Reinhard Panse's Perspectives
Reinhard Panse's Perspectives
Podcast
24.2.2022
The central banks will not be able to keep inflation at two percent in the long term. This is supported by two obvious trends. This is a good sign for investments such as shares.
Many people are asking themselves: will we ever get back to an inflation level of a comfortable 1.5 to two percent? The answer is clear: this will not happen. This is because two obvious trends mean that our economic growth will weaken, government debt will rise and, as a result, the central banks' ability to act will be severely restricted. The fight against inflation is therefore hopeless.
The two trends are demographics on the one hand and the productivity of society on the other. While we have long seen an increase in population growth thanks to the baby boomers, this trend has been reversed since the "Pillenknick" in 1966 at the latest. Since then, society in Germany and other industrialized countries has grown almost exclusively through immigration, and even then not fast enough. Accordingly, we must expect a slowdown in economic growth due to lower population growth.
Another argument against a further increase in economic growth is the lack of productivity growth in industrialized nations. Human productivity has not increased since the internet age at the latest, not least because many modern technologies do not really drive productivity. Take computer games, crypto "currencies" or air cabs, for example, and compare them with a telephone or a car. It is immediately obvious why one has taken us further - and the other has not. On the productivity side, we also have to reckon with the fact that capital waste, regulation, the formation of monopolies, stagnating education levels and the expansion of the welfare state will not contribute much to an increase in productivity.
Falling productivity and demographic trends will lead to a further increase in government debt, which will severely restrict the central banks' room for maneuver. Neither in the USA nor in the eurozone will the central banks be able to maintain the target of two percent inflation in the long term. This leads to a simple conclusion for investors: shares, investment funds, residential real estate and, last but not least, gold will continue to yield higher returns than fixed-interest investments in the future.
Reinhard Panse's Perspectives
24.2.2022
Reinhard Panse
Will the central banks keep current inflation at 2 percent? Reinhard Panse, Chief Investment Officer, shows what the current trends mean for investments such as equities.
The central banks will not be able to keep inflation at two percent in the long term. This is supported by two obvious trends. This is a good sign for investments such as shares.
Many people are asking themselves: will we ever get back to an inflation level of a comfortable 1.5 to two percent? The answer is clear: this will not happen. This is because two obvious trends mean that our economic growth will weaken, government debt will rise and, as a result, the central banks' ability to act will be severely restricted. The fight against inflation is therefore hopeless.
The two trends are demographics on the one hand and the productivity of society on the other. While we have long seen an increase in population growth thanks to the baby boomers, this trend has been reversed since the "Pillenknick" in 1966 at the latest. Since then, society in Germany and other industrialized countries has grown almost exclusively through immigration, and even then not fast enough. Accordingly, we must expect a slowdown in economic growth due to lower population growth.
Another argument against a further increase in economic growth is the lack of productivity growth in industrialized nations. Human productivity has not increased since the internet age at the latest, not least because many modern technologies do not really drive productivity. Take computer games, crypto "currencies" or air cabs, for example, and compare them with a telephone or a car. It is immediately obvious why one has taken us further - and the other has not. On the productivity side, we also have to reckon with the fact that capital waste, regulation, the formation of monopolies, stagnating education levels and the expansion of the welfare state will not contribute much to an increase in productivity.
Falling productivity and demographic trends will lead to a further increase in government debt, which will severely restrict the central banks' room for maneuver. Neither in the USA nor in the eurozone will the central banks be able to maintain the target of two percent inflation in the long term. This leads to a simple conclusion for investors: shares, investment funds, residential real estate and, last but not least, gold will continue to yield higher returns than fixed-interest investments in the future.
About the author
Reinhard Panse
Reinhard Panse is Chief Investment Officer and co-founder of FINVIA Family Office GmbH. Until February 2020, Reinhard Panse was a member of the Management Board and Chief Investment Officer for HQ Trust GmbH, which is owned by the Harald Quandt family. From 2004 until joining HQ Trust GmbH in 2011, Reinhard Panse was Chief Investment Officer of the UBS Sauerborn business unit created within UBS Deutschland AG. From 2001, Reinhard Panse was a member of the Management Board of Sauerborn Trust AG and its legal predecessors. He was responsible for the investment strategy and played a leading role in the holistic asset management and administration of large private assets. Reinhard Panse began his career by taking over capital market and client support activities at Feri GmbH in 1989, after having founded and managed his own wealth management as managing director.
