CW 498 FBF – Demographic Dangers with Harry Dent – NY Times Best-Selling Author of 'The Great Depression Ahead'

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Our great podcasts, visit hartmanmedia.com hey, this is Jason Hartman. Thank you so much for joining me. Do you know what day it is? Yes. It is Flashback Friday where you hear the best of the Creating wealth show and you hear some good prior episodes, some good review. Remember, we've got almost 5, 500 episodes out. And you know what? Itunes doesn't even hold them all. If you're an itunes listener, if you are listening on Stitcher. Thank you for joining us. So we want to bring you some good review stuff. Now, what's interesting about Flashback Friday, it's a little scary for me. I gotta be very, very candid with you on that because you, the listener, you get the chance to hold my feet to the fire. Did I make any predictions? Was I right? Was I wrong? I've been right about a lot of things, but I've been wrong about a few. So you can give me a hard time about that if you wish. But it's Flashback Friday and we will give you the uncensored best of the Creating wealth show with a prior episode. So let's dive in. Here we go. Remember, this is not current. It's Flashback Friday.

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Welcome to the Creating wealth show. This is your host, Jason Hartman. And this is episode number 352. And pardon the sound quality, I will get on the headset here in just a moment. But I'm coming to you today from Jamaica from Montego Bay. And I wanted to introduce my Jamaican friend here. This is o'. Neill. O', Neill. How you doing?

I'm doing very well. Welcome to Jamaica, man.

Hey, that's all right. I love that. Teach our listeners today a new Jamaican phrase, if you would.

Alright. In Jamaica we always say, how you doing? Like what's going on? So our Jamaican phrase for today is Wa Guan. So we are like wa Guan. And that's the best thing you could say. And we'll be like, we're good. It's always bring a smile to someone's face.

You know what amazes me? O' Neill o' Neil is the butler in our villa here. And everybody here is so nice and so happy all the time and so mellow, and everything's like peace and love, and it's all good, you know? Tell us about the Jamaican spirit.

A little bit, actually. Jamaican spirit, we have problems, but we always can fix it. But we always say, no problem, you know, so we always. It's like, smile. Give a smile. And smile is always the key ingredient in our day. So if we get a smile from you, it's like a chain reaction. So we always be like, all right, you smile at me, I smile at you. And it's perfect day.

Yeah. It's reflected in the whole culture, like, in the music and everything. You know, in reggae music, it's very happy, and everything is joyful and positive.

Maybe this one is not fit for the air, but it's the marijuana, I must say. Yes.

By the way, I meant to ask you, because we're going to a Rasta village today.

Okay.

Is that legal here? Is marijuana legal here?

No, it's not legal.

It's just popular.

That's the thing that gets most people through today.

So it's not.

It's illegal, but, you know, the Jamaican police will give you a slap on the wrist.

It's. Nobody really cares, even though technically. So maybe I ask you, and I didn't tell you we were going to talk about this, but since we're talking about other issues. So Jamaica has had quite a bit of problems lately. I watched a documentary a few years ago called Life and Debt, and it was about the political issues here and what the World bank did to the country and, like, really put the country in debt. And it's a. It was really a very enlightening, you know, thing, because what they did is they made Jamaican government devalue their currency to increase the exports. And that really hurt the economy here. It hurt the people because the value of their money declined, so they couldn't afford to import things very much. Yeah.

What's going on? We had two separate incident, I think back in 1980 was the first time it was FINSAC. And now in the new millennium, we had. It was 2005, we had the IMF come in. And all of these times, it's always about getting more product into Jamaica. So the local people, the farmers, they don't get as much sales, so less profit. So the country is solely dependent on tourism. So that's why I'm happy you're here.

Yeah.

So 75% of our population, working class, is actually tourism, working in the tourist industry. So if you have that, it's totally depend on what you think.

Right.

And in real life story, Jamaica really are getting better little by little. But we are so deep under, it's going to take a long, long time to get up. So we need as much help as we can. And I think we need change of government, you know, younger people, more education. Education is the key. We don't have that around a lot. Most Jamaicans, 80% of Jamaicans poor. So if you have 80% of your population being poor, you don't have nothing.

Yeah, right.

So that's the key. Thank you.

