Our first port of call – Demographics

As we set sail for the economic future we need to understand one fundamental thing about economics and that is that economics is about people. If the animal kingdom has economics it is invisible to us because we have no real way of knowing how an ant trades with a termite. We do know that ants and termites have complex relationships but they don’t seem to be anywhere as complex as humans have with each other.

If economics is about people then the best way to understand the economy is to understand people demographics. In February of 2020, Census.gov released an updated sobering report on the challenges facing the United States over the next 10 years. You can read the full report here but in a nicely cut jib, the summary is simply that in 2030, all over the 73 million baby boomers (humans born between 1946-1964) will be over the age of 65. The “65” age group is also the time people can elect to take social security and enroll in medicare, two of the largest entitlement programs in the United States. The report ironically claims that this “grey tsunami” will be a challenge for the United States and that’s exactly how it feels like, a giant tsunami about to hit America.

If that news doesn’t want you to batten down the hatches and hide below deck, consider that the next demographic group, “Generation Xers” (humans born between 1965-1980) will be following right behind them into retirement. The “Xers” cohort is 65 million strong.

Why is this an issue since people have been aging since the beginning of time? If you consider that the population of the United States is roughly 330 million today and consider that 70 million will be eligible to retire and not work anymore, the situation begs a fundamental question: Who will do the work?

Other questions to consider:

How will the consumption patterns change?

How will production patterns change?

How will capital investment change because of the lack of a viable labor force in the United States?

Where will people be living in 2030? Will people depart colder north for warmer south?

There is also one more thing to worry about on top of everything else. According to WorldoMeters, the population growth rate and fertility rate in the United States has been declining for the last decade as the median age has been rising limiting the growth of the population.

As we set sail through this “Demographics port of call” keep in mind that we will need to find opportunity in peril. We will need to find a way through the devil and the deep blue sea. We will need safe economic harbors, beacons, lighthouses and occasional rest and recreation to get to better fortunes in this environment.

In yesterday’s post we told you this journey would end in 2030 and with good reason, that will be just a little over 8 short years from now. By 2030, if we haven’t created an investment portfolio that can sustain all of us in a healthy way then we may end up entirely reliant on whatever political winds blows our way in the form of social programs or charitable handouts.

Deploy your anchors and catch some z’s or read this link while we work out the next heading.