It is now June 2009 and about a year into the global economic financial cricis, and although many jobs have been lost and many companies have been bankrupted, I do not think that most people realise how bad it is going to get in the next few years. I am optimistic that eventually we will come out of recession....but only in ten years time after things have got a lot worse than today. Here are some reasons why I think we will decline over the next few years and then not start to recover until 2020.
1) Decades of borrowing to feed growth have come to a sudden end in a collapse brought about by people borrowing and spending more money than they earn and companies growing faster than can be maintained in the long run. The result has got to be a shakeout across all economic sectors where bankruptcies, mergers and acquisitions change the face of the landscape and allow us to emerge at the other end of the recession with fewer leaner, more effecient and more harmonious institutions with regards to standardisation of goods and services particularly in crowded competitive sectors.
At the moment I believe that this shakeout is being prevented from happening by governments artificially propping up ineffecient industry by lending more money and continuing the growth and borrowing craziness which got us into this mess in the first place. Newspapers talk about recovery and that the worst is over. I think this is temporary recovery boosted by tax payers money and that it will not last. When the crash does come there will be no more money to bail out bad companies and worse than that there will be no government money for public services.
2) We have reached near saturation of the microchip led cycle of market growth, with the personal computer, mobile phones and internet access. It is time for the shakeout of companies in these sectors with resulting standardisation and slow growth benefiting the consumer before the next boom cycle starts.
3) The post war baby boomer generation is retiring over the next decade. This means an exodus of highly paid big spenders from the work force, who will stop paying taxes and start drawing on the state funds for pension and health care. This will be a huge problem for the governments who have spent all the taxpayers money on prolonging the borrowing and spending craze, as they will have nothing less for pensions, health care, schools, policing, infrastructure repair etc. Not only are there going to be a very large amount of pensioners to look after with government money, but the age groups below in the population pyramid contain far fewer people who are working and paying these much needed taxes.
Europe is badly affected by this aging population problem and the United States is also affected (to a lesser extent) but is also over $11 trillion in debt ( http://www.brillig.com/debt_clock/ ) and I've read reports that U.S. infrastructure is badly in need of funds for repair and maintenance.
Other implications of an aging population include downsizing of property as people retire to smaller homes and flood the market with no longer needed larger
properties. This will affect property prices.
4) Environmental issues. We are facing new challenges of a growing world population (declining in western countries but growing in poorer ones) but running out of energy and water whilst facing rising sea levels and global warming. Glaciers provide much drinking water through feeding rivers in S.America, India and surrounding areas. These are melting away and new catastrophes will hit those areas.
It would be great if our countries were prepared for the way in which such changes to our planet will affect us and had action plans ready across the world.
But unfortunately I can't see that we will be ready to take on these challenges, but will instead still be struggling to deal with our own economic disasters and fighting each other for resources and access to markets etc.