This is a parody video made by a trio of entertainment industry guys long before YouTube came along, back in 1998, I think. The Star Wars prequel series was behind schedule, and the movie Titanic just blew box office records out of the water. I know this because Chad Leeper, who did the voices for this parody, worked at a lighting company with me, and gave me one of the first few VHS copies of this video right after they made it. I still love the part where the lifeboat guy's head gets blown off. Great little parody video.
Imagine for a second you got catapulted through some sci-fi movie scenario, like a wormhole or a stargate, and suddenly found yourself on the ship Titanic, in port, hours before leaving on its maiden voyage. Since you're from its future, you know the ship will get most of the way across the cold, north Atlantic, and then hit an iceberg and sink. What do you do? You get your ass off the ship, that's what you do. Economically, many of us are on the Titanic right now. It's time to run back down the gangplank and get off that ship. A serious recession will
What am I talking about? If you read this blog very often, you know that taking a futurist look at the global economic picture is a passion of mind. I think of it like a long term weather report when there's a hurricane brewing off the coast of Africa. By standing back and looking at the big picture, the satellite images of the mid-Atlantic storms, we get an idea of how big a fledgling hurricane may be, and a general idea of where it's headed. I try to do the same thing to the economy. I look at the big forces building up, and the big picture that they tell about where things are headed. When I, or someone else, does this, big issues that will eventually happen, become apparent.
Here's some of the main things we know about our mid and long-term economic picture, the "storm clouds," so to speak.
-Our whole civilization is in a long, drawn out, transition between the old Industrial Age of factories, and the new "information age," or "knowledge-based society," as futurists Alvin and Heidi Toffler called it. This completely changes how society functions on most every level. It also means that much of what we all believe about "the way things work," is no longer true in our rapidly changing world. The bad part of this issue is that MOST traditional businesses these days are working based on knowledge and assumptions that are probably no longer true, because technology, communication, and society are changing so quickly. This goes from the largest industrial age corporations to small mom and pop businesses. Knowledge-based society and "obsolete knowledge"
-The United States has a recession or depression every 4 to 10 years, on average, in the last 50 years. We're in year 10 since the last one. We're due. Recessions on wikipedia.
-The loss of good paying factory jobs from the 1970's to the 2000's, combined with the clustering of high tech companies, and The Great Recession of 2008, devastated much of rural and small town America. Huge swaths of this country have never really recovered from the Great Recession of 2008. In effect, there's a "Geographic Recession," vast areas of this country left behind and slowly dying that are basically in a "permanent" recession. "Rural America is the New Inner City"
- Since the Great Recession of 2008, student loans have been bought, repackaged as Student Loan Asset Backed Securities (SLABS), and sold to investors almost exactly like subprime mortgages were in the late 1990's and early 2000's, which was the bubble that burst and drove us into that recession. Student Loans/SLABS
- There's over $1.5 TRILLION of student debt owed in the United States, that's $200 billion more than the $1.3 Trillion in subprime loans that collapsed the world economy in 2008. $1.5 trillion student loan debt
-Total public (government) debt in the U.S. is nearly $21.3 trillion. Debt clock
-Total personal debt (that's all of the bills owed by us regular humans) has hit $13.2 trillion, more than $500 billion more than the peak before the 2008 recession. A huge chunk of that is mortgage debt, but student loan debt and auto loan debt have grown a lot in the last ten years, and those hit hard when your hours get cut, you get laid off, and those types of things that happen in recessions to a lot of hard working people.
-Total corporate debt in the U.S. is $6.3 trillion as of June 2018. CNBC/corporate debt
-I realize that "a trillion dollars" is impossible to really imagine. Here's the actual number, one trillion: $1,000,000,000,000. Compare that to your paycheck. A trillion is 1,000 billions. I know, it's still hard to imagine. So try this one, a trillion dollars could buy one of these Lamborghini Gallardos (about $200,000 each)
for EVERY SINGLE PERSON in Chicago and in Houston, and still have enough left over to buy one for every person in Huntington Beach, California, where I used to live. That's how to think about a trillion dollars. Five million Lamborghinis, that's a trillion bucks. What color Lambo do you want? You can always trade it in to buy a house if you get too many speeding tickets.
- Basically, the U.S. government, U.S. businesses, and average people have been getting a lot of loans that they can barely afford now, and many won't be able to afford in an economic downturn. When interest rates go up (which the Federal Reserve plans to do this year), EVERYBODY pays more interest, and payments go up. That's the problem that set us up for the Great Recession, and we've gone past that level this time.
