Naturally, globalization led to deflation

A benchmark interest rate is the yield on the US 10-year treasury bond. It was around 13% in 1982. It hit a low of 0.33% in March of 2020.

For 38 years bond yields fell . . . in waves of disinflation.

There were two reasons for the disinflation: (1) the central banks had kept interest rates high during the 1980s, having been spooked by the inflation of the prior decade; and (2) transportation and communication technology reached a point where a new era of full globalization was possible. The latter meant that a (for all intents and purposes) infinite pool of cheap labor was available worldwide. On that basis wages stagnated in the advanced sector (US/Canada/Europe/Japan), unions were decimated, goods were cheap, and the whole system trended toward deflation.

By the mid-1990s the central banks changed course and started to try to counter the deflationary tendencies. Huge stimulus and quantitative easing buoyed asset prices in the FIRE sector (Finance, Insurance, Real Estate). This exacerbated wealth inequality, but the process has a limit. Bond, stock, and real estate prices have reached extremes of valuation.

Financial analysts debate about where things go from here. As usual, when it comes to trying to discern economic trends, opinions are all over the place:

A co-editor of Green Horizon Magazine, Steve has been a Green movement activist for almost thirty years.