Christopher Lee of CEL Associates has a thesis that the U.S. economy is due for a broad devaluation, if not full-blown depression, in the late 2020s. To support this, he points to over-leveraged corporate and consumer borrowing, unchecked government spending, approaching bankruptcy of the Social Security and Medicare systems, social discord, tribalism, a growing retirement-age labor pool that can’t and won’t retire, and baby boomers who have discovered their accustomed consumption rate is not sustainable.
Others eyeing the same math draw the same conclusion, if maybe on a different date either side of roughly 2030.
Many of these conclusions were built on pre-Trump era assumptions, though. Will an increase in tax revenue tied to a new 4 percent GDP growth rate coupled with new trade deals allow us to avoid it?
If it continues, then the answer is probably yes.
The math, though, is tough stuff to digest and worrisome. Social Security and Medicare going to baby boomers as they grow older up against the ability of the remaining labor force to pay into the system doesn’t pencil. Borrowing to cover the deficit can last only so long, so we would have to agree to deploy some discipline somewhere in that math. Unfortunately, we seem deeply divided over the role of government, so our politics will likely wiggle and the current 4 percent GDP is unlikely to hold up over time.
The good news is there are immense opportunities created from these broad economic devaluations. Those who have some liquidity on hand as dry powder will lead the market out as they buy at the bottom of the cycle. Real estate investors will have particularly exciting opportunities and are likely to possess valuable skills learned from the great recession of 2008-2010 that hit financial institutions and real estate hardest.
Lee and others are very keen on an almost patriotic-sounding view that millennials will lead a “rebuilding of society” after the devaluation. Now in their 30s, theirs will be a new foundation of self-actualization, stability, consistency and dependability focusing on “the unique needs of customers of every kind” — including (or especially) those in the real estate industry, which touches every aspect of the economy.
By then, the entire big data structure to our economy will be replaced by new players with the Internet of Things (IoT) infiltrating everything. The old model of home construction might be replaced by much more affordable and efficient models; apartment living may change where the uberization of housing drives efficiency, and smart cities emerge as the place where millennials want to live and work.
Rebuilding society is a strong statement, but Lee’s probably right. The very idea that we would solve so many of our problems through government is fairly new and tied to a baby boomer generation that restructured society to its liking with its sheer mass. Since that isn’t sustainable, and the pain inflicted on or about 2030 could be deep, new ideas will emerge and millennials with skills, access to liquidity and ability may well lead America out.
Tom Hoban is chairman and co-founder of the Hoban Family Office, a real estate investment and services enterprise in Everett.