- The major central banks of the world have kept up policies like artificially low interest rates and creating money out of nothing and investing it in the economy, called Quantitative Easing. These policies were initially started as "emergency measures," to help the world economic system survive The Great Recession, but nearly a decade later, they're still doing these "emergency measures," and Wall Street and world financiers are now hooked on this cheap money like a crack ho is hooked on the rock. This has set our economy up for another HUGE collapse. Central bank "Collusion"
-The U.S. stock markets have been on an upward track, with some small, minor corrections, since about March of 2009. What goes up must eventually come down. The old school, traditional stock index, the Dow Jones Industrial Average (The Dow), peaked in January of this year, and has been bouncing up and down a ways below that peak since . DIJA chart- click "max" for long term chart
-The NASDAQ stock index, which contains mostly high tech stocks, continued going up, but Facebook and some others took big hits last week (July 25th, 2018), and it seems the NASDAQ may have just peaked, or is real close to peaking. Historical NASDAQ chart NASDAQ 1 year chart
So what does this mean for you as an employee? What does this mean for you as a small (or large) business person. There WILL, without a shred of doubt, be a serious recession in the next year or so. This next recession WILL be as intense as the Great Recession of 2008, and it will likely be worse. That's what all the facts above, the "storm clouds," are pointing to. It will affect every single one of us at some level. So what do you do when a really big storm is coming? You get prepared... if you're smart, anyhow.
So it's time to get prepared. I don't know exactly when this next recession will hit, but I do know we're overdue. It should have started about a year ago, but the policies the Federal Reserve and other Central banks have in place have postponed the start of it. The huge tax cuts put the start of the recession off for a few months, maybe more. But these things have also let the debt and underlying problems keep growing, so the actual recession will be worse when it does happen. It's a little like paying off your credit cards... with another credit card, and then using the cards you just paid off. It buys you time, but the bills later on are a lot bigger.
I also don't know what will trigger the real start of this next recession. The trade war with China could do it. The investigations into President Trump and Paul Manafort and all the related issues could do it, if enough investors see that as scary for the markets. Heck, today a crisis in with Turkey's currency sent the Dow down over 200 points. I don't pay attention to Turkey, it's not on my radar, I look at more long term things happening. But the stock markets are down about 1% today because of a surprise from the other side of the world. The stage is set, and any one of dozens of obscure things could be the trigger to really get things headed downhill. Which I see as all the more reason to prepare in whatever way makes sense for you.
Who will be hit the hardest in this next recession? Here are some of the groups that will have it tougher than most. Rural America, to a large extent, is already in a near-recession situation. Things will get worse for most rural areas and small towns.
Because college debt is so much higher and has been encouraged like the subprime loans 15 years ago, college students, colleges and universities themselves, college towns and cities, and college sports will be harder hit than in the 2008 recession. That's one small reason I just left a region where the three main cities are all heavily dependent on the colleges there.
In any big recession, and any big downturn in the stock markets, retirement savings, mutual funds, 401K's and other investments owned by millions of average Americans will take a big hit, just like in the Great Recession. Precious metals like actual physical gold and silver, generally speaking, hold their value better in tough times. In today's world, a lot of younger people may put money in crypto currencies, and I have no idea how that will work out.
You've probably already heard of the "Retail Apocalypse." That's the name given to the fact that thousands of old school, traditional retail stores have closed in the last two or three years. This will keep happening. This is a huge example of the shift from the Industrial Age economy (big stores, shopping centers, huge malls, chain restaurants), to the Information Age or "knowledge based economy." People like shopping online and having stuff delivered, and that's going to get a LOT worse in the next recession. Right now, as many as 10,000 retail stores are expected to close in 2018, thousands have shuttered already. That's happening when we're NOT in a recession. In addition, 400 entire shopping malls (of about 1,100 total)are expected to close by about 2021. Again, that's happening without a recession. That's just the shift from the old school, shopping mall mentality to the Amazon/online shopping mentality. It will happen faster when the recession hits. So if you're working in retail, it's a good time to think of other options.
Real estate has soared in the big, tech hub cities since 2008-10, but not as much in most small and mid-sized cities. So that's a hard one to judge this time around. Real estate doesn't move up and down as a national trend like it once did, it's more of a regional thing.
There are a ton of variables. If, for example, you're in a mid-sized town where a second-tier college provides a lot of the economy, and you're an IT worker, it might be time to look for work in a major city.
I know this is a really depressing blog post. Is there any upside? Yes... New ideas, new businesses, and new industries tend to explode on the scene during recessions, especially big ones. There will be enormous opportunities for new ideas and new businesses in the next few years. One of the biggest opportunities coming is to completely re-invent both our K-12 and our college and trade education systems. We desperately need ways to teach today's children the ACTUAL SKILLS they will need in today's world. Check out Kahn Academy, as one example. It started as one smart guy making tutorial videos for his kids, nieces, and nephews, I think. Now it's considered revolutionary. That's just one example of where things are headed. Education will be HUGE in the next decade.
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