The Cleanest Shirt in the Dirty Laundry
ou all know I tell it to you straight. In my 2017 economic commentary , I predicted three main courses of the U.S. economy: debt, deleveraging, and demographics. For the last few years, I've been predicting these three D's are NOT going away. Let's review each one.
So what is debt? Think about it like this:
This past Thanksgiving, Joe wanted to watch the traditional NFL games on a big ol' 65-inch flat-screen. So Joe hopped in his car, drove down to the local Best Buy, and picked out a new T.V. When he checked out, all Joe had to do was hand over his credit card, sign, and spend some of his future on today!
That's all debt really is: taking from the future and spending today. So what does our economic future look like? Here's the math: 60 trillion (plus interest) LESS than what it coulda, woulda, shoulda been! Expect very low interest rates for a very long time because that debt is going to take a long time to deleverage.
What happens during deleveraging? When paying off debt, what aren't you doing with your money? You're NOT spending it. You're NOT saving it either.
Governments tend to cut spending and raise taxes in hopes of getting out of debt . But this strangles an economy, and it's highly deflationary! There's a third way of deleveraging: growth. If we achieve enough growth you'll see interest rates rise, but we are struggling to grow enough because of the third 'D': demographics.
Our population is getting old, our country is even older, and guess what, old people don't spend money! I'm one of 78 million Baby Boomers who will soon be spending less, and less, and less. Aging populations all across the world will be spending less.
When the market crashes, it won't be U.S. based. Europe, Japan, and countries all over the world are worse off than us.
We are the cleanest shirt in the dirty laundry.
Economies everywhere are facing similar struggles. I've been saying for years, keep an eye on older countries to predict what will happen to your own. I'll be ringing the New Year with my 2018 economic commentary very soon so stay posted.