Household deformation trumps demand management policy in the 21st century

Demographic impacts that will disrupt traditional demand management policy tools are examined. Given the demographics of aging, the lifecycle of consumption for a country, as well as an individual, this paper concludes that one of the key drivers of demand management policy will disappear from many of the wealthy economies over the next 30 years. Economists often speak of the liquidity trap justifying fiscal stimulus. The new mantra may become “forget the liquidity trap, it’s the demographic trap” that weighs down the economy. As a result, systemic issues will loom large, affecting housing demand, development models, and portfolio valuations for many of the pension funds needed to support an aging population. Narrowly focused upon household (de)formation, the paper’s analysis allows to draw wider implications of the impact of aging populations