Harry S Dent — Demographics, Debt and Deflation

Harry S Dent gave an incredible performance that was loaded with economic forecast information of a very different kind to that we hear from various politicians. The Dent Method is a long term economic forecasting technique based on the study of and changes in demographic trends and the impact of these on the US economy.

It is apparently the only documented record of success at forecasting long term economic trends, The Dent Method works by showing how predictable consumer spending patterns combined with demographic trends allow us to forecast the economy years or even decades in advance.

The Dent Method is a common sense approach that states that economics is tied to demographics. And that spending habits are a logical result of people making predictable spending decisions as they move through life.

During the presentation, Harry Dent talked about potato chips (crisps in UK speak). It turns out that the highest demand for potato chips is at age 42. But it isn’t because lots of 42 year olds suddenly start eating eating potato chips. They’re buying the chips for their children. When the parent is 42, the average aged child is by then, 14.

Harry made some remarkable predictions based on his study of demographics. He talked about the seasons of economic cycles, and it turns out that we are in depth of winter right now. It’s got nothing to do with government, and nothing much to do with climate change. It’s about demographics.

The Dent Method tells us that economic booms and busts are determined by demographics. Individual spending tends to peak in the mid 40s. Spending should correlate with the size of the mid-40s population. If we plot the estimated size of those in their mid 40s with the projected year, we obtain a generally rising trend that shows a number of peaks and troughs due to past variations in birth and immigration rates.

For example fewer babies were born during the Depression than before or afterward. So, we would expect that 45 years later (during the 1970’s and early 1980’s) there would be a corresponding drop in the number of middle age people. Economic boom times are associated with an increasing size of the mid-40s population and bust times are associated with a decreasing size of this population. The oscillation in the number of middle-agers at their peak-spending years is called the spending wave.

According to Harry, even inflation is driven by demographics, not by government policy. Since the 1960s the baby boom caused rising inflation rates. But after 1980 we have seen falling and low inflation as these new workers and their new technologies have increased productivity rates. After that inflation falls because the larger baby boom will start to retire and offset the workforce growth of the younger generation and the economy will be slowing because of the Spending Wave.

For more on this go get your free gift from Harry’s site at www.hsdent.com/5concepts-lp

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