“Technology Has Changed The Game”: Why The Rise Of Robots Will Be A Permanent Deflationary Force
by Tyler Durden
ZeroHedge.com
May 2, 2017
Back in 2015, BofA put together a simple equation trying to explain the pervasive deflationary wave around the globe when it said that “Deflation = Debt plus Disruption plus Demographics.”
In his overnight take on recent events, Bloomberg macro commentator Mark Cudmore took another look at this underlying assumption, and specifically the “disruption” part, or the role played by technology, and machines, both of which are reducing the need for labor (and implicitly pressuring the global labor force growth), and concluded that “while those with specialized skills can continue to earn more in a wealthier world, the rise of robots provides a significant disinflationary force on the median wage globally. This effect will be most extreme in developed economies where labor costs are already elevated. (And as an aside, is the reason why increasing inequality and populism isn’t going away any time soon).”
Adding demographics into the mix, Cudmore notes that “the growth rate of the global population continues to slow, further relaxing consumer demand pressures over the long-term. All this means that, excluding isolated and idiosyncratic flare-ups, consumer prices won’t ramp higher in real terms” even and as “a lack of CPI growth doesn’t prevent financial-asset inflation.”
However, the implication is that “bond curves should remain flatter than we are used to, equity valuations will look distorted relative to history due to a sustainable paradigm shift in discount rates, and many financial operations will have to adjust their whole business model.”
The Rest…HERE
