Thoughts on Global Capex
What is global capex, what drives it, and do we need more or less? In a recent note over at GEM I address these questions from the point of view population ageing.
Below, I feature an excerpt of my final remarks.
'(...) what I ultimately propose is that ageing and its impact on the economy might turn around the short term/long term view in the sense that we need to think about long term growth driven by for example technology and investment relative to a given level of consumption to GDP. In essence, we need to think about the idea of a balanced growth path and what happens when consumption as a share of GDP decreases to below 60%? Of course offloading your goods abroad might provide a brief asylum, especially if you are good at it, but in the end this is not structurally viable since many countries also have debt to pay and expensive welfare systems which after all depend on growth rates in the absolute level of GDP and not simply on changes in GDP per working member of the population (productivity).
Ending on the remarks made by MS I am not at all at odds with the general analysis that the skewed K/L ratio demands capex from a theoretical point of view. I am also much intrigued by the proposed relationship between this and the concept of excess liquidity and a savings glut. I like the idea that the world might, in fact, be in the 'early stages' of a whole capex cycle. I don't diasgree with much here but I think other structural forces are at play here in the long run which are important to consider when we discuss the global economy, macroeconomic imbalances and other related topics.'