Patch Blog: Did the Baby Boomers Cause Our Economic Crisis?

Why is my portfolio crashing? Why has this decade been so darn rough to grow any kind retirement fund at all? 

Well, there's the Greek Crisis. Sure, okay. I guess so. It's Greece's fault.

But before that there was the Debt Cieling Crisis. Oh there ya go! It's the Democrats' fault. No, uh - it's the Republicans' fault.

And before that it was the banks' fault for the Housing & Credit Bubble. And before that it was Silicon Valley's fault for the Dot.Com Bubble. 

And tomorrow it will be the Federal Reserve Bank's fault for printing money, or China's fault for having the worlds biggest real estate bubble.

All just random occurences in our life and times with no rhyme or reason except that we are cursed as a generation! Oh for the 80s and 90s. Will we ever see their kind again?

Well, having written a popular article entitled, Inflation or Deflation?: America's Monetary System in Crisis and How to Plan For It, I had the opportunity to study up. And perhaps the most vital question of our time - will dollars in fact become worthless, or will assets from real estate, to stocks, to yes - even gold as we have recently seen - crash so hard that the only thing left will be cash? This was the case in 2008. Most people think the latter is nonsense, but don't forget how miscalled was the rating downgrade of U.S. Bonds. Of course that downgrade in safety was supposed to dramatically raise interest rates, but instead it crashed the stock market and money poured into the downgraded U.S. Bond market, because "who else was safer?" and interest rates fell! That is a Deflationary scenario, my friends.

But I digress. What I discovered in my research is that governments don't drive economies. People do! Let me explain:

Last January, someone made the mistake of handing me a microphone at the Dennis Praeger Wealth Summit, sponsored by my Los Angeles home station KRLA (AM 870). There was a lively discussion taking place about who is to blame for all this. Here's what I pointed out that was completely omitted from the conversation:

I said...

"Look folks, if I could come in here tonight and show you solid proof that nearly one-third of our entire population, 83 million of our 300 million people were just going into their late twenties, and they're either just out of college or settling into their life vocations and they're all going to move out from mom and dad's and need their own new houses. Would you feel any different about the outlook for our economic and financial future?

"They need those homes especially since they'll largely be getting married soon. And you know what that means, don't you? Then they're going to have babies and people with children consume like nobodys business! (Hey! 73 percent of our GDP is consumption driven! We boom on selling crud to consumers, don't we?)

"Sell those Dodge Caravans for the next 20 years! And the soccer games, and the DVD players, and the vacation packages, the jetskis and potato chips for the teenagers!

And don't forget lend these people money to consume what they MUST (studies have found that economic climates in America have far less impact on consumer trends than age of children. You have kids - you buy, no matter how broke you are and how much you have to borrow). And let's all invest in the things they're going to buy!"

Now before you think that this scenario would begin to look like the 80s and 90s all over again, let me explain. That was the 80s and 90s! And it's over! That Baby Boom demographic, (imagine a football moving through a garden house) is done consuming! The kids are out, and all we want to do is one, pay off our freakin' debts, and two, save money for retirement.

Of course, since this is America and since no one should ever feel any pain, government will try to stimulate (spend) their way out of an organic contraction that is ultimately inexorable.

Now, in future blog entires I'll go a lot more into some ideas about how we should be adjusting as an economy. And how do these demographics play out in the European Crisis, and how China is the next great bubble!

But maybe more importantly, I'm also going to cover vitally important aspects of how you should be changing your own habit patterns from 80s and 90s style of investing in "diversified portfolios of stock and mutual funds" with "buy and hold" strategies. Those strategies died in 2000 and grew most Boomers zilch on their principal for the last 10 years. The next 10 years will be the same.

If you want a jump on it, go to our website SOLUTIONS page and watch the 28-minute slide show entitled "Historic Rates of Return; Wall Street's Dirty Little Lie". and find out about a Retirement Roadmap.

Or just stay tuned. I promised a bunch of blogs. Are you SURE you want me to do that, Nicole??