The Federal Reserve is Panicking!
Demographic Tsunami is CRUSHING THEM…
Federal Reserve officials aren’t dumb: they have access to massive amounts of data, and they’re seeing some unsettling and irreversible trends in the making.
You see, most people don’t realize that the number of annual births in industrialized nations has been declining for years.
To make matters worse, the largest generation, the baby boomers, are now cutting back like never before, all a normal part of our lifecycles.
Their replacement, the millennials, are having less children, and they seem to want to own less stuff as well.
However, the economy is dependent on more debt and a hell of a lot more consumption to keep the ball rolling.
The government needs spending for taxes and growth, and from 1980 to 2005, most of that spending came from a booming and thriving generation.
Think about it like this: in your 30s, you probably had kids and your spending went way up for the next 25 years on everything from food, diapers, toys, cars, college, and more. In your 50s, you’re peaking in income, and by the time your 60s hit, your spending is collapsing.
This is a normal lifecycle of an industrialized nation, but that’s all changing, and to make matters worse, 75 million past-producing spenders are becoming savers.
Since 2007, the number of births in the United States has declined by nearly 14% while the federal debt has increased by 150%. Here’s what this looks like when represented visually; note the near-vertical slope of the line in recent years:
Now, you might counter that there will be enough young, hardworking Americans with decades ahead of them to work, be productive, pay taxes, and bear the burden of the debt that previous generations saddled them with. In other words, future generations of workers should be able to pick up the pieces, right?
Don’t count on that. From 2020 to 2040, the 70-year-and-older demographic segment will increase by 24 million, while the 20-to-70-year-old segment will increase by just 9 million.
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What that means is that the working-age population will grow by 15 million fewer people than the retirement-age population in the U.S.
The trend will be towards fewer people working and producing and more people drawing from Social Security and pension funds (if they still exist in the coming decades). But the outlook gets even worse, as this age demographic shift also presents a major threat to the other foundation of the American economy: consumption.
By all accounts, the only thing holding up the U.S. economy right now is that consumers are spending. As a nation, America might not be producing as much as it ought to – 1.9% annual GDP growth isn’t much to brag about – but Americans are spending like there’s no tomorrow, so at least the capital is flowing and businesses have a source of income for the time being.
Let’s put all of these pieces together: anemic productivity levels will decline even further due to shifts in the population age brackets. The single pillar bolstering the U.S. economy is consumer spending, which is mostly done by working-age people (people age 75 and older are 50% less likely to use credit than the working-age population).
***Less producing, less spending, less capital flow, less money supply – it’s a disaster waiting to happen, and the government can’t do much about it. Sure, the Fed can keep hitting that QE button over and over, but that’s a short-term, stopgap solution to a much deeper problem.***
As I’ve explained many times before, the middle class will suffer the brunt of the wealth destruction when the massive national debt bomb finally explodes. For now, stay vigilant to the signs of fragility and deterioration in the economy and markets as the economic expansion faces its final phases: desperate manipulation, soon to be followed by full capitulation.
Avoid conventional thought or people touting historical charts for gold, stocks, or real estate.
We’re in uncharted territory.
Preservation and cash flow are #1. Growth and speculation are there for us too, but we need to be more disciplined with our investments than ever before.
Best Regards,
James Davis
FutureMoneyTrends.com
Governments Have Amassed ungodly Debt Piles and Have Promised Retirees Unreasonable Amounts of Entitlements, Not In Line with Income Tax Collections. The House of Cards Is Set To Be Worse than 2008! Rising Interest Rates Can Topple The Fiat Monetary Structure, Leaving Investors with Less Than Half of Their Equity Intact!
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