The greatest depression in history is just around the corner...

[jtuck004]

http://www.thegreatbustahead.com/

btw - his book pretty much says you could try investing in stocks up to about 2013, but you would do better to get out of stocks and
into bonds by 2010, before interest rates drop out. That boat has sailed.

The charts that show the demographics are interesting. I still have to google his numbers however.

He suggests that we in fact have a consumer economy, and most people's spending peaks from age 45-54, and the populationg is beginning to age out past their prime spending time. Consider what is not in his book about the spending that was done in the past 10 years and the retrenchment and deleveraging that is taking place today.

This is from the keep it simple school of economics. Very thin book, short enough to read it on most mass transit commutes of any length, I expect, though the chart on his home page makes his case.

[leveymg]

1. Americans will be working a lot longer than they have previously, so the bottom need not drop out

just because of the aging demographics. The issue is skills, particularly in knowledge industry occupations. If the cost of post-graduate education and training can be brought down to more reasonable levels, there's no reason why people can't be as productive in their sixties as they were in their forties. Indeed, if their skills are higher, they could be making considerably more as they age.

Unless you have a real pension, and few do, people will have to continue working. My mother is in her 'eighties, and she still works as a designer.

[eridani]

9. That can't happen because large productivity increases are part of the current problem

--which of course would not be a problem if corporations were forced to maintain current pay levels with reduced work hours. How else can we deal with fewer and fewer people making more and more stuff?

[ixion]

2. I agree that we're facing a very large depression ahead, however

The way this author presents the material on his site -- and the look of the site in general -- does not bolster confidence in his particular thesis.

The goal of the site is not to spread information, per se, but to sell you a book.

[jtuck004]

5. Absolutely. And it does look like fear mongering. I probably wouldn't

have purchased it, but as it was in the library.

I do think it is interesting that he posits the age\spending habits of several countries as the "cause" in the correlation
he shows. There are a ton of other factors involved in an economy for people to filter through and talk about.

I too am very suspicious about authors who pose a problem for which their book is the answer, and I do try to watch out for fear-mongering. But I try to evaluate information for what it is worth, not based on the motivations of a particular person.

The correlation is there, for better or worse, and so far I can't find anything that refutes it, whether it is Japan (which he also mentions) or the U.S. Otoh, just because the correlation is there doesn't mean that age is the cause, of course.

thanks

[ixion]

6. yeah, I agree

The economy is going to look very different because the Age of Shipping Cheap Crap From China is over, and the 'consumer' is tapped out.

In that sense he is correct. I don't think that is the heart of why there needs to be a market correction, though. I think the reason we're in hot water is, in a nutshell, because of Wall St. players gaming the system. We, the People, haven't helped by racking up our own debt, though.

[jtuck004]

7. Agreed. And our own debt? We have stopped spending so much,

we are deleveraging, paying down bills. And look at the effect on hiring and sales of merchandise and housing, which is pretty scary.

One might want to compare the loss of a trillion dollars on the "consumer deficit" side and think about what the effect will be when the feds begin to do the same thing to the nation's deficit.

I just posted a quick review of "It takes a Pillage" by Nomi Prins. She talks about the $140 trillion in Wall Street debt that has collapsed on the economy, how it came about, and how we have become responsible for it. That is going to impact us for decades.

I think I am glad I live near the hills, 'cause my wife and I might have to grab the dogs and make a run for them ;)'

thanks

[mwb970]

3. I'm always suspicious of "The Sky Is Falling" books.

This sounds like the kind of fear-mongering that gets our friends on the right all hot and bothered. Excuse me if I smell opportunism on the part of the author.

[Crazy Dave]

4. Who needs to read a book when you can see it with your own eyes?

And no not on the news. Just take a random drive around town and see all the businesses from stores to engineering firms shut down and on every street in my neighborhood, an older neighborhood at that, there's no less than two houses that have been foreclosed on.

[Warpy]

8. His peak age for spending coincides

with the peak age for trying to educate children.

I'd think the peak age for consumer spending would be that 25-44 demographic, when they're furnishing homes and spending themselves into the poorhouse on their children.

The reason the over 55 cohort aren't big spenders is that corporate expiration date stamped on their foreheads. With the kids gone, their continued employment would create spending on things like travel, downsizing and furnishing a different type of home, and probably health spending. When they're tossed out 7 years before they're eligible for reduced Social Security, their spending just stops.

The reason we don't have a healthy consumer economy is the wage depression that has been policy for the last 40 years. Only keeping the credit spigot wide open kept it on life support over the last 10 years and we've reached the limit of how much debt people can be expected to assume.

