We have been able to gain some time with our most esteemed guest and discuss with them the accomplishment of having made the milestone of 10 years of economic expansion! June 2019 marked the longest expansion in modern U.S. history. This much celebrated milestone has gained much attention and we are so lucky to be able to carve out some time with our guest, The U.S. Economy.
THE INTERVIEW
PAUL: We are so glad you are able to spend some time with us. Last month, we celebrated your milestone victory age of 10 years!
U.S.E.: Yes! I am so happy to be here, and it has been a roller-coaster ride at times. But yes, we have made it quite a long way and there are so many people to thank—chief among them are the American people! They are the biggest reason for our success as they do make up almost 70% of the economy and if we want another 10 years then their economic health will continue to be my driving factor.
PAUL: I am glad you brought that up because we are all trying to understand how to keep this expansion going and continue in prosperity. What do you see as the other drivers that have contributed to the health of the overall economy and the consumer?
U.S.E.: Well there are some interesting developments we have seen in the last few years that have certainly contributed. Let me see if I can throw out some important numbers for you:
6.2% is the personal savings rate, which is twice as high now as it was before the Great Recession. That suggests that Americans have been more cautious about spending money during the expansion than they used to be. Yes, we want more spending in the economy, but I do believe we are seeing a much more responsible consumer.
76% is roughly the household-debt-to-GDP ratio, or, to use human words... it is how much money people owe relative to the size of the U.S. economy. That number has gone down, way down, since it peaked all the way back in 2007. There are, of course, big exceptions to this trend, like, for example, student loan debt has gone way up in the past 10 years. But overall, given the health of the economy, people are not racking up as much debt as they would've been expected to in earlier expansions. And this is especially the case for mortgage debt.
12 million. The United States is now producing roughly 12 million barrels of crude oil per day, twice as much as it was producing just seven years ago. That means we are now the single biggest producer of crude oil in the world, bigger than both Saudi Arabia and Russia, passing them both last year.
There are, of course, other reasons that contribute to this healthy expansion over these past 10 years. Nonetheless, I think what we are seeing are the results of an incredibly resourceful people running an incredibly diverse economy in a global marketplace that is needingthe quality the United States is known for.
PAUL: Now, your expansion is not the greatest one in history… in the expansion between the 90’s and 2000 you grew by about twice as much as this last one. Should we be disappointed?
U.S.E.: You know Paul, I have always lived by a very simple ideology which is “never let the perfect be the enemy of the good.” You are right we have been a little sluggish in comparison to prior decades but that doesn’t mean that our 22% growth since 2009 should be frowned upon. We also don’t know how long this one will last. In fact, if we look at Australia we can see an economic expansion that is in its 28th year! My main take away is that we just don’t know when a coming change in the cycle will take place and we can’t afford to sit around screaming that the sky is falling.
PAUL: What do you see as the main obstacles in your way to gaining more in the coming years?
U.S.E.: Well, I’ll tell you, as much as I am proud of what we have accomplished, there are still factors that keep me up at night. Right now, I look at the great political divide we have in this country and I really don’t like it. Economics is essentially the art of people getting along with each other for their needs and wants. I need people to feel satisfied with their abilities to exchange freely with one another. I feel our leaders need to lead by example and heal the divides in this country. Economic policies need to reflect American progress and be devoted to the betterment of all people. Tax policies, trade policies, and regulation need to reflect the diverse culture and progress of this amazing nation.
PAUL: What can people do to participate in this great American expansion you have spoken of?
U.S.E.: The main way this can be accomplished is for individuals to take control of their own personal finance journey. We have transitioned from a do-it-for-me retirement system that was largely funded by government and employers to a system in which the employee or the consumer will have to be responsible for their own financial future. This hasn’t been an easy transition and there are many out there unaware of this transfer of responsibility. People need to realize how available the prosperity machine is today for every economic class and to take advantage of it. There are very few barriers today compared to in prior years. Even if a 401(k) isn’t offered at one’s place of employment, we have long had good options for people wanting to save for retirement and other future goals. Whether it be a 401(k) plan at work or a traditional or Roth IRA, people, especially those Millennials, need to get in the game of saving. With an average Social Security check in the neighborhood of $1,500 per month I don’t know how people are going to make it unless they start taking some of those dollars today and investing for the future.
PAUL: What do you say to people who have procrastinated or feel this economic expansion has passed them by?
U.S.E.: I say it’s never too late! This expansion is one of many that our country has had and your ability to get out into the world and create for yourself a new path towards prosperity is better today than ever before. In the last couple years, we’ve come up with the ‘gig economy' which has been the use of technology to enhance one’s entrepreneurial spirits and has created additional wealth for those looking to capitalize on a skillset or idea. We have seen wage growth significantly increase in 2018 which has turned out to be the largest jump in 10 years. We have an unemployment rate that is under 4% and an inflation rate under 2%. This all tells me that now is the time to get on board and more people participating in this expansion means a rosier view for those people looking to build their futures.
PAUL: Where do you think you can go from here? Could there be another 10 years in you?
U.S.E.: That is a very good question. If you listen to Jamie Dimon, influential CEO of JP Morgan, he said last year that we were in the sixth inning of this expansion. If you like listening to wise pillars of American economics then I would also have you listen to Warren Buffet, Chairman of Berkshire Hathaway and legendary stock market investor. He and I have worked very well together over the decades and recently he told me, “I’m no good at predicting out two or three or five years from now, although I will say this: There’s no question in my mind that America’s going to be far ahead of where we are now 10, 20 and 30 years from now. But right now, business is good. There’s no question about it.” I believe that younger people should participate in the economy, the stock market, and engage their own personal finance goals. It’s important for people to remember that expansions and recessions are part of the economic cycle.
PAUL: As we wrap up our time together what is some parting advice that you can give our audience out there about how they can participate in this wonderful expansion?
U.S.E.: Of course! Here are a couple of observations that I feel have helped people get the most out of this growth we have experienced.
Be a conservative spender and an aggressive saver–whether in savings account or a brokerage account. You don’t have to look too far beyond the magical formula of compound interest to see the benefits of aggressive saving.
Beware of toxic debt. Servicing debts are a part of life, but some debts are worse than others. Mortgage debt is absolutely fine. Most auto debts aren’t going to hurt you especially if you aren’t extravagant and you finance with a low rate. Ongoing credit card debts, personal loans, and other debts garnering high interest rates are toxic and will kill any well-intentioned financial plan. Get rid of them!
Communicate your plan and if you don’t have one, find a financial planner that can provide you the guidance and advice you need to build one. It is important to select a planner who is an actual ‘Fiduciary’, a person who, by law, must act in the best interest of their clients. They are barred from selling products for a particular entity and can view your entire financial picture free from conflicts of interest.
DON’T WAIT!!! The time to get this started was yesterday, so get on your path to a more planned out life TODAY!
PAUL: Well, Mr. Economy, I want to thank you for spending some time with us. And, again, congratulations on your milestone of 10 years of economic expansion. I believe I can speak for all of us in saying we hope you continue on into the future.
U.S.E.: Thank you Paul and God bless the USA.
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