People tend, for instance, to buy houses at about the same age — age 31 or so. Around age 53 is when people tend to buy their luxury cars — after the kids have finished college, before old age sets in. Demographics can even tell us when your household spending on potato chips is likely to peak — when the head of it is about 42. Ultimately the size of the US economy is simply the total of what we’re all spending. Overall household spending hits a high when we’re about 46. So the peak of the Baby Boom (1961) plus 46 suggests that a high point in the US economy should be about 2007, with a long, slow decline to follow for years to come.There is a glimmer of hope for those soon entering the economy. There was a baby boomlet in the 1980s that'll start being felt around 2019 when these consumers start buying houses.
Anyone find that convincing?
Artificial, forced spending like government stimulus is not going to spark real voluntary spending because that isn’t what old people do. They’ve already paid for their houses, cars and their children’s schooling. Merchants try to goose lackluster sales by cutting prices, which increases the incentive for people to save their money, expecting things will be cheaper in the future than they are today.
That’s a deflationary spiral, and Dent sees it coming here..., and soon.
Post-crash, the US economy has been limping along for nearly five years despite a series of massive fiscal and monetary stimuli. A principal reason for what growth we have had is the spending pattern of rich people, who tend to put off their big purchases years later in life than the average. Their peak spending year should be, according to Dent, 2014.
And, no, immigration isn’t going to save us; even adjusted for immigration, the overall US population is aging. (Moreover, an anemic economy attracts fewer foreigners: Net new immigration from Mexico dropped to zero between 2005 and 2010).
Even so, according to Dent, the prosperity enjoyed by the post-WWII generation will not be realized again, at least not any time soon. As Smith says, though:
Implicitly, Dent is saying: Don’t blame politicians, the decline of manufacturing, education or cheap foreign imports for the economic stagnation that has already begun and will continue for many years. Blame your parents and grandparents for losing interest in having children back in the Sixties.If this is all true what does it portend for the entitlement state in which we live and wherein a relatively few people at the top of the socio-economic pyramid support the masses of people further down. As the number of older, wealthy taxpayers decreases there'll be less wealth to transfer to the poor, infirm, and just plain lazy. What will society look like then when the masses have less than they have now and the few who have managed to hold onto some wealth are loath to give it up?