That is the reason for the dawning of the second great depression, right there. The wealthy stripmined the consumer class for 40 years and are now shocked that their consumer base has dried up.

What a shocker, I tell you, what a shocker.

[raccoon]

10. Well said! This'uns a keeper. nt

[Art_from_Ark]

11. The "spending themselves into the poorhouse on their children" phase

lasts well past 44, I'm afraid.

[Warpy]

13. It does for some parents

while others boot them out the door at 18 and that's that.

[Art_from_Ark]

17. You're assuming the parents have their last kid at 26

Certainly in my family, that's never been the case. And if the kid goes on to college, most parents want to help out, if they are able.

[Warpy]

20. I'm not ASSuming anything, you are

I'm pointing out the statistical norm. You're saying that some people are always outside it. Well duh.

Those are not my arbitrary age demographics, they're used in consumer research, they're their arbitrary age demographics.

[Art_from_Ark]

24. Statistical norm?

What statistical norm says that people have their last kid at 26, and kick them out at 18 with no financial support after that?

[jtuck004]

12. The 45-54 group has more income, and spends more, This is fairly

well established by more than just the Bureau of Labor statistics survey, (which is based on Census data collected in a survey that goes back to the WPA). Ask any stockbroker who has more money, the 25-30 year old customer or one that is 50 ;) OR ask a life insurance company who they sell the big annuities to.

Anyway, here's the data from BLS

Average Annual Expenditures

< 25      25-34      35-44      45-54      55-64
$29,325   $48,159   $58,808   $61,179   $54,783


In other surveys it shows the 25-44 actually has the least disposable income in those age ranges, because it is tied up in the things you mention. The 45+ crowd not only has higher average earning, many have assets they have aquired over time, equity in their home, etc.

I'm not shilling for his book, but his data isn't just his opinion.

[Warpy]

14. Spending on stocks and annuities is not the same as spending

in the consumer economy, which was largely my point.

[Crazy Dave]

15. I can't spend anything in the economy right now...

Until I know if I'll still have a job after September. On the plus side I've saved more in one year than what used to take me three years to save and the credit cards are all below 50% of their limit.

[Warpy]

16. You're doing some of the right things for this economy

but you still need to pay those puppies off. Start with the one with the lowest balance. You can keep the last one for emergencies, although you'd probably get a better deal on a short term consumer loan at a credit union.

Income can be sporadic but debt always has its hand picking your pocket. If you've learned that much, you're well ahead of most people.

[jtuck004]

18. I'm sure Dr. Scanzoni would have agreed with you. n.t.

[Kat45]

21. But will this (about those 45+) continue to be true?

Now that companies are shedding older workers, many of whom are among the long-term unemployed, perhaps never to get a good job again. I should be in my peak earning years, but my 16-year job was outsourced a decade ago and I have not been able to find full time, benefited work since. Yes, some in my age cohort still have their long-term good jobs, but I think the number is getting smaller as time goes on. Is this new trend large enough to seriously affect the statistics on income and spending? I don't know.

[jtuck004]

22. I think that is something we are both going to have to wait to find

out, but I think your evaluation of how things are changing seems right on. I am in a similar position in the job search, so it is something that I am paying attention to as well.

I may have to keep a copy of this guy's book just to compare what he said to reality in another 5 years.

[Followedtherules]

19. U.S. Creating an Aristocracy

http://www.nytimes.com/2010/07/12/opinion/12madoff.html?ref=opinion

America Builds an Aristocracy

Dynasty trusts: forever free from taxation, cannot be touched by creditors even if the beneficiary is sued for injuries. These trusts pass from one generation to the next and can be used to own businesses as well as houses.

“But Congress could fix the problem by limiting the generation-skipping-transfer exemption to trusts that last no longer than two generations. After that, beneficiaries of a trust should be subject to tax, like everyone else. Then America would not have to face the uncontrollable growth of a new aristocracy.”

In the future, a hoard of Paris Hilton's littering our news pages instead of anything you need to know; their existence showing you that you are part of the Under Class.

[jtuck004]

23. I was thinking back as I read the story at your link...

I cannot recall a single kid (of the universe consisting of those I knew personally, or at least tangentially) who didn't screw up their parents business after having it all handed to them. I don't "blame" the kids - it's just that different people have different motivations.

And, frankly, without the money earned and paid by millions of American workers to create the roads, hospitals, police, teachers - the commons, it is very likely the wealthy would not have the money they have.

It is criminal that significant portion of that is not returned to pay a fair share as well.

And welcome to DU.