1. Long-Term Growth Decline and Global Discontent

Since the 1950s, the global economic growth rate has declined from 5% to an estimated 2.4% by the 2020s. This persistent slowdown is fueling public dissatisfaction with incumbent politicians around the world.

To secure growth, major powers such as the U.S. and China have adopted predatory economic policies:

• China: Utilizes export subsidies to collapse manufacturing industries in other countries and boost its own GDP.
• United States: Leverages tariffs to “steal” growth from other nations by making foreign goods less competitive.

This U.S.-China trade war has spread globally, triggering political instability in regions like Europe and accelerating the fragmentation of global supply chains into more localized systems.

2. The Three Drivers of Economic Growth — And Their Limits

2.1 Capital Input

U.S. 10-year Treasury yields surged from 1.5% in the 2010s to 4.4% today, increasing the cost of capital and reducing investment activity.

2.2 Labor Input

Global fertility rates continue to decline. Even India’s fertility rate has dropped to 2.0, signaling the end of its demographic dividend. In the next two decades, most nations will see a shrinking working-age population.

2.3 Productivity Growth

Despite the IT revolution, productivity gains have not matched past innovations like the invention of the telegraph. Until a true AI revolution occurs, productivity growth is expected to remain sluggish.

3. Endgame Scenario: Limits of Monetary and Fiscal Policy

3.1 Interest Rate Policy Is No Longer a Cure-All

After the 2008 crisis, even zero interest rates failed to revive the economy. This showed that rate cuts are no longer a guaranteed solution.

3.2 Quantitative Easing (QE) Side Effects

While QE lifted asset prices, it also worsened wealth inequality.

3.3 Fiscal Expansion and Ballooning Debt

• Biden’s fiscal spending aimed to reduce inequality but pushed U.S. national debt to $36 trillion.
• Trump’s tax cuts will likely increase debt further.

The combination of high debt and inflation concerns suggests a persistent “mid-rate era” — interest rates will remain elevated for a long time.

Even stablecoins are being explored as a way to support the U.S. bond market, but the scale of national debt is simply overwhelming.

4. Korea’s Unique Economic Structure and FX Outlook

• The National Pension Service’s mandatory domestic bond purchases (28%) and a delayed baby boomer retirement phase support relatively low interest rates in Korea.
• However, increased dollar holdings by exporters, rising money supply by the Bank of Korea, and declining FX reserves add upward pressure on the KRW/USD exchange rate.
• Korea’s demographic decline is more severe than in most other countries, making structural low growth more likely.

In early-stage low growth, asset prices may rise due to government liquidity injection — but this often leads to exchange rate depreciation.

5. Q&A Highlights

• Interest Rate Outlook: When tariffs and fiscal spending coexist, interest rates tend to remain elevated. Even if a recession temporarily lowers rates, inflation expectations will push them back up.
• Trump’s Tariff Policy: Trump will adjust tariffs based on inflation, stock market performance, and bond yields. Tariff-driven inflation lags by 6 months, but yields may influence policy more directly. He is unlikely to abandon tariffs due to their revenue generation potential.
• How Korea Can Attract Capital: Playing a central role in AI hardware and forming strategic tech partnerships with the U.S. may attract foreign investment. Long-term KRW strength requires breakthrough innovation in biotech, software, and core future industries.