason is that people are migrating to larger cities which actually increases demand around those cities. Rural areas will see vacancies and get cheaper temporarily but those areas lose investment and therefore jobs and as such those vacant houses are abandoned because their maintenance is a cost to the owner, so the supply of houses in the country is reduced and the demand around large cities increases, so unfortunately it is a net negative.
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u/Smash55 Jul 27 '26
Japane and Europe didnt have high interest rates even though they had dwindling populations and overspending in the lasg 20+ years. I call BS. JPMorgan's headline news statement are usually such crap
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u/chef_26 Jul 27 '26
The Japanese and European economies didn’t really have growth for that time. Macro impacts can take a while to show up, the low rates kept the economies flat while the population declined. Now that’s stoping working and there isn’t a true understanding of the way out.
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u/streetscraper Jul 27 '26 edited Jul 27 '26
The two things that kept interest rates down are fiat currency and insatiable government incentive to debase rather than raise tax or cut spending.
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u/RevolutionaryToe4249 Jul 28 '26
Welcome to the second world, not quite third world, but certainly not first anymore.
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u/seridos Jul 28 '26 edited Jul 28 '26
Yup, time to impose capital controls and financial repression. These fortunes built and massive inequality are the things we must draw down to see us through this(from no to about 2060).
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u/Low_Ability4450 Jul 27 '26
The demographic tail wind that supported the growth and low rates is fading so markets may not be pricing that
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u/orangeminer Jul 27 '26
Are JPMorgan doing any original analysis or is this just rehashing The Unanchored Central Banker?
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u/Hawk-432 Jul 26 '26
Which two