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The Year Everything Changes

2017 is still over three years away, but we can already say a lot about it. We know that there will be a new President, although it’s not clear yet which party has the edge this far out. It’s likely that whoever is elected she (as it well could be) will try very hard to take the partisan edge off of Washington and get things done. There may even be a new Congress by then with a completely different configuration. But as big as the political changes are likely to be, the real change will be away from Washingtoon.

That will be the year that the peak Baby Boomers, born from 1952-1959, hit 65 years old and start to retire. Ahead of them are at least 15 million Boomers who will have passed that threshold, with probably 10M or more retiring. With slow growth inflation should still be low and unemployment will suddenly and sharply decline. The Millenial Generation will hit the workforce (and the electorate) in a big way. Combine that with the rising optimism coming on slowly and the boom should fire up.

It's going to be their world, probably all at once.

It’s going to be their world, probably all at once.

Before we make too many projections about the economy, we have to set the parameters. With a deficit of about 12M jobs still hanging over us, we won’t move towards full employment until the Boomers start to retire. We can’t expect them to all move on as soon as they hit 65, given the sorry state of return on savings in a low interest rate environment.

If the headline unemployment rate (U3) does dive below 6% about this time, as it should, the Fed Funds rate by the Taylor Rule should be 1.5-2.0%. That’s the first prediction. It assumes that inflation remains tame at around 1% and the velocity of money hasn’t turned around yet.

Interest rates that low will still be historically bullish. What is as likely to move the market will be years of high corporate profits. The basic rule for business cycles is that they last as long as the previous one. The Bull Market ran from 1985-2001, more or less, meaning that according to schedule attitudes should change around in 2017 like clockwork. Bullishness means a willingness to take on more risk and expand the business.

Optimism starts out small.  There's room to grow it.

Optimism starts out small. There’s room to grow it.

Combine a young workforce with low interest rates, stir in a few years of high corporate profits, and add a pinch of optimism. There will be plenty of cake to go around.

Naturally, things could change before or after 2017 by a year, given that the two forces that will change that year are really ongoing, slow processes. There won’t be any big surprises, really. But a genuine change in leadership and even more Millenials getting into politics could be the catalyst that moves it all along finally. It will come down to leadership, assuming that generation finds a style that it can finally embrace.

It’s about far more than youth, however, as the changes we are seeing are both generational and cultural. The third great force on our economy today, globalism, is both a slow pressure and a quick shock. We’ve already had to make the adjustments necessary to deal with a global economy, but the movement of people across borders is necessarily slower.

The population of the US will continue to include more foreign-born people through 2017, especially as the economy turns around. If we are uniquely strong among developed nations, as we can expect given the malaise in Europe and Japan, we will have a rich pool of talent to draw from. Pressure to allow them green cards will accelerate this once our unemployment rate starts to drop. But we will have already changed as nation, just as we are today.

Give me your energetic, your educated ...

Give me your energetic, your educated …

It’s worth noting, however, that waves of immigration are more of a tradition in the US than anything we could possibly call “new”.

All of these forces seem to converge nicely around 2017. It’s very likely to be the year that everything changes, barring some terrible development between now and then. There will be many signs between now and then, and in many ways the changes will only accelerate for the next few years as it all sinks in. But predictions beyond this period are going to be much harder than making the call for 2017. It will be a different world after that, and hopefully one that we haven’t screwed up by making poor choices now.

Are you ready for The Year Everything Changes?

Some of what is included here is going to be controversial, surprising, or perhaps just stupid looking.  If you have questions or doubt, please follow the links to the supporting pieces.  Thanks!

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37 thoughts on “The Year Everything Changes

    • Thanks! I do think this is the situation we’re in. Whether or not some of the big changes and news happen before that is another question, but I don’t expect a lot to change in the next 3 years. There may be some of it, however, that comes sooner than 2017.

  1. Ceterus Paribus?

    If you make enough predictions, some of them will come true…

    “Fairy tales come/ It can happen to you/ If you’re young at heart.”

    Shame on you for always referring to your own columns as support for your essay! Only God is allowed to do that. : )

    Kate Upton says hi…!

    • That is true – to be prophetic, make a lot of predictions, and only talk about the ones that came true. Also be as vague as possible (the Nostradamus method).

      I’m doing this like I did my predictions for 2013 – a regular check-in on progress. I thought I should do this now so that I can see where I’m at in early 2014 – especially after the holiday season.

      As for referring to my own stuff – I thought about a few outside links for this one, but I’m building arguments from smaller works. The outside justification is in the articles I reference. This is a summary – a statement of the only reasonable conclusion if you look at my previous work. I think it’s OK to only ref your own work for a piece like this (as long as you only do it once in a while!). 🙂

      I don’t know Kate Upton … should I?

      • Remember how Marilyn Monroe and Arthur Miller were married?

        With at in mind, all you have to know about Kate Upton is that she likes smart guys and most men would find her enjoyable company for dinner at W. A. Frost and Company.

      • I think Monroe and Miller weren’t married all that long. But if Kate Upton is really available then please introduce us. Thanks. 🙂

  2. You make a good case but seriously, that far into the future just about anything could happen. I won’t argue with you but what if there is another bank failure between now and then? Alot of people are predicting that could happen & they have a good case too.

    • That could happen, yes, but banks are much less fragile than they were in 2008. I do worry about JP Morgan hitting the wall in the near future, given the cavalier way they operate. But the worst is clearly behind us, and I do think that anything like this would be an isolate incident – not a systemic problem.
      It is true that just about anything can happen in this climate, however.

  3. Rest in peace John Fitzgerald Kennedy.

    “The torch has been passed to a new generation of Americans…”

    My generation was born in the 1960s, but we are too young to have remembered you firsthand.

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