If you recognize the reference to Dr. Strangelove in the title above, you’re either a student of film or old. Like me. The subtitle of the 1964 movie does, however, fit my mood.
For most of my life, I’ve applied the tools of economic analysis to forecast the future. There are many possible futures, of course, but the outcome that worried me most was a debt crisis.
That’s changed. I’m now in the camp of those who want the perpetual borrowing from future generations to stop as quickly as possible—no matter how painful it is.
We know what drives government debt. Alan Greenspan describes it as “aging and disease and such.”
Today, the US has a debt load comparable to that of the end of World War II. And it’s worse in much of Europe and Asia, which may be where the debt crisis will first emerge full blown.
There are two major differences between now and the post-war period, though. One is that post-war America was united in its determination to pay off the debt.
Today, there is little interest in reversing or even slowing deficit spending.
We recently saw the least painful solution—across-the-board spending cuts that could be covered by waste reduction—killed by the Senate in a rare show of bipartisanship.
The other major difference between post-war and current conditions is demographic. There was the huge uptick in birthrates following the war.
That temporary fertility spike produced the Baby Boomers, the largest taxpayer class in history, who helped pay off the debt amassed during World War II.
Today, Boomers are rapidly shifting out of the contributor column and into the dependent column. About 10,000 retire every day.
Almost 25% of Boomers have never had any savings, and Social Security benefits have lost about a third of their purchasing power since 2000. Half the federal budget goes to Social Security and Medicare, which continues to automatically grow due to mandates.
When I talk about this topic, the most common question is, “But won’t immigration help fix this problem?”
Immigration does increase population, but that’s not the problem. The problem is the dependency ratio, and so many immigrants are in the dependent column that they exacerbate budgetary problems as a group.
- The timing of the debt reckoning is important for investors, of course, but it is particularly important for older investors who want to be alive to personally manage their portfolios.
That will require access to drugs that are currently locked up within the regulatory labyrinth. However, there’s a change in the way biogerontologists think. Many have been coming around to the idea that aging is reversible.
I parted company with my mainstream-economist colleagues on the topic of fiscal responsibility a while ago. I now look forward to the debt reckoning.
And I think it’s going to happen faster than most people think.
Perhaps that’s a good thing. The debt crisis is driven by demographic aging, and it can be solved only by addressing the biological causes of aging.
The first phase of the solution is the next generation of geroprotectors—drugs that can extend health spans and roll back existing symptoms of aging.
The second stage will be true age-reversal biotechnologies that reactivate embryonic gene pathways.
One of the companies in our Transformational Technology Alert portfolio is the clear leader here. Its technology will not only reverse aging... it will repair major injuries caused by aging and trauma.
But anti-aging biotechnologies have never before existed, so we may need a Schumpeterian disruption to accelerate their arrival and the unparalleled profits they will produce.
Theoretically, the West—including the US—could reform the laws covering approval of regenerative medicine, Japanese-style. China has already gone down that path, and Korea is well on the way.
Unfortunately, the real scientific progress isn’t yet happening in Asia but in the West—and I don’t think the US and Europe will take the Asian approach until we have no other choice. Asia, however, is already sounding the alarm.
The recent G20, the annual gathering of the world’s most important financial policy-makers, focused on the global economic threat of societal aging. The story was picked up by all the major wires and appeared in dozens of major publications and websites. Not surprisingly, the best coverage came from Japan.
The tacit admission by the financial elite that they have failed to deal with the most important macroeconomic event of our era is historic.
It will be followed rapidly by even more desperate warnings before the growing debt caused by demographic aging begins to demolish the fiscal house of cards.
Then, the US and the rest of the West will join Asia in prioritizing biotechnologies that can address that debt by keeping people healthy and paying taxes longer.
One thing you can do to prepare for this inevitable financial crisis and the opportunities it will present:
- Watch what’s happening in Europe, Scandinavia, and Asia. The crisis will hit first and hardest there. You’ll get important clues about how the script will play out in the US.
Your best weapon is knowledge. If you understand what's coming, you'll be better prepared than 99.9% of all investors who have no clue that the world economy is stressed to the breaking point... by the cost of supporting an unprecedented number of sick retirees.
Personally, I want to get this drama over with so we can move on. When the debt crisis finally hits the boiling point, the elites will no longer be able to pretend they’re doing a swell job running things. Then, they’ll be forced to embrace solutions that they’ve ignored.
That’s why I’ve learned to stop worrying and love the debt.