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You Can See What's Coming If You Know Where to Look

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Knowledge is the button you can fasten to keep the economic sneak thief out of your pocket.

Economic events tend to sneak up on us like a pickpocket in the crowd when in fact we could see most of them coming if we just knew where to look.

Alan Beaulieu and John Maketa know where to look. Beaulieu is the chief economist with ITR Economics and Maketa is a demographer with KGC Direct. Both spoke at the Copper and Brass Servicenter Association’s annual convention last month in San Antonio. While their presentations were completely separate, they shared a common thread.

Beaulieu has co-authored a book, “Prosperity in the Age of Decline,” in which he predicts the next Great Depression will be upon us in or about the year 2030. How can he possibly forecast such a cataclysmic global event so far in the future when so much could change in the interim? Because immutable and unstoppable forces are already at play, he says. Huge debt levels around the world and demographic trends such as low birth rates in Asia will surely trigger a downturn that could last a decade or more. Being forewarned, he adds, gives those in the know the opportunity to take advantage of the situation and become buyers when others are panicked and selling cheap.

Maketa offered up a basic primer on the enormous power of demographic trends. “People age, populations move and markets change as a result,” he explained. “Based on your age and position in life, your needs are very predictable, from diapers to college to coffins.”

In the U.S., the huge generation of Baby Boomers, the 78 million born in the post-war years of 1945-65, are rapidly retiring, selling their homes and moving someplace warm to live out their golden years. The economy is poised to take a significant hit as these seniors move into the next phase of their lives.

As Beaulieu pointed out, “Baby Boomers are an anchor around the necks of the next generations. Boomers are retiring at a rate of 10,000 a day, and Gen X and Gen Y will be paying for us for a long time, because we want to live forever.”

The U.S. is in an enviable demographic position compared to many other countries. With a birth rate over 2.2 children per couple, the U.S. is maintaining its population base. “If your economy does not have a sufficient number of heavy lifters, then you are in trouble. An economy needs those individuals, usually between age 40 and 60, who make the most, buy the most and pay the most in taxes,” Maketa said.

In contrast, nations like Japan and China have shrinking populations and a cohort of the elderly that far outnumbers the younger wage-earners that society needs to support them. “If you don’t have babies, then you don’t have consumers, taxpayers or labor in the future,” Maketa said.

Following the Baby Boomers is Generation X, those born from 1965-85. It’s a much smaller group, numbering about nine million less. Businesses of all types can expect to see some lost market share in the years to come. As Maketa noted: “You can’t sell the same amount of product to people who don’t exist.”

But take heart, he says. On the horizon is Generation Y, individuals born from 1985-2005, nearly 100 million strong and the largest generation in the history of the country. “If you thought the Baby Boomers changed the world, wait until you see what Gen Y does. It’s the Baby Boom generation on steroids. Why? Because they have technology and they know how to use it.”

Generation Y is a hidden asset and virtually assures future prosperity, once the nation gets past the Baby Boom bust and is done settling the affairs of that fading generation. “The best days for the U.S. are ahead of us, not behind us,” Maketa asserted, with knowledge that comes from
numbers, not a crystal ball.