The debt crisis is part of a long-term economic restructuring in the developed markets. The likely policy response, given the dominant thinking in both academic and policy circles, is inflationary in the long term. The end result will be a one-time but prolonged inflationary impact that is likely to support real estate pricing in emerging markets for years to come.

The central thesis put forward in Economic Observer, the Chinese book that I co-wrote with Arthur Shek, is that the current debt crisis is part of a long-term economic restructuring in the advanced economies as they face various issues –– an expansion of entitlement programmes, a growing balance of government debt and the increasingly significant effects of an ageing society. The issue of the ageing population has dragged down Japan, and it is also a pressing question that the United States is facing.

NOT AGEING GRACEFULLY

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