To make projections about the building supply industry in the next 30 years, you must first make projections about the economy. I see a grim future, due to great declines in our economy. Big change won’t come from technology, terrorism, cultural shifts, or World War III; it will be because of debt.
Our society has created a false sunshine by using debt to pay for wants and perceived needs. But the bill is coming soon. There will be a lot of pain incurred in the payment of it.
The U.S. national debt is now $21.5 trillion, almost 10 times what it was in 1988. Corporate debt today is estimated at $6.3 trillion, personal debt at $19.1 trillion, mortgage debt at $15.1 trillion, student debt at $1.5 trillion, state debt at $1.2 trillion, and local community debt at $1.9 trillion. The total for unfunded liabilities like Social Security, Medicare, and pensions ranges from $114.4 trillion to $210 trillion.
This debt bomb that’s about to explode will wipe out businesses, local governments, and much of our perceived wealth. Plus, it will set back technology development and expansion.
There have been three significant recessions over the past 30 years: The Gulf War and oil recession of 1990–1991, the dot-com bust of 2000–2002, and the Great Recession of 2007–2009, the last of which rewrote conventional thinking on recessions because of debt.
I predict three more recessions in the next 30 years, ones that will be worse than those we’ve experienced in the past.
The first recession will occur in 2019–2020, as the stock market bubble will burst, exposing the hubris of Wall Street. Next, an obscure geopolitical event will ignite a massive, 40-year debt bomb that’s been building in America and around the world that will cause what I’ll call The Great Debt Depression. This will be an economic collapse potentially far worse than existed in the Great Depression.
The Great Debt Depression will have a profound effect on housing, as communities will have no money to upgrade and expand utilities or maintain decaying systems. New single-family home construction will hit historic lows because most Americans will be forced to live in multifamily dwellings.
Housing for most Americans will be in one of four categories:
- Millions will be living in tents, campers, or RVs;
- Older, larger homes will be remodeled into multigenerational and extended-family homes;
- Most will be living in cramped multifamily subsistance-housing complexes; and
- For those who have the cash or financial wherewithal to build a single-family home, their homes will be smaller and located in areas of government control and utilities.
Thousands of bankrupt communities will cease to exist; the lack of building codes and enforcement will lead to shantytowns and squatters. Chronic unemployment will force wages down, and real wage growth tied to inflation will decline.
That’s not all. A third recession will begin six years after the Great Debt Depression ends, as greed and want create yet another bubble.
Most national building supply companies will be obliterated during the Great Debt Depression due to collapsing housing demand, heavy debt loads, and goodwill-laden balance sheets. Employees and local entrepreneurs will take over their footprints with cash for pennies on the dollar. The building supply industry will resurrect with local entrepreneurs who develop relationships with surviving manufacturers and distributors to move products through a new supply chain. Consignment of inventory will be an old strategy with a new meaning.
Be smart: Prepare now for The Great Debt Depression. Be frugal, eliminate debt, and, remember: Cash will truly be king.
