Nearly 70 years to the day after the largest invasion force in history began the bloody task of exorcising political evil from Europe, a different kind of force began the serious work of extricating Europe from the potentially lethal disease of consumer price deflation.

This is not to equate the life-and-death nature of a tragic military conflict and its associated horrors with an economic predicament. Still, last week’s unusually aggressive moves by the European Central Bank to keep Japanese-style deflation from infecting the 18-country eurozone carries with it immense consequences on both sides of the Atlantic.

With European inflation hovering at just 0.5%, the world economy faces the stark prospect of heading into the next downturn with almost one-fourth of its output — the eurozone and Japan — battling “lowflation” or outright deflation, even as major central banks are out of conventional monetary ammunition.

No wonder bond yields have surprised investors by heading south this year from already low levels. Since January, yields on benchmark Treasury and German debt have fallen by a half percentage point, back to levels last seen in mid-2013.

Gray matters

This was supposed to be the year when global growth — and inflation — revived. Though equity markets are buoyant, bond investors are singing a more melancholy tune.

Conventional wisdom says both sides can’t be right. But these are not conventional times.

Out of sight and out of mind, sharp changes in global demographic patterns are rewriting the economic playbook, and ultimately could trump whatever success governments achieve in nurturing a cyclical recovery from the banking crisis of 2008.

The percentage of the world population that is most likely to consume — and thus boost growth, employment and inflation — is stagnant and set to shrink markedly.

According to a United Nations report, the ratio of those age 65 and older to those of working age — the so-called dependency ratio — will rise by more than half over the next 20 years. Japan’s population is projected to fall from 127 million to 43 million by early next century.

The reason: longer lives and fewer kids.

In 1950, the fertility rate (children per woman) was 3.65 in the United States and 4.9 worldwide. Since then, the numbers have dropped to 1.89 and 2.5, respectively. Within a decade, the U.S. will have more people age 65 and older than 14 and younger.

Meanwhile, life expectancy has increased by 20 years worldwide since 1950 and is projected to jump by another 16 years by 2100.

Garage sales

With the strongest headwinds from falling birthrates and increased longevity still to be felt, demographics might be considered a non-factor in the glacial global recovery.

That would be a mistake.

If you’re over 50 but under 65, ask yourself these questions: Do you buy as much “stuff” as when you were in your 30s and 40s? Does “retail therapy” still satisfy? Probably not, which is why advertisers largely ignore you and entertainment programming “skews young.”

An aging population translates into less demand. That, in turn, means that employers have less reason to hire and those employed have less leverage. The U.N. population report concludes that demographic factors will probably chop up to half a percentage point off economic growth in much of the developed world in coming years.

That could be good for bonds.

Historically, 10-year U.S. Treasury yields have averaged about two percentage points over inflation, a number that should drop as the impact of shifting demographics becomes obvious.

For equities, slower growth will be a restraining factor on earnings, but subdued labor costs might offset a portion of that drag.

Because of resistance from the inflation-phobic German Bundesbank, the ECB’s response to the looming threat of eurozone deflation has been mostly bluster. That changed last week with its negative interest rates and hints of asset purchases.

But the price and supply of money is only half the equation for growth. The other half is demand, and central banks have limited capacity to meaningfully alter the buying patterns of a rapidly graying world.

Look for demand-side economic theories to soon join the supply-side versions that helped reinvigorate global growth in the late 20th century.

Tom Saler is an author and freelance financial journalist in Madison. He can be reached at www.tomsaler.com.