I agree that there is probably causation, but come at it from a slightly different perspective. Older households tend to be savers, preparing for retirement, whilst younger households need to be borrowers, to buy all the things they need to set up for their life ahead. In equilibrium, the demand for savings from older households matches the demand for borrowing from younger ones and returns on savings/cost of borrowing hovers around some sort of natural equilibrium level (if such a thing exists).
If you move out of balance, with ‘too many’ older households wishing to save, but limited desire from younger households to borrow, the rate of return on savings products is going to be pushed lower. Conversely, if you have ‘too many’ young households, their demand for borrowings cannot be met by the desire for savings from the older households, which naturally pushes borrowing rates, and thus rates of return on savings, higher.
I think I might have mentioned previously that I am fascinated by the effects of post war baby booms in various countries, as the cohort of baby boomers moved through childhood, into young household formation and borrowings, through repayment in middle age before accumulating savings ready for retirement. You can see the effect they had on the economy and interest rates at each stage. Each country’s baby boom was slightly different – Germany, for example had a very short but intense baby boom a little bit later than other countries. Japan has an immediate post war baby boom, and another noticeable echo baby boom years later as the first cohort of boomers all had children at the same time.
At some point soon all baby boomers are going to be in retirement and will presumably be dis-saving (effectively running a deficit). I’d be interested in any views on what this might lead to. Who will run a smaller deficit, or even switch from deficit to surplus to compensate? Will boomer spending be inflationary, or will it only affect certain sectors?
BTW, there was some criticism on Twitter of that piece from M&G, as it excludes some notable economies that don’t fit, such as Switzerland.