The Great Depression of the 1930s had a devastating impact on the entire world, not just the US. For many years now, the experts at ITR Economics have forecasted that, a century after that trying event, a new Great Depression will be arriving around 2030. Many would like to know why we are forecasting another depression, so we put together a list of the top five causes of the 2030s Great Depression.
Demographics
As we approach 2030, an aging population is a global issue that is a strong reason for the upcoming Great Depression. Many major countries, especially China, Germany, Russia, Japan, and Canada, are projected to have the highest percentages of population in the 40-64 age group, as well as the 65+ age group, starting in 2030.
The US hasn't dodged this bullet; we also have an aging population. This is bad news because the older generation won’t have as large of a younger base as in the past to support it by paying a larger share of taxes. Having fewer young people may also lead to significant labor problems heading into the 2030s.
Health Care Costs
Growing old often isn't easy. With an aging population, the number of people needing and receiving Social Security benefits and health care increases. In fact, health care expenditures are rising faster than US GDP. In 2020, there were 62 million Medicare recipients. By 2030, it is expected there will be a staggering 80 million Medicare recipients. This increase will put a lot of pressure on the US government.
Along with the greater number of elderly people needing care, health care costs will continue to escalate with future inflation. The government will need more money to fund and support all of this, meaning more or higher taxes and more borrowing – both of which weigh heavily on economic growth.
Entitlements
One way to potentially mitigate the impact of the upcoming Great Depression would be by cutting Social Security benefits and raising taxes, or by curtailing other popular entitlement programs. And any politician that proposed this would be heavily booed or laughed at, and likely both.
Looking toward the future, there just isn’t going to be enough funding for programs like Social Security, Medicare, and prescription drug assistance. Unfortunately, Social Security trustees see no new tax solutions that can rescue our underfunded Social Security program, as it is just too late to make a substantial difference.
If the millions of Americans who need those checks were to see their Social Security benefits cut, it would become common to see the elderly needing to move back in with their families and make hard spending choices.
Inflation
Inflation is on everyone’s mind right now. We are currently experiencing a surge in inflation that has been frustrating for so many. While some are convinced the inflation will continue to rise, we believe that inflation will peak, and disinflation will be coming later this year.
As COVID-19 seemed to change the world as we knew it, the economic shutdowns had their own impact, and supply chains were disrupted. The government poured trillions of dollars into the economy to stimulate it, and supply chain issues are finally starting to become more manageable.
Federal deficit spending will likely be a common trend of the 2020s, with decline in the value of the US dollar a likely consequence. When the US dollar is weakened, we will experience higher inflation.
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US National Debt
The current US national debt is above $30 trillion. The less debt a country has, the better it will be positioned for the upcoming Great Depression.
Leading up to 2030, we project no changes in political power that would have a large impact on fixing our debt issues. In fact, neither party is solely to blame for the debt, and neither party is likely to fix it.
Remember, the upcoming Great Depression will be a global issue. No one knows if it will start in the US and expand outward, or if it will start thousands of miles away. Like the US, other nations such as China, the European nations, Mexico, Canada, and more will face issues. Japan is the nation with the highest government debt as a percentage of GDP and, with many other nations, is in for a world of hurt.
While ITR Economics wasn't around to predict the original Great Depression, we have been able to identify the trends that will lead up to 2030. We have been actively warning businesses about what lies ahead. Now that you are aware of the top five causes of the 2030s Great Depression, what will you do differently to position yourself for success? We are here to help! Contact us today to discuss your business goals and how we might support you in your planning.