Financial markets do not believe in the effects of population ageing on the economy

Population ageing is now going to be very significant in OECD countries. It is expected to give rise to: Inflation, because pensioners are non-produc ing consumers; Lower real interest rates and higher real wages due to a higher level of per capita capital (passed on by the previous, larger generations); Lower asset prices (equities, housing), because the larger number of pensioners are sellers of assets and corporate profitability will be weakened by the increase in real wages. We are currently seeing that financial markets expect neither inflation nor a fall in asset prices, and that the fall in real long-term interest rates is linked to the expansionary monetary policy and not demographics.