How to Predict the Future

Knowing with certainty what will happen in the future is, of course, impossible. Predicting the future with certainty is, on the other hand, quite possible. We do it every day. We shop food and predict we'll get hungry. We buy gas before the tank is empty. But that's not really what you think of when it comes to predicting the future.

We know that business moves in cycles, but we don't always know how to predict those cycles. If we did, everyone would be a stock market millionaire.

There is, however, one area which can be used to predict the future, even twenty or fifty years ahead; an area which will help us understand already today what the world will be like tomorrow. That area is demographics.

We know that if the number of newborn double in an area they will need twice as many schools six or seven years later. Not that most politicians think that far ahead.

And we know that the shape of the demographic curve will have a major impact on nations around the world.

Let's look at a small segment of the demographic curve, and predict what changes in that segment will do to the United States by the year 2050, more than forty years ahead. The population over the age of 60 is expected to almost double, to 26.4% of the total, from 16.7% today. And we know that 60 year olds are different from 20 year olds. They require more healthcare, they listen to different music, they eat different food and they generally have a lot more money than 20 year olds. They also need to be supported through retirement programs and social security. Sales or RV buses may boom, and so will builders focusing on retirement communities. Drug companies that still have drugs on patent will do very well, because old bodies need more drugs than young ones. It will also make the burden for Medicare and Social Security much higher, which may result in higher taxes, less money for investment, a shaky stock market and higher interest rates.

In essence, the elderly are like a big loan that comes due. They've paid their dues, worked and paid taxes, and now we have to pay for their care, drugs, and pension.

But the U.S. is actually in a pretty good place. You see, we have a 30% higher birth rate than Europe or Canada, we also have much higher immigration, legal and illegal, which will help pay for all those elderly people. In fact, we will remain one of the youngest industrialized nations.

Other countries are facing near catastrophic impact. In Japan, 26.3% of the population is already over 60 and this number will balloon to 41.7%. Can you imagine the impact and the burden on society? In Germany the number of elderly will increase from 25.1% to 31%. And in China the demographic changes are a ticking time bomb. The elderly will increase from 10.9% to 31.0% of the population. The only thing that can save that continent is continued rapid industrialization, or social upheaval will throw China into turmoil when there's no more food for the poor elderly population.

And of course this will have political consequences, because all those elderly folks vote, and they aren't going to want to have less than their parents. So higher taxes is pretty much a certainty and this will really bog down Europe, with already high tax pressures, and continue to give the U.S. a competitive edge, since we start off with lower taxes and the percentage of elderly will be much more favorable in this country.

So in the end, our illegal immigration, will continue to give us the strength to remain a superpower, while Europe ages and withers.

I'm not saying we should simply continue on this path. I believe in legal and regulated immigration. I don't believe that the one who can afford to pay a coyote to run across the border, or the one who can endure the grueling trek through arid deserts to get into the U.S. should be the one we favor, because that's what we essentially do today.

I'm saying we should be fair to all countries, stop the current illegal immigration, but open up our borders to legal, prescreened immigrants, and we should rejoice that they want to come here, because, they are the ones through their youth and their children, who will help pay for aging Americans.