Yeah, thank you. That's really, that's really insightful. So thank you for doing that. And I may have misspoke. It was the imf, the International Monetary Fund, that did that. But they promised a lot of development for the country. I know that was their promise. I don't know if they kept the promise, the highways and infrastructure and things that would help the country grow and build.

But what happened is we haven't met their requirements. Even now, we haven't met their requirements. So based on that, it's not really going well for us. There are so many requirements. Health, they want pension funds, a lot of things to be happening and it's not happening.

So they really, like a lot of people say they force the country into a default situation, and then the default terms were much worse on the loans. So it really, really crippled the country.

Yes, it is. It has crippled our cane produce. Our bauxite was the biggest thing that Jamaica had for exports, for export. And all this is like no more. Based on the fact that the IMF forced us to sell what we own. So we only have like a meager 2% in most in our cane industry. We have a meager 2% in our backside.

That is so wrong.

Our airport and our national airline, because we had Air Jamaica, now we have sold it as Caribbean Airlines. And now all of that is just coming down. It's like a big bridge just falling. And we have to do something. It has to change. And we have the imf, they are doing something because, you know, they, they have the stronghold, so they're bringing in the economy, bringing in some money.

Right.

Let's say. But it's not really doing it for the poorer class, the poor class, we still don't have jobs, we still don't have schools, we still don't have proper health. So this is like, it's a fight.

Real challenges to overcome. Real challenges. Well, well, I gotta say, in the face, amazingly in the face of all of those challenges and the lack of education and health care and the poverty that goes on in this country, it is still amazed me the spirit of the Jamaican people and how friendly and how nice they are and how happy they are. So, you know, that's true. You talked about the secret to that.

But it has a lot to do with our four parents. They sing a lot of songs. And when you have a community or a country singing a lot, because if you walk on a Jamaican street right now, 10% of the people will be walking and I'm in a song.

Oh, will they really?

Yeah. So we are into music like where we are into weed. These things work, you know, and so you have a smile consistently and your family, you're close to your family. Some minor things may happen. It's just, it's just a family oriented island. So that's why when you come, we have to embrace you like family.

Oh, fantastic. Well, thank you, o'. Neill. And when I asked you to come on and just teach people Jamaican phrase and say hello, I didn't tell you we were going to talk about any of this stuff. So thank you for talking about all the political and economic stuff. That's very interesting. I appreciate it. Okay, thank you.

Thank you.

Well, I hope you enjoyed that. That was our butler in the villa. His name is o' Neill and pardon the sound quality, but I didn't have much to work with here. So anyway, you learned a little bit about Jamaica in the background. I'm here for a business conference and you know, of course we're all having a little bit of fun too. There's about, I don't know, maybe a hundred here, maybe 80 to 100. And I will be back in a couple of days and we are trying to get our podcast up every Tuesday and Thursday now, somewhat consistently. So that is a goal we're going to strive for. And thank you for listening to that. Our guest today, he's back for the third time and that is the famous author and economist Harry Dent. So we will have him on here in just a moment and be sure to go to jasonhartman.com check out properties, get the last several remaining tickets for our Meet the Masters event in January, and let's go to Harry Dent by the Way. This interview was originally released in the members section about two months ago. We released stuff to the members first and then we knew it would come on to the regular show. And it's really interesting. I thought this was. Of the three interviews, the three times I've had Harry on the show, I thought this was the most interesting interview because he gives some really interesting insights into real estate investment. And at first when you hear him it's going to sound like he's bearish on real estate but then if you listen a little deeper to the conversation he becomes very bullish on the right kind of real estate. And that's what I always say, that all real estate is local so you have to be area agnostic. Anyway, let's go to our guest, Harry Dent. Remember, you're listening to Flashback Friday. Our new episodes are published every Monday and Wednesday. Hey, it's my pleasure to welcome Harry Dent back to the show. He is now a three time guest and his new book coming out January 7th is entitled the Demographic how to Survive and Prosper the great deflation of 2014-2019. Harry's resume speaks for itself. He's been doing this a long time. I first discovered his work in the mid-90s and just really, really fell with the idea of predicting the economy through demographics. And there's a lot of talk about China now, but China's. They've got some problems and we're going to talk about all of this stuff around the globe. So. Harry Dent, welcome back. How are you?

