For the remainder of the typical Baby Boomer’s life the United States will likely be in decline, which will put Boomers—much more than others—in a very precarious position. But, that does not mean one cannot survive and prosper, although it may require re-defining your life and a whole lot of work.
Following the Federal debt debacle, the subsequent market sell-off, and the downgrade of U.S Treasuries by Standard & Poor’s, I received a Friday evening email from a financial consultant (to “Our Valued Clients”) that implored their valued ones to avoid panic. They (all much younger than I) wrote: “We urge clients to take a deep breath, relax, and not react emotionally to what we are seeing in the market.” While I was nowhere near panicking—perhaps because I have come to accