What we can monitor and do now in preparation for a 2030s depression, which may or may not arrive.
Topics covered include:
- Why ITR Economics has been predicting a 2030s depression for over a decade.
- What are the early warning signs we can monitor for increasing risk of economic and financial turmoil
- What are U.S. and global population predictions by the Congressional Budget Office and the United Nations
- What is the status of Social Security and what would it take to make it more sustainable
- What are the impacts of a slowing or shrinking population
- How should we invest, and what other financial actions should we take in the face of long-term depression forecasts
Show Notes
Top 5 Causes of the 2030s Great Depression—ITR Economics
The Demographic Outlook: 2024 to 2054—Congressional Budget Office
Testimony on Social Security’s Finances—Congressional Budget Office
World Population Prospects 2024—The United Nations
World Population Prospects 2024: Graphs/Profiles—The United Nations
America is uniquely ill-suited to handle a falling population—The Economist
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Transcript
Welcome to Money for the Rest of Us. This is a personal finance show on money, how it works, how to invest it, and how to live without worrying about it. I’m your host, David Stein. Today is episode 487. It’s titled “Global Economic and Population Shifts. Are we Heading for a 2030s Depression?”
A Dire Prediction
A month or so ago I received an email from a listener. He had just read a book titled Prosperity in The Age of Decline, by Brian and Alan Beaulieu. This book came out 10 years ago, and in the book, they are predicting a Great Depression in the 2030s. They go through their analysis, and this listener’s question is do I agree that we’re going to have a Great Depression in the 2030s? And why or why not, and what should we as investor do to protect ourselves if there’s going to be this type of economic decline.
Brian and Alan Beaulieu are principal economists at ITR Economics. This is the oldest privately-held, continuously operating economic research and consulting firm in the US, according to their website. They also say their predictive ability, or their historical track record in predicting economic events is close to 95%. They have a table on their website that is their record, and it shows different economic indicators such as GDP, industrial production. It says their accuracy each year is 95% to 98%.
I don’t have access to the actual predictions, so I don’t know if that record is that accurate. It seems a little high, but maybe it is. But we’re not worried about whether they’re able to predict the economy that accurately. Most firms and individuals are not, so when I see a 99% success rate in predicting economic data, it raises some red flags and I want to dig deeper. But I didn’t find anything other than this table. I did spend some meaningful time on their website, trying to understand the basis for their 2030s Great Depression prediction.
What I do like about their site is they’re not bombastic. There’s no fear mongering. It’s level-headed, but there are a lot of economic generalities. I’ll link to one of their blog posts, “Top five causes for the 2030s Great Recession.” They believe it will be global in nature, last six years or so.
What Is a Depression?
As a reminder, when we think about what a depression is, it’s a severe economic contraction where GDP falls. GDP being the monetary value of what’s produced, goods and services. There’ll be fewer things produced, fewer services rendered; incomes will fall, unemployment will increase, budget deficits will expand due to lower tax revenues, and higher entitlement payments such as unemployment benefits.
Typically, the federal government will step in with some type of fiscal stimulus. It could be additional payments to the private sector, it could be a tax cut. Often it’s combined with the Federal Reserve or other central banks purchasing bonds, and effectively monetizing debt, so that the private sector net worth and their spending power increases, hopefully providing additional stimulus to encourage people to buy things, so that companies produce so that the economy rebounds.
Central banks will lower their policy rates, with the hope that that’ll push down longer-term interest rates, encouraging more borrowing by households and businesses. That leads to additional money creation and additional spending power. That’s what happens during a recession, and a depression is just a longer and deeper recession.
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