Nice to be back, Jason.

Well, it's good to have you. So you're out with some, some pretty big predictions. Dow 3300, Gold 750. Tell us what you think.

Well, you know, I think the big picture to get and I don't see why this isn't more obvious every time I'm on places like cnbc and I say, well you know, the next, you know, the Dow could go up 16,000, 16,500 and then crash to 6,000 a little lower in the next few years. People say, oh that's crazy, that can't happen. I said, well, this is all that's happened for the last couple of decades. We had a bubble, the tech bubble in the early 2000 and a big crash into late 2002. And then we had the emerging markets and real estate bubble and stock bubble again into late 2007. Then it crashed into early 2009. Every bubble has taken us higher and every crash has taken us lower. So that's all that projection is. If I Draw a line, a trend line through the tops and the Dow, we're going to hit that trend line top in the next few months at a little over 16,000. And then if we go all the way down through the trend lines, through the bottoms in 2002 and 2009, we would hit a bottom about 5,800 in 2015 or so. So it's just more the same. I mean, it'd be one thing if this, at least the last two bubbles were somewhat real. I mean, technologies were moving, mainstream baby boomers were in their sweet spot of spending, which I was one of the few people to see in the late early 90s as well as the downturn in Japan, because like you say, demographics, predictable thing. And then, you know, the 2003-2007 boom was kind of like the last levels of baby boomers, last levels of technology progress. But hey, everybody's got cell phones and Internet now. And baby boomers peaked in their spending in 2007. And then it's taken all this massive stimulus just to keep our economy growing 2% on average. And the truth is these stimulus cycles have seen every seven quarters. So a little less than two years we had qe, the economy came back for four quarters boom and then three quarters bust. And next thing you know, we were in a, in a 1/4 recession minus 1.4%. Then QE2 came in, we had 3/4 of boom, 4/4 of bust, 7/4 later we were back at zero growth. And that was just the fourth quarter, 2012. So whether we taper or not, and they're probably going to have to taper at some point. But stimulus only lasts so long unless you up and up and up the ante. So we've had two quarters of growth. The third quarter is almost certain to be good from what we've seen. Fourth quarter maybe, maybe not. And then the first three quarters of next year we're probably going to go back to zero again. So that's not going to be good for real estate, it's not going to be good for stocks. And the Fed will probably start to taper here in the third quarter or so or fourth quarter, I mean ahead because of stronger growth, just in time for the cycle to drop off anyway. But there's a lot more problems we see in the world. But we see this megaphone pattern in stocks which says we're near a peak. You know, the markets have gotten more and more bubbly real estate, you know, the more we, we look at this, who's really buying? Well, it's a lot of hedge funds and pension funds and individual investors, the people who get mortgages for purchase, young families that has barely bounced off the bottom. So it's showing that real people are not buying homes. Just like everything else. The Fed's shoving trillions of dollars in the economy and it goes into stocks and commodities and real estate. It has to go somewhere. So it goes into speculation and then you just get one bub. Peaks and crash. What we think is we're on it. We're heading for a cycle in 2014 where the whole system kind of breaks down short term again, like in 2008. 9. So we see the greatest danger. I think the stock market is likely to peak between mid January and late March. So I'm telling people to be cautious in that arena. And of course, if stocks are starting to peak, it's a leading indicator for the economy and housing. Housing peaks and alikes. So that means watch out in real estate as well. And then I think we could see the next major crash. Stocks start to set in in the first couple quarters of next year and you know, it could take a year and a half, two, two and a half years for that to work out. And stocks, the projection is stocks are going to be below $6,000 before this next crash is over. So nothing to sit through and hold through. If stocks are down that much, then, you know, real estate's going to see another major decline as well.

Yeah, and I want to make the distinction too, because we talked about it because so many of our listeners are real estate investors. Real estate in the nonlinear, cyclical, high flying bubble markets like California, like New York, et cetera, that's a different animal than it is in markets where you're buying at or below the cost of construction that we talked about. Right. Or do you want to make some distinction there?

Yeah, yeah. I mean, stocks kind of go up and down together with about a 75% correlation even around the world. Real estate is very local and regional, you know, supply and demand. I mean, there's, there's states where people are migrating or immigrating into that whole different demand patterns. There are states that have. Texas has endless flat land. The joke I say is you can watch your dog run away all day in Dallas. You know, it's just unbelievable.

