Our economies are drowning for lack of oxygen in overpopulated safe havens.

Sir, I refer to John Dizard’s “Central banks enlist ageing populations in the competitive devaluation game”, March 28.

Dizard discusses Bank of Japan’s paper “Demographic Changes and Macroeconomic Performance — Japanese Experiences”; IMF’s “Is Japan’s Population Aging Deflationary?” and a paper by BIS titled “Can Demography Affect Inflation and Monetary Policy?”

One aspect not discussed in connection to this demographic change, is that since increased risk-aversion goes with the investment objectives of an aging population, the demand for safe havens relative to risky bays should be increasing.

Add to that the sad fact that bank regulators decided, on their own, that it was more important for our banks to avoid risks instead of to allocate bank credit to efficiently to the real needs of the economy, that of course also adds immensely to the demand for safe havens.

And it is only getting worse. Now by means of added Basel III liquidity requirements for banks, and Solvency II regulations for the insurance sector, which all-predicates risk-aversion, the demand for what’s “safe” must grow even more.

And, since any safe haven can become extremely dangerous if overly populated, it should be clear that an amazing scarcity of financial safety is lurching around the corner. Poor widows and orphans financially they will be more widowed and orphaned than ever.

But also poor the coming young generations, those who will be denied that societal risk-taking that could help them to have a good future with plenty of jobs.

@PerKurowski