AI is likely to lead to large number of job losses. And even people who have jobs are likely to have low incomes. Hence, people will not have purchasing power. This could lead to deflation.
What Japan has experienced over the last 2.5 decades, the developed world including US, Europe, UK could see Japan like deflation over the next few decades.
While central banks and finance minster are trying to avoid Japan like situation, I think it will be difficult to avoid such a situation.
Often, Japan is blamed for not doing enough. But perhaps, the fact is there isn't much that Japan could have done to avoid deflation.
Similar could be the case with other developed countries.
Is there a way out?
Perhaps, if developing and under-developed countries start consuming more because of their sheer demographics, then overall world growth may pick up. US and Japan and other developed countries could make investments in these countries, and thus improve their growth prospects for their companies and countries.
World is expected to add 2.5bn people between 2000 and 2030 and 1.2bn people between 2030 and 2050. This is like adding India and China by 2030 and adding India between 2030 and 2050. So, demographics could come to the rescue of world growth.
But investments have to come from developed countries.
http://www.livemint.com/Opinion/yH6zh11sW2N5qyxkPAG8BJ/Groping-in-the-dark.html
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