Just a reminder, you're listening to Flashback Friday. Our new episodes are published every Monday and every Wednesday.

I mean, there's no constraints on supply. So Texas never bubbled up much, with the exception of parts of Houston and downtown Austin. Now is a bubble like south beach.

But downtown Austin and those high rises.

It went up with inflation. It went up with inflation. That's what real estate supposed to do, go up with replacement costs and inflation. So you take that from, from the Rocky Mountains to the Allegheny or mountains on the east coast, everywhere in there, there weren't, weren't bubble markets like you say. They were more linear. The bubbles happen in coastal cities that happen in Florida, Nevada, Arizona, California, where the biggest parts, D.C. you know, New York. And so that's where we always say, you know, the greater the bubble, the greater the burst. Now people actually think the opposite, people that are in these bubble areas. And I've, and I've been to all of them, you know, Tokyo and I've lectured a lot in California and I was just in Korea and I've been to Australia a lot. I mean, I mean I lived in Miami for three years and then moved to Tampa. Right in the bubble. I mean, people in bubble areas say, well, real estate can't go down here because the supply so limited and we're so special. That's exactly what causes the bubbles. And then bubbles go burst because they get too expensive. Young people buy all the real estate, old people sit in it.

Yeah, right. Yeah, yeah, very good point.

So when the young people can't afford it anymore, the bubbles over.

Yeah, good point, very good point. Tell us about gold. I mean, a 750 prediction is a big downturn. What do you think?

Well, that's just the next stop. I think gold could be gold, A bubble like everything else. Everything is bubbled. You know, like you say, this bubble, real estate. I mean, I mean, you want to talk about a real estate bubble, you will look at China, look at emerging markets and look at London and stuff. I mean, it's just unbelievable, this bubbles around the world. Emerging markets, stock markets bubbled and burst. China burst 70%. In the last downturn, emerging markets went down 60% on average, more than the US, more than even Europe in some parts and stuff. So these bubbles are everywhere. Gold is a bubble. And we said in the last book, the Great Crash, gold would probably be the last bubble to burst. Well, it kind of peaked out over 1900, went sideways for two years and it just keeps dropping like a rock. So I think in the next year or two you're going to see 700 to 750 minimum. I think gold is probably going to bounce a bit more first. It's really been kind of oversold here. And I think down the road we see, as the book subtitle says, 2014-19 is kind of the difficult period where our commodity cycles are down, our geopolitical cycles and our demographic cycles are all down at the same time. That is the danger period for the economy ahead. So we get out six, seven years from now, I think gold could be back at 250, it could be that low. I think oil could go back to 10 to 20. None of these are going to stay there. That's just a bottom. And I think this bubble real estate could go down again. I'm still renting in Tampa, Florida. I told my wife I'm not going to even think about buying until we see another downturn and at least into sometime in 2015. And then we could see the bargains of a lifetime.

Yeah, well, I've always thought that renting a high end home and owning a lot of little cheap houses that you rent to other people was the best.

Exactly.

The best equation ever. The best arbitrage.

Well, you know, real quick, Jason, I mean, real estate also is. It's not one industry. Every sector has a different age group. And right now, apartment, basically buying affordable small homes and renting them out is the sweet spot. The echo boom is in a positive rental cycle into 2017 or 18, more and more people can't afford homes or get blank loans. So that's the best place. But a few years from now, when we see this next real estate downturn, buying affordable starter homes is going to be the sweet spot going out for many years with this generation. So it goes from apartments that peak in like 26, 27 starter homes, 31, 32, trade up homes, 41, 42 by age. You know, there's a first vacation in the late 40s and there's a second one in the late 50s to early to mid-60s. So vacation homes that they crash, they're the ones that crash the most. I'd love to buy beachfront property and mountain property and stuff a few years from now if we get another crash because the gent because baby boomers will have one more round of vacation home buying. But it's the echo boomers buying affordable starter homes in the next decade that'll be the best part of the real estate market. So like you say rent, rent big homes and own a lot of small homes you can buy at replacement costs are below and rent out at positive cash flow. Because where can you get, I mean, you can't buy bonds anymore and get any decent cash flow. Rental real estate's about the only place you can get it.

