For over a decade I have sought after the latest and most factual economic indicators in order to choose my investments. I refer to myself as a macro-economic investor because I believe macro-economics is the best route to wealth for the average person. Looking at the big picture and knowing where the tide is inevitably going to go is like betting on a fixed fight. It’s not a matter of if your going to win, but what round its official. Right now there are two macro economic forces I am betting on: 1. There is an unprecedented shift in spending habits taking place in the United States and 2. like the other 3,800 fiat currencies that came before it, the 38 year old fiat dollar has run its course.


Today I would like to talk about the fist, the unprecedented contraction in consumer spending. In order to see the big picture we have to go back all the way to 1946. The U.S. and the allies had just declared victory and World War II was finally over. Despite the New Deal and government stimulus the U.S. was finally coming out of a 15 year Depression. With uncertainty behind them, Americans started having babies. Between 1946 and 1964 the U.S. had 76 million births. In fact, 1957 still holds the record for U.S. births, 4.3 million people in just one year. To give you an idea just how dramatic this demographic change was, the year prior to the baby boom 1945 had just over 2.8 million births and 10 years following the baby boom generation 1974 the annual live births had dropped down to 3.1 million. It’s safe to say the baby boom generation dwarfed the generation before it and the generation after it.

Why does any of this matter? Well to start, baby boomers currently account for 77% of all financial assets in the United States. Currently boomers pay the most in income taxes, sales, and property taxes. We also know from government and private data that the average American peaks in spending between 46-50 years old with the average being 48. Now are you starting to get it? The first Baby Boomer turned 46 in 1992 and the last one will turn 46 in 2010. By knowing this data we can come to the factual conclusion that the U.S., a 72% consumer economy, has officially hit peak spending. The U.S. will see a dramatic decline in consumer spending because of the dramatic shift in spending habits. Not only do we peak around 48, but our spending habits change radically and drop off a cliff by the time we are 60. Let me give you some more macro-economic data, just the facts statistical averages. We enter the workforce at age 21, get married at 26, have kids at 28, buy our first home at 31, purchase our first trade up home at 42, and peak in overall home buying at age 45. Wait a minute, that means the baby boomers peaked in home buying in 2005, uh oh! Of course the most important event at age 28 is the one that we can really look to in order to understand our spending habits. The average baby boomer had their first child at age 28 and according to the U.S commerce department, the average child costs 200,000 from the time of birth to age 18. So, here we have the largest generation starting to buy diapers, life insurance, and larger automobiles starting in 1974. Within 10 years, millions of baby boomers have children and increase their spending habits. By the mid 1990’s, the first wave of baby boomers were spending big bucks on automobiles for their children, auto insurance, college tuition, and food for their teenagers who were peaking in calorie consumption. The credit bubble had plenty of fuel and new borrowers by the millions.

So, why is this generational cycle any different from the past? It is and it isn’t. To start, the previous generational cycles in the U.S. occurred from 1930-1942 and 1968-1982. For those not familiar with economic downturns, the Great Depression occurred from 1930 to the early 1940’s and from 1968-1982 the U.S. was plagued with recessions. So as far as the contraction goes, nothing will be different. Just like previous generation cycles, the U.S. economy will face a significant inevitable contraction. What’s different is our economy itself; we are no longer a manufacturing based economy. The American family is no longer supported by a single income earner with little to no debt. The U.S. wasn’t competing with a strong Asia supported by 3 billion savers vs. our 300 million debtors and the biggest change in our economy, unfunded liabilities.


Let’s get back to the baby boomer data. So far, we have only covered what they contributed to the economy. Now let’s talk about the negative effects as they age. During the last decade roughly 500,000 people applied for social security on an annual basis. According to the Social Security Department, the next decade will see 1.5 to 2 million apply for social security every year until 2026.

What Keynesian Economist fail to see and obviously have no clue of, is that we are about to enter the perfect economic storm. All the models that show Social Security, Medicare, and other government entitlements going bankrupt in the next 20-30 years fail to account for the dramatic decrease in tax income receipts. What we are entering into is the largest generation in the U.S. getting ready to explode in entitlement spending and at the same time collapse in consumer spending. The entitlement fiasco of the last 90 years is about to explode in our faces. The government’s response, print print print and when that doesn’t work, borrow borrow borrow. I’ll expand on that more in next week’s blog. Now, back to the population. The worst part is, not only are the baby boomers contracting in spending, but as a result of the imbalances of the last 35 years, the echo boomers, generation X, and Y are also losing jobs in the ever dependent consumer economy. The U.S. economy is dependent on a constant credit expansion backed by junk spending. Just like the peak of any bubble, we saw the extreme during the last 10 years as people from all generations borrowed thousands of dollars without ever proving their incomes. Looking past all the government stimulus distractions, I believe it is a very logical and predictable prediction that the U.S. will be in a depression for at least the next 15 years. Why 15 years? Simple, the first echo boomer hits his peak spending habits in the year 2023.

After reviewing macro economic data like this, I have a question for all the economist and pundits predicting a U.S. economic recovery. So here it goes, to the economist and pundits who didn’t see the greatest downturn since the great depression, “Do you even have a clue?” I know what some must be thinking, who am I to make this kind of assumption about the smartest people in the world. Well to be honest, I’m a nobody, just an average American armed with the truth. I guess to sum it up I’m just the guy who warned everyone at DOW 14,000, bought gold at 450, shorted Countrywide, and through research, had a clue.

Source: Vision Victory Manifesto