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According to report author Jim Reed and his team, the hallmark of the new era will be China’s economic growth, which will outpace that of the United States and cause concomitant tensions in relations between them, increasing the growth of global debt, political monetary helicopter. by central banks and increasing the presence of the so-called “millennial” generation and the younger generation, even as electoral burden.
The mess will define the new era for 10 years or more.
“Not all messes are bad,” Deutsche Bank said.
“We must emphasize that the advent of the new era should not be seen as a refusal to buy financial assets, as the new era will bring large-scale intervention by the monetary authorities and liquidity,” the report said.
The age of disorder will be characterized by at least eight main themes:
Deterioration of US-China relations in response to the increasing economic burden on Beijing;
Europe’s moment of truth: the COVID-19 pandemic has given new impetus to integration processes, but Europe is likely to remain in economic stagnation with the prospect of political fragmentation;
Continued increase in debt and spread of “helicopter money” policy as main stream of money;
Probable increase in inflation due to fiscal and monetary expansion;
An intensification of economic inequality is expected at the beginning of the post-covid era, and in the future a reversal of this trend;
The states will begin to withhold more taxes than the rich;
Increased intergenerational competition: By 2030, millennials and young people will catch up with the older generation, allowing them to determine the outcome of democratic elections;
Growing concerns about climate issues;
A new technological revolution.
Another cold war
Towards the end of the decade, China may surpass the United States in terms of nominal GDP. In relation to the reduction of the gap between the economies, fears of the so-called Thucydides trap (a term that means the risk of military conflict between two rival powers when one catches up with the other economically) will increase.
According to Deutsche Bank’s analysis, 16 such situations have arisen in the last 500 years, and in 12 cases this has led to war. “Military conflict is unlikely today, but instead there is the possibility of an economic war,” analysts wrote.
The opposition between Washington and Beijing, which will intensify regardless of the outcome of the next US presidential election, will recall the Cold War between the United States and the Soviet Union.
The manifestation of the economic conflict will be the introduction of additional duties, sanctions, blocking of assets, prohibition of technology transfer. This will inevitably lead to the creation of party blocs, one led by China and the other by the United States.
Southeast Asian nations will enter China’s orbit, while Japan, South Korea and Australia are likely to join the American camp.
China, Russia, the European Union and Turkey will compete for influence in the Middle East and Africa.
Opposition of generations
In Europe, the problem of large debts is growing. In a context of growing indebtedness, global interest rates are at an acceptable level only thanks to the intervention of central banks, which distort the free market.
“In the future, we will see more crises, more riots and even more money printing by central banks,” the report said.
The transition to a “helicopter money” policy, in which there is an inflow of funds not into the financial sector but into the broader economy (eg, households), is likely to accelerate inflation.
Economic inequality among people in the post-COVID-19 era will increase, but governments are expected to raise taxes on wealthy citizens and corporations.
The issue of competition between different generations is also related to inequality. According to Deutsche Bank, after 2030 the number of voters belonging to the so-called millennial and younger generation in the G7 countries will be higher than that of people born before 1980. The new proportion will lead to a change in electoral results. and, consequently, in politics.
As the younger generation is more concerned about climate change, a carbon tax is expected to be introduced over the next decade.
Eventually, current assessments of tech companies will be confirmed, leading to technological advancements, or a repeat of the dot-com bubble that burst in 2000. In either case, the tech race of the major powers seems inevitable.
The United States remains a world leader in technology, but China is closing in on it with increasing spending on R&D. The United States and China are likely to continue to apply competitive technology standards, experts at Deutsche Bank say.
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