This economy isn’t turning around anytime soon. Deal with it!
by Andy Buyting on Oct 04 at 6:00 am
The North American economy isn’t going to fully recover for a long time, deal with it!
If I were you, I would not look at the recession as a passing phase. I really believe this economy is here to say for a while. To survive, you must make changes to your business now for the long haul.
I heard an investment trader speak back in 2003, and his message was profound. If you can imagine, back eight years ago, this gentleman got up on stage and told the audience that in 2008 or 2009, the North American economy was going to head into a long-term recession. His prediction was that once the recession hit, it wasn’t going to be until 2020 or later before we fully recover.
There were two reasons for his prediction, and I want you to consider these because they make so much sense.
Reason #1.
He didn’t speak specifically of the sub-prime mortgage lending, but he did talk on the overwhelming debt that the average North American was taking on. People were starting to spend more than they could afford, and that was going to backfire. No big surprise, that’s exactly what we saw in 2008.
However the real concern that I have is in the second reason, which isn’t talked about much on the news as far as I can tell.
Reason #2.
A full 2/3 of the North American economy is driven by the consumer. 2008 marked the year when over 50% of baby boomers turned retirement age. And as well all know, the vast majority of North American wealth (80%+) is held by baby boomers. Well when people retire a funny thing happens. Regardless of how much wealth they’ve accumulated and large their mountain of cash is when the money stops coming in, the money stops going out. Baby boomers retiring with drastically slow down their spending because they simply do not want their mountain of cash to get any smaller, especially after losing so much in the market crash of 2008. With no new money coming in to the pockets of baby boomers, less money will go out. This will result in a massive slow down of 2/3 of our economy. Now once that money is inherited, it will start to flow freely again. However it will be another 15-20 years before we meet that tipping point.
This is what’s scary to me. I see it now with my parents and others in their generation who have retired in recent years. Regardless of how much money they have, they’re just not spending it like they used to. It is human nature to want to keep a balance in our security, and that means not eating away at our nest egg.
So if it’s going to take another 15-20 years before we see another boom period in the economy, as small business owners, we really need to think about the future. We need to figure out what exactly we can do to ensure that we survive and thrive in business.
Photo by alancleaver_2000 on Flickr.
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