Yeah, yeah, I know. It's it's the. It's. What is it the. Tina, There is no alternative, right? Or there is no better alternative. Right? Yeah, that's true. And then here you also look at that demographic thing of the echo boomers, or generation Y, the millennials. They're just saddled with so much student loan debt. I mean, that student loan debt bubble is now over a trillion dollars. I mean, is that the next big bubble to pop?

Yeah, yeah. There's no question. I mean, I mean, here you've got this generation entering the economy in rising numbers, just like the Bob Hope generation did in the 1930s, and a bad economy. These people are not going to spend as much as baby boomers. They're not going to borrow as much. They're going to be a little more conservative about everything. And, yeah, they've got these massive student loans. I mean, education. People talk about healthcare, infl. The greatest inflation has come in education costs. So these poor kids. Now, it costs, you know, 200,000 plus just to go to a, you know, well, two to $300,000, go to an Ivy League school and get a great degree. Okay, maybe you make 20,000 more a year. Does that really? And then these people have to go into debt to get this. It's very grim. And they're facing a falling housing market that nobody's seen in our lifetimes. They're facing difficult loans. You know, the baby boomers could borrow and buy with no money down and low interest rates, and everything was subsid by the government and Fannie Mae and Freddie Mac. I mean, so, yeah, these, These. This echo generation is facing a new normal, and it's going to shape their personalities. They're going to be stronger because of it and more fiscally responsible than the crazy baby boomers. We grew up in the 50s and 60s, everything hunky dory. And then baby boomers never really save for retirement.

Yeah, yeah, that's. It's amazing because that's going to keep them renting for a long time, isn't it? Because the fact that it's going to.

Keep them in the workforce longer. Yeah, that's another problem for these echo boomers. This happened in the Great Depression. Baby boomers will decide, gosh, I can't retire at 63, 65, I don't have any savings. The economy's down, my wages aren't as good. Whatever. I'm gonna have to work longer, stay in the workforce longer, and it's gonna make it harder for these kids to get good jobs and to pay off their darn student Loans.

Yeah, yeah, it really is. Well, Harry, what about the Fed cycles? That was interesting what you said to me before we started recording, when you were talking about the Fed cycle and how the Fed acts. They act in a sort of a cyclical fashion, don't they?

Well, yeah, yeah. I mean, everybody keeps saying, oh, you know, we're finally in a sustainable recovery. No, it's been the same thing over and over again. We went and had this big crash. It took massive amounts of quantitative easing. I don't know anybody. The most progressive, most liberal economists would have, that would have forecast the Fed would have put as much money as the economies did. They didn't even do this in World War II. To this degree. This is unprecedented. And it's around the world. Japan's doing it, Europe's doing it, China's doing it, everybody's doing it is just putting massive amounts of money to stop a recession from happening. But, but stimulus is short term. It's like any drug. It's like a cup of coffee you take, it wakes you up a little bit, you feel a little better and then it wears off and you actually feel worse. So what we've noticed is a seven quarter cycle that then when the economy gets weak and it gets weak every seven quarters, if you go back, you know, mid 2000, you know, early 2011 and before that, and I think it was, yeah, mid 2009 and all that, every seven quarters, economy gets weak again, gets zero or below, even after massive stimulus. So the government steps in and stimulates strongly again, even stronger. And it always takes more and more of a drug to have less and less effect. So once the stimulus starts, you get three to four quarters of growing GDP, you know, 1, 2, 3% or so. And then despite the stimulus, you get a slowing and the stimulus doesn't work anymore. So every seven quarters, what it says is we've had two quarters of GDP growth since the last low. And fourth quarter, 2012, the Fed stepped in with QE3, of course, and it was stronger than QE2 as usual. So now we've had two quarters of growth. The third quarter should be as good or better. And somewhere between the fourth quarter and first quarter next year, this model would say, hey, we're going to start falling off. Even if they don't taper, the stimulus will just fail. I mean, only so many people can refinance or go out. And you know, basically stimulus is getting people to purchase something today they would have purchased tomorrow. And so it keeps the economy going, but that's why it doesn't work. It wears off.

Right, right. It's just bringing purchases forward. Like the cash for clunkers disaster.

