Preventing the Great Depression Ahead

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Preventing the Great Depression Ahead

Since the subprime crisis began to unravel in August 2007, a whole host of doomsayers have come crawling out of the woodwork. Some are perennial "quacks" like Ravi Batra. Others are academics who've happened to get the short-term facts right for once. By and large, they have predicted "Armageddon" in the wake of every financial crisis since their careers began. So, like a stopped clock, they finally got it right.

However, Harry S. Dent, Jr. is not a member of this "panic du jour crowd." At the end of the 1991 to 1992 recession, he was one of the few who accurately forecast the tech boom that ended in 2000. Subsequently, he predicted the recent rise and bursting of the housing and commodities bubbles.

Like Trends, the H.S. Dent Foundation focuses on long-term forecasts driven by an ongoing analysis of demography and technology. Its short-term forecasts are based on the interplay of short-term technical indicators with these long-term trends and cycles.

As a forecaster, Dent's expertise lies in his insights about the long-term cycles that tend to shape the economy across decades and even centuries. Therefore, this discussion doesn't focus so much on the next 12 to 18 months, which the Trends editors have previously examined, but on the next 10 to 15 years. We want to determine what economic realities you are likely to face as managers, investors, and consumers in the decade from 2010 to 2020. Will there be a global depression resembling the 1930s? Will it be a healthy period of steady growth like the late 1940s and 1950s? Or will we see a tremendous boom time like we saw in the '90s?

From his first book, Our Power to Predict,1 in 1990, to his current one, Dent has consistently relied upon the same demography-based framework. He assumes, first of all, that numerous economic patterns behave in predictable cycles. The most important of these is the "generation wave," a construct describing the impact of each birth cohort as it moves through its life cycle. Dent's generation wave insights are built upon the landmark research of historians Neil Howe and William Strauss, described in their 1991 book entitled, Generations.2

The generation wave has four components of interest to economists.3 The first is the so-called birth wave, which tells us when people were born. The other waves are dependent on this demographic element and can be calculated from it...

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