Sex and the Economy: Predicting Boom and Bust
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Dallas, Texas, US, 26 June. It’s sex that creates economic peaks and troughs. The number of babies born in a certain time can largely predict economic trends with surprising accuracy. In fact, in 1999, Harry S. Dent predicted that the economy would crash in about 2009.[br]
Dallas, Texas, US, 26 June. It’s sex that creates economic peaks and troughs. The number of babies born in a certain time can largely predict economic trends with surprising accuracy. In fact, in 1999, Harry S. Dent predicted that the economy would crash in about 2009.[br]
Dent is a Forutne 100 consultant with a Harvard MBA, and was first in his class at University of South Carolina.
This prediction was based on the demographic distribution in the US, which was then mainly driven by the Baby Boomer Generation, or those born right after World War II.[br]
Dent watches spending habits, trends, and productivity cycles of Americans. He uses the Baby Boomer age-wave theory to make predictions on where the DOW, NASDAQ, and other economic yardsticks will be in the future.
The cycle follows a family-formation pattern: Young adults earn and spend little, which increases as they get better jobs and soon have children. Their spending maxes out as the children leave home, and then it slows down in the last decade and-a-half of their careers as they save and plan for retirement. And that’s where we are now, in 2009.
Much to the chagrin of economists, Dent asserts that fiscal and monetary policy are not what drives economies. At least not like generational spending: No amount of government policy will counter the Baby Boomers’ decreasing spending.”This Baby Boomer generation is massive — the largest we’ve seen in a couple hundred years, probably since the American Revolution. They’ve been entering the work force, getting married, raising families, buying houses and earning more money since the early ’80s,” Dent said.
“That’s what this boom has been about — their new technology, their productivity, their buying habits. We said 20 years ago, ‘Hey, there will be an end to this.’ They’ll peak in their spending cycle after they buy houses, raise their kids, get them into college and all that good stuff.”
“Now, they’re just doing predictable things as they age. In other words, they’ll become savers, not spenders. They don’t need a bigger house. They don’t need more cars. The kids are gone. That’s what happening. They’re going to spend less and the economy’s going to get slower and slower.”
“Because these are statistically-factual cycles, Dent’s predictions have been fairly accurate,” says EconomyWatch correspondent Hiroko Mirafiori.
“He just follows the Baby Boomers as they are the largest segment of the US demographic. He has even done so in Japan where he forecast its 90s crash.”
“But now the $64,000 question is when is our next bubble or crash?”
Dent asserts that we are in trouble. The Baby Boomer spending is done. They’ve hit their peak and now they’re in decline. There is no other force, demographic or otherwise, that can take the Baby Boomers’ place.
No matter what economic incentives or stimulus packages governments implement, the Baby Boomers will be spending less and saving more. No more new cars, college tuition, food for kids, insurance, or homes.
Dent says that new generations will follow different, more conservative patterns of spending. They’ve witnessed terrorism, a different kind of war than Vietnam, and geopolitical tensions unlike any before. But they’re not enough to make up for what we’ve been used to in the past 30 years.
If Dent’s forecasts continue to be true, no amount of sex today can save our economy for the next fifty years.
Vladimir Gonzalez, EconomyWatch.com