Cash for clunkers. And same thing with housing.

They did it with, what was that? The $770 $500 credit? I can't even remember. It was a few years ago. But if you go buy a house this year, you'll get a credit. Stupid. None of that stuff really works in any real world.

Yeah, all you're doing is borrowing from the future. Then the future comes, nobody needs a home. And it's like, oops, the economy's we now. What this cycle would say is that the first, second and third quarter of next year again, even if the Fed doesn't taper, and they're probably going to taper sometime in the next few months, that the economy is going to go back to zero or so. So that's enough to help trigger a stock crash that's going to hurt real estate demand if people see a slowing economy. But my thing is, look how many cycles of this, how many times can the Fed stimulate, save the economy, economy goose it up and then it flops over again before people just get it. Look, you know, we took Viagra and we didn't get the result. Something's wrong here. And something is wrong here. The demographic trends are horrible. The debt ratios are unprecedented. We need to weed this stuff out of our economy. And that's what the Great Depression was. It was three years of a huge financial detox. But we came screaming out of that downturn. We're not coming screaming out of this. And it's taking massive stimulus because we're not restructuring our debt. We're not letting banks and businesses fail. The whole foundation of the free market capitalist system is failure. Without failure, you don't get innovation. Governments are not allowing anything to fail. Not allowing banks to fail, companies to fail, not allowing the economy to slow down and restructure, not allowing debt to deleverage. If they hadn't given the banks trillions of dollars, the banks would have had to either go under or write down and restructure a lot of loans, which would have reduced the debt burden for households and businesses and would have given us more cash flow. That's a real stimul that goes at the heart of the problem. Instead, the governments are giving banks money for free. The banks sit there and say, well, we don't have to write down loans. The Fed just keeps bailing us out. So we'll just wait for housing to come back one day and in Goldilocks land and never have to write off our loans. Well that's not going to happen. But that's what everybody's doing because the government's creating that illusion.

It's a silly business plan. But the problem is when you have politicians who want to make get this instant gratification during their tenure, there's all kinds of mal investment and this is just not like a prudent real way to manage an economy, is it?

Well, yeah, I call it Jason killing the golden goose. Basically free market capitalism needs inflation, stimulates massive investment and innovation. It needs deflation, it needs booms, it needs bust. If you don't deleverage financial and debt bubbles, they just keep weighing on you. A 300 pound backpack. And that's what Japan has. Japan has grown at 00/0 GDP growth in fact slightly negative for the last 20 years because they're in a coma economy. Why endless stimulus. They're like in an emergency room, you know, on life support, barely alive because they're not letting the system flush out the excesses. And again, you know, how's the next generation going to afford real estate if it doesn't come down in price? You know, how are they going to move forward with all these student loans and all these baby boomers have all this massive debt, you know, against real estate that isn't worth that. That really will revert, like you say, always to the mean replacement cost. Real estate throughout history always goes back to replacement costs. That's how it goes up. It doesn't go up with the economy, doesn't go up like stocks with earnings. Replacement costs is what drives real estate. And real estate's got to go down further.

So, so construction there, the next generation.

Can afford it again and they'll start buying houses.

That that means to the listeners, if you're buying real estate for more than depending on the market, 85 to say $120 per square foot. You're in that bubble territory where either the price of all those materials needs to go up or you just have to keep having the speculative kind of scenario where you get malinvestment and the greater fool will come along after you. No matter what I pay some greater fool will come along and pay more. That's the greater fool theory. But that's a speculative dangerous game rather than a prudent long term cash flow game. Game on sensible property. So I couldn't agree more. Harry, It's a very good point. Talk to us for a moment before you go about China. I mean I remember back in the in the late 80s, there was this, this xenophobia was sweeping our country. It seemed like everybody thought Japan was going to take over. They bought Rockefeller center, they were buying movie studios, they were buying up every piece of trophy real estate in the country. And turns out not so much. And now maybe, maybe that maybe China's taking their place.

