Deflation supercycle, a period of falling prices and wages, is ending as the world’s labour force is shrinking. For the first time in half a century, the global labour force is contracting, which implies a shift from a deflationary era to an inflationary era. This change is driven by demographic shifts, including ageing populations and falling birth rates, particularly in China and Russia. The world is running out of workers, and as the supply of labour decreases, wages are likely to rise, leading to inflation. Central banks, which have been battling deflation for years, may soon have to deal with the opposite problem: inflation. This could lead to a rise in interest rates, making borrowing more expensive and potentially slowing economic growth. The end of the deflationary era could also impact the bond market, as bonds tend to perform poorly during inflationary periods. The transition from a deflationary era to an inflationary era could have significant implications for the global economy.
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