The Motley Fool has a lengthy but excellent article showing us where the future of the US economy may be headed.
Despite a number of hiccups this year, the stock market is still just a rock’s throw from another all-time high.
But we’re coming up on a bend in the yellow brick road, and going ’round it could cause the party lights to go dark quickly. That could change everything about the way we and future Americans live. Sound scary? It is.
What now? Many of us would like to believe Uncle Bernanke will bail us out by slashing interest rates and bringing back the good old days. Right?
Kind of — and that’s where the massive economic debacle begins, my friends. Those same spend-happy consumers raised in the go-go 1990s — they’re still alive and kicking, and you better believe they still love to spend.
Despite some of the negative news we’ve been hearing about for the past few months with regards to banks writing off losses, real estate values going down, and a slowdown in economic activity, it appears that consumers still continue to spend. A visit to your nearest mall or retail shopping center, even before the ‘holiday spending season,’ would provide some evidence to support this. It’s still very early in the cycle for most people to see what is going on, but in the coming months and years there will be plenty of statistical data to paint a clearer picture of what is really happening.
I think you can see the predicament we face: One part of our economy demands lower interest rates to bail out the housing debacle, and foreign investors who finance our massive spending habits demand higher interest rates to forestall the dollar’s demise.
What’s a central banker to do?
The time is coming when all hell will break loose. What is most troubling is how everything (economic issues) will be compounded due to baby boomers. Let me explain. The immense number of soon-to-be retirees are counting on their retirement savings. Many of them have invested in real estate after losing out during the tech bust in the late 90’s. I personally know people who have lost upwards of 70% of their investment because of heavy concentration in growth stocks. Anyway, many aging Americans began banking on the surge in real estate value. With such a bleak outlook on the real estate market, what are the other options to safeguard their nest eggs? Well, they could sell their properties (if there are any buyers) and pump up their 401Ks or other IRAs. With many experts predicting a recession soon, this option seems like a bad idea. We know that social security is actually the opposite of what the name suggests. SS will not have funds for the next generation of retirees. Even for the boomers, SS alone will not be enough.
If Baby Boomers do not have enough to retire on due to market losses, everyone else in the country will feel the after effects. All anyone can do is be hopeful, hopeful that people start changing their spending habits and hope that someone can come up with the miracle cure for the economy. With a little Kool-Aid, its easy to stay optimistic.