Well, you know, a few people like Sir John Templeton saw the great boom in the 90s like we did, but nobody saw the collapse of Japan. In the late 80s. We were saying, Japan is going to have a 12 to 14 year major downturn. Their demographics is peaking. They got the biggest real estate bubble in the world back then. It's going to burst. And people thought we were crazy. This was inevitable. It's the same in China. China's demographics are peaking now. They kind of plateau for a decade now. China's an emerging country. Most emerging countries have positive demographic trends out for decades, some of them for several decade. China is the first to peak because of its one child policy. But at the same time, they have been shoving people. I mean, the trend in all emerging countries is for people to move from rural areas to urban areas where they earn three times as much money and then become whole new consumers and stuff. But China's just been shoving people by boatloads. And they've moved 250 million people in the last decade from rural areas to urban. It's the biggest social dislocation ever. They are building massive housing. They got 25% of houses in cities are vacant, hookup, electricity, not using them. You got whole cities like Ordos and this new Parisian city that are built for million people that are just empty. The great mall of America and China, the largest mall, twice as large as the great mall in Minnesota, the great American mall, totally empty. But here's the kicker. Here's what I think. Nobody's in Chinese cities. They're 53% urban now. 31% of the people in these cities, 221 million people out of 700 million are not registered urban citizens. They're like illegal Mexican, I mean literally like illegal Mexican emirates in the United States. They don't have access to services. They're not considered citizens. You know, they're considered citizens back in their rural province that they moved from. But if the world economy slows down as we're seeing, and the export machine and the overbuilding machine in China is forced to slow down, these are the people with no skills sitting in cities fresh off the farms. They're going to lose their jobs first and you know What I think they're doing, I think they're going to do the same thing illegal Mexicans are doing. People don't realize illegal Mexicans now are moving back to Mexico faster than Mexicans are moving to the US anymore. We have net negative immigration and it's only going to get worse in a dinner. I think these underclass in these cities, these rural citizens are going to have to be. A lot of them have to move back to rural areas where they can be a citizen, can get services and most of all can survive on the land. How are these people going to survive when unemployment goes up in China? I mean they have overbuilt real estate and infrastructures more than any country ever in Southeast Asia had a major crash because of this. And China's outdone them two to one for twice as long. So China bubble is going to burst. It's a question of when. And it's going to be the hardest landing of the this century.

China has ghost cities. I mean it's, it's mind boggling. It really is.

A million Ordos is built for a million people and they have 70,000 people living.

It's that, that must be just so weird. It must be like living in a Twilight Zone episode where, you know, you.

Wake up, who do you have a barbecue with, who do you buy stuff from? I mean it's crazy. Nobody there.

It's really crazy. Hey, but explain one thing for the people that may not be that familiar with your work. Just explain the concept, Harry, if you would, of peaking demographics. You talked about China has peaking demographics. And that means I think people are at a certain age where they're spending, working and all is well but not replacing themselves. Right?

Yeah, but you know, the most fundamental concept is the family life cycle of spending. We enter the, in the United States, for example, we enter the workforce on average age 20. We will earn and spend more money, get married at 26, have our kids on average at 28, buy our first home at 31, buy our trade up home, our largest home at 41, spend the most money including furnishings and furniture at 46, buy the most cars at 53. But at the peak in spending in the United States and for most developed countries is right around 46. So from 20 to 46 now that's 26 years. The baby boom generation, the largest generation in history, went through that accelerated cycle. All the housing outside of apartments, all of the owned housing is bought between age 27, 41. So that's why housing did so well. And we had such a Bubble. It was just unbelievable demand from baby boomers against limited supply, especially in coastal areas. So that's why we had the bubble, the boom. 46 year lag on the Baby Boom Birth Index 1983-2007, something we saw decades ago. We'd have a boom and then from 2008 to 2023 the economy would slow down because there'd be less people moving. Their peak spending, buying houses. And of course buying houses is where people borrow the most money. So borrow borrowing accelerates between age 27 and 41 and then slows down. So demographics can tell you from cradle to grave and macro to micro. Total spending, total borrowing, total investing, all these sort of things. What's going to happen in the future. And economists don't even look at it. All they look at is a replacement rate. And the United States is close to replacing ourselves. So we go sideways. Most southern central European countries, East Asian countries are not even close to replacing themselves and they're just going to basically shrink for decades. Shrink. How is the country going to grow when its workforce and its population is actually shrinking? And these are all things you can see. That's the point. This is a piece of cake. Economists don't even look at.

