Investment have to be lifted in order to prevent deflation – Natixis

FXStreet reports that according to economists at Natixis, the world is on a deflationary path due to the sharp rise in private savings, which will be difficult to correct in the short-term.

“The fact there are structural excess savings over investment (ex-ante, before reaching the equilibrium that inevitably rebalances savings and investment at the global level), i.e. a deflationary trend, is revealed by the decline in inflation and the decline in real long-term interest rates. We also note that ex-post, the global savings rate has risen, which is a sign of an even larger increase ex-ante; and that the global private savings rate has risen considerably.”

“If the deflationary trend is not corrected, the world could slide into a real deflation. Getting off the deflationary path will require an increase in investment, which could result from an increase in efficient public investment (Energy transition, healthcare and medicines, education, digital economy, etc.) in OECD countries and in emerging countries with low investment rates (Africa, Latin America), international financing of additional investment, both public and private.”