The demand for income will only get more acute if Citi credit Matt King’s forecast is correct. In a June 27 report called The Power of Doves, Mr. King wrote,
“secular stagnation is a real phenomenon … the bursting of [asset] bubbles has caused the last few recessions, but in each case the bubble was ultimately resolved by the taking on of still more debt. That each bubble ultimately proved vulnerable at successively lower levels of real interest rates is therefore not a bug, but a feature. .. it seems highly likely that the next recession will also be caused by a sell-off in asset prices, conceivably at an even lower level of interest rates still – and probably long before inflation has risen to reach [developed market] central banks’ targets.”
The low productivity growth inherent in secular stagnation, along with occasional asset bubbles and low inflation, is a recipe for lower and lower interest rates as North American populations age and need reliable cash flows.