Understanding the World Economy: Exploring three macro trends"

🌏 Three macro trends to better understand the world economy 💹 :

👵 Rapidly aging developed countries. In developed nations, people are living longer and birth rates are declining. That means societies are getting older. This has serious economic consequences, as aging populations tend to have lower rates of consumption, increased demand for healthcare services, and lower rates of workforce participation. These factors lead to slower economic growth, higher healthcare costs, and pressure on government benefits (pension plans, healthcare, etc.). Look no further than the weeks-long protests in France to see the culmination of these forces.

💵 De-dollarization. Many countries are reducing their holdings of U.S. dollars within their foreign capital reserves. Still, the U.S. dollar dominates compared to other currencies, as it represents around 58% of global reserves, according to the IMF. What does all this mean? Well, if the de-dollarization trend continues, the value of the U.S. dollar could further decrease, leading to higher inflation, higher borrowing costs for US businesses and consumers, and a decline in the purchasing power of the US dollar relative to other currencies. However, there’s a lot that remains to be seen with de-dollarization. For now, it’s just something to keep an eye on.

🏠 Growing debt. There’s a fundamental clash at the heart of economics: debt grows at an exponential rate, while economic productivity does not. Debt has reached record levels in many countries. Over the last two decades, household debt in the U.S. has nearly doubled, according to data from the Federal Reserve. High levels of debt can constrain economic growth and increase the risk of financial crises, particularly in countries with high levels of foreign debt denominated in foreign currencies. High levels of government debt can also limit the ability of policymakers to respond to economic shocks, as they may be constrained by concerns about increasing their debt levels further.