In my previous article, I discussed several reasons why our system as a whole will come apart. In this article, I want to give the fundamental reason why our stock market will crash from it’s current historical highs.
I mentioned in my earlier article that I believe the deflationary event that will collapse the stock market is already beginning. In a nutshell, it works like this. The baby boomers are the largest generation in American history. They did not have enough kids to replace themselves. This is an important fact to note. Generation X also has not had enough children to replace itself, and Generation Y is only just now old enough to enter the economy en-masse. Generation X, while doing far better than Generation Y, doesn’t make nearly the amount of money on average that the Baby Boomers do. What does this mean for the stock market? Well it’s very simple. Stock prices are being upheld by a combination of fiat money creation by the Fed and Baby Boomers buying stocks. As the Baby Boomers retire, they will stop making money and putting it into the market. Instead, they will start withdrawing money from the market as they tap into their savings for retirement. Now, in order for stock prices to even stay the same, they need as much money flowing in as there is flowing out. Because there aren’t enough Gen Xers to replace Baby Boomers, you cannot do a 1 to 1 replacement. Moreover, not only are there not enough Gen Xers putting money into the market to keep the prices afloat, they don’t make as much money as the Baby Boomers do, so you would actually need MORE Gen Xers to replace the earnings of the Baby Boomers. Generation Y can’t help either. That generation is saddled with debt and can’t even afford to save money, let alone put money into investments. Many of them can’t even get full time employment. Therefore, once enough Baby Boomers retire and start pulling money out of the market, (whatever unknown percentage of them that is) there won’t be enough money flowing in to keep stock prices high, and they will crash at the first trigger.
Moreover, as people get older, they actually spend less money. An 80 year old man is living off his savings and doesn’t buy new luxury sports cars, bigger houses, etc. The only thing they spend more money on is healthcare. (Which is why healthcare is one of the few sectors of the economy projected to grow, and why Obamacare is such a disastrous policy, it’s killing one of our only growing industries.) Thus, as our average population age grows older, the population will buy less goods and services overall. This will lessen demand and prices will fall. Hence the deflation. But wait! It gets better! The labor force participation rate has been dropping steadily since 2008. It has not been lower since the Great Depression. This creates two problems. First, the increased social spending to assist those who aren’t working adds to the deficit and debt problem in our nation. Second, the lower the participation rate, the lower the number of people who are creating wealth and investing in the stock market! The day of reckoning is then hastened.
Understand this is isn’t some theory belonging to the Austrian or Keynesian school of economics. This is cold, hard demographics and math. Unless we suddenly import tens of millions of already rich, investment savvy, 30-40 year old Martians who are popping out productive kids who easily integrate into our society, there will be a stock market crash. But, as I doubt E.T. will be landing and applying for U.S. citizenship anytime soon, we know how this is going to end. I know it’s hard to swallow, and it’s easy to listen to the soothing voices on the TV telling you that it’s going to be OK. The reality is that the mental giants over at the Fed are terrified and are trying to keep it going as long as they can. No one wants to start a panic, so no one wants to admit to what’s going on. They will not admit to a coming stock collapse until it happens. They then won’t admit to a systemic collapse until it happens. It’s important that you accept it and act before it’s too late.
It didn’t have to be this way. If the federal government hadn’t bailed out the major banks in 2008/2009, if the Fed had’t set zero percent interest rates and massive QE programs, we would have had a worse recession in the short term, but we wouldn’t have put ourselves in this position. The market would have had a gradual decline as baby boomers retired, but we wouldn’t have had this giant bubble with historic stock market highs not seen since 1928.
Now the market is so inflated, and so many people have bought in at such astronomically high prices, that it isn’t realistic that they will get much of their money back when this things comes down. There will be a lot of pain in the road ahead. Do what you can to get out of its way now.
This was originally posted on my website XY Rising ? Because Being A Free Man Shouldn't Be Illegal. If you liked the article, come over and give us a visit.
I mentioned in my earlier article that I believe the deflationary event that will collapse the stock market is already beginning. In a nutshell, it works like this. The baby boomers are the largest generation in American history. They did not have enough kids to replace themselves. This is an important fact to note. Generation X also has not had enough children to replace itself, and Generation Y is only just now old enough to enter the economy en-masse. Generation X, while doing far better than Generation Y, doesn’t make nearly the amount of money on average that the Baby Boomers do. What does this mean for the stock market? Well it’s very simple. Stock prices are being upheld by a combination of fiat money creation by the Fed and Baby Boomers buying stocks. As the Baby Boomers retire, they will stop making money and putting it into the market. Instead, they will start withdrawing money from the market as they tap into their savings for retirement. Now, in order for stock prices to even stay the same, they need as much money flowing in as there is flowing out. Because there aren’t enough Gen Xers to replace Baby Boomers, you cannot do a 1 to 1 replacement. Moreover, not only are there not enough Gen Xers putting money into the market to keep the prices afloat, they don’t make as much money as the Baby Boomers do, so you would actually need MORE Gen Xers to replace the earnings of the Baby Boomers. Generation Y can’t help either. That generation is saddled with debt and can’t even afford to save money, let alone put money into investments. Many of them can’t even get full time employment. Therefore, once enough Baby Boomers retire and start pulling money out of the market, (whatever unknown percentage of them that is) there won’t be enough money flowing in to keep stock prices high, and they will crash at the first trigger.
Moreover, as people get older, they actually spend less money. An 80 year old man is living off his savings and doesn’t buy new luxury sports cars, bigger houses, etc. The only thing they spend more money on is healthcare. (Which is why healthcare is one of the few sectors of the economy projected to grow, and why Obamacare is such a disastrous policy, it’s killing one of our only growing industries.) Thus, as our average population age grows older, the population will buy less goods and services overall. This will lessen demand and prices will fall. Hence the deflation. But wait! It gets better! The labor force participation rate has been dropping steadily since 2008. It has not been lower since the Great Depression. This creates two problems. First, the increased social spending to assist those who aren’t working adds to the deficit and debt problem in our nation. Second, the lower the participation rate, the lower the number of people who are creating wealth and investing in the stock market! The day of reckoning is then hastened.
Understand this is isn’t some theory belonging to the Austrian or Keynesian school of economics. This is cold, hard demographics and math. Unless we suddenly import tens of millions of already rich, investment savvy, 30-40 year old Martians who are popping out productive kids who easily integrate into our society, there will be a stock market crash. But, as I doubt E.T. will be landing and applying for U.S. citizenship anytime soon, we know how this is going to end. I know it’s hard to swallow, and it’s easy to listen to the soothing voices on the TV telling you that it’s going to be OK. The reality is that the mental giants over at the Fed are terrified and are trying to keep it going as long as they can. No one wants to start a panic, so no one wants to admit to what’s going on. They will not admit to a coming stock collapse until it happens. They then won’t admit to a systemic collapse until it happens. It’s important that you accept it and act before it’s too late.
It didn’t have to be this way. If the federal government hadn’t bailed out the major banks in 2008/2009, if the Fed had’t set zero percent interest rates and massive QE programs, we would have had a worse recession in the short term, but we wouldn’t have put ourselves in this position. The market would have had a gradual decline as baby boomers retired, but we wouldn’t have had this giant bubble with historic stock market highs not seen since 1928.
Now the market is so inflated, and so many people have bought in at such astronomically high prices, that it isn’t realistic that they will get much of their money back when this things comes down. There will be a lot of pain in the road ahead. Do what you can to get out of its way now.
This was originally posted on my website XY Rising ? Because Being A Free Man Shouldn't Be Illegal. If you liked the article, come over and give us a visit.