Yeah, it really is. It really is. You know, we talked about Japan. Is Japan going to default on their debt? I mean they got a huge debt problem too.

Yeah, yeah. At some point. I mean a country like the US probably can't because of the reserve of currency. But yeah, Japan. Japan has gone from 60% debt to GDP ratio on their government debt to 250% and it's still rising because they're just trying to stimulate their way out of a bad demographic decline. And they're not allowing private debt to deleverage and they're only increasing government debt to stimulate the economy like we're doing. It is an absolute disaster. The only reason they haven't defaulted already is because they have. Unlike us, where 50% of our bonds are still bought by foreigners and stuff. Their internal system, their pension plans, their banks, their government buy all their bonds, their populace doesn't. Only 7% are foreign. I mean they basically have kept interest rates below 1% even lower than ours. And if interest rates just rose to historical standards in Japan, which is 5 to 6%, they would be bankrupt overnight. They couldn't. The interest on their debt would be more than their entire government revenue. So yeah, Japan is going to default at some point. They have positive demographics from an echo boom. Right now they're stimulating even harder. So I don't see Japan triggering this next downturn. But if there is a downturn and they get hit, as John Malden says, they're like a bug looking for a windshield. They have the fastest aging society in the world and the highest debt. I mean that just deadly.

And the longest living. They live longest in terms of age, which is actually a problem.

84. It is actually a problem for them.

Yeah, good point. Good point. Harry. I know you got to go give out your website if you would.

Yeah. Best place to go. Ww.harrydent.com we have a free daily newsletter called Survive and Prosper. It's great content. It's just a way for people to get to know us and learn more about what we think about current events and new research that comes out and et cetera. And that's what I recommend. Just go to that website and all you got to do is put in your email address, you're on.

Okay. And then just another quickie. Thank you for that. So it's harrydent.com and another quickie. Anything you want to mention just real fast about Europe because the huge mess there. And I just kind of. The closing concept is, I mean, things are so problematic around the world. You look at so many countries are in such a pickle. That's an understatement. You know, kind of a folksy way to say it, but is. Is the US really that bad when you, when you comparatively. I mean, it's just a global economic fiasco, but maybe we're in a better position than anybody else, or at least bad position type thing.

No, no, no, that's exactly it. The demographics. Everybody goes off this cliff in the developed world, but some countries just go more sideways and don't decline as steep. Here's the thing about Europe. Europe's already in deep trouble and they haven't gone off their cliff yet. Japan did it first in the 90s and in the US 2008 for it again, we forecast all of that ahead. The of much of Europe goes off that same downward demographic cliff starting in 2014 next year, including Germany, Austria, Switzerland, England, these are the strongest countries over there. The weakest are already in depressions and they're aging even faster. But Germany is supposed to hold up. Europe and Germany is going to age unbelievably fast. They're already covering over commercial and residential real estate developments and turning them back into parks to hide the demographic declines. So there's parts of the world like Southern Europe, Central Europe, East Asia, including China, but Japan, Singapore, South Korea, Taiwan, all those strong countries go off very steep cliffs over time. Us, Northern Europe, like Scandinavia, England, France, go more sideways over times in Australia and New Zealand. So there's stronger and weaker countries. And yes, we're in the stronger group where we at least get to go sideways over coming decades and don't just fall. I mean, Japan and Europe, European countries are going to shrink 30, 40, 50%. It's just absolutely unprecedented.

You can, you cannot, there's nothing you can do about that. That's just, it's the.

Let me ask you that, Let me give this a thought for people in real estate down the road. What happens when there's more people dying, which means you become a seller, than people, young people buying? And why has Japan real estate, estate not turned around after 22 years of decline even when the next young generation came on? Because you got more, more people dying than buying. And you got more adult diapers being sold than baby diapers.

Yeah, that's a crazy scenario. You know, the people go away, but the properties are still there. That's not good for prices, right?

Yeah, oh yeah, yeah. That's the ply. That's those, those are homes that don't need to be built because they just got vacated by a dead person.

Yeah, absolutely. It's supply and demand. Well, Harry Dent, thank you so much for joining us today. You can order the new book coming out January 7th on Amazon. You can pre order it and it's called the demographic cliff and harrydent.com thanks for coming back on the show. Third time. It was awesome.

Okay, thank you, Jason.

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