You’ve heard the Henry Ford story in which he says he pays his workers well so that they will be able to afford his cars?  Too bad that attitude has been mislaid for the last 40 years or so. 

And we are now starting to recognize that we can no longer count on China — and other “emerging” markets — to continue as the world’s manufacturing engines.  

How about a look at the sequence of events over the past few decades: (1) developed nations downsize and move production offshore, (2) this leads to job losses in the home country, (3) those job losses lead to fewer dollars to buy imported goods from offshore manufacturers, (4) there are layoffs in “emerging” markets, and (5) profits for owners of offshore manufacturing tank, and (6) economy of “developed” nations sputter.

Today our global “neighbours” are actually much more than neighbours — we are so closely dependant on economic activity in emerging markets that we are as close as family.  And when one member of the family fails, the reverberations are felt around the world.

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So what does that mean here in Canada?  For years now we have heard that the children and grandchildren of Baby Boomers will be on the hook for the increased health-care costs of aging Boomers.  I wonder.  I expect that Gen Xers will still be paying off their mortgage debt, and Millennials appear more interested in renting than in buying, with student debt likely contributing to their decision-making.  

The Globe & Mail’s Rob Carrick makes the point very succintly in his “Morneau may be suffering from millennial blindness” (Nov.15/15): 
“This isn’t about not being able to buy enough lattes or iPhones. It’s about a generation’s ability to pay the taxes required to support an aging population and participate in a real estate market where boomers will increasingly be trying to cash in on their long-term gains by selling their houses.”

 

Bloomberg TV (Dec. 28/15), informed viewers how U.S. Millennials like to spend their money.  It’s on airlines, hotels and restaurants.  Service-oriented spending is their choice of where they distribute their dollars.  

 

I’d had an introduction to this recently when, researching debt loads, I came across a Globe & Mail online graph showing the opposite of what I’d expected.  Rather than Millennials holding the bulk of debt in Canada, it is instead the 35-44 age group.  And when I thought about it, it started to make a lot of sense — the tail end of Gen X are the ones with the highest amount of mortgage debt, and the Millennials are invested instead in credit card debt.  Sure the interest rates are high, but the dollar amounts can’t compete with mortgages in the hundreds of thousands.   

 
On Wednesday December 30th we heard that new home building in the states fell by 0.9 per cent in November, in spite of predictions of a gain (a reality which will, I expect, affect the Canadian lumber market), and re-sales fell even further.I realize these are U.S. figures, but I doubt Canada will buck the trend — I can’t see Canuck Millennials being that much different from their American counterparts.  I believe this has less to do with inability to borrow, and more to do with a lifestyle that defines “freedom” as being able to easily move from place to place, job to job, and situation to situation.

Now I realize that one month’s figures does not a trend make, but anyone expecting the Millennials to keep our economy rolling as far as real estate is concerned may want to take a second look at stories now emerging.  Yet I doubt any politician is even considering the repercussions of this new reality.

And apparently even the Christmas sales of electronics disappointed in the states.  Perhaps that’s not surprising when you see how satisfied Millennials are with a single — albeit expensive — hand-held device that can carry as many apps as required.  And since many of those apps facilitate the current trend of buying and paying online, one cannot help but wonder if even the banking industry will be affected.

So what’s the bottom line?  Perhaps it’s that Baby Boomers are going to have to plan on funding their own expenses as they age since it appears Millennials really don’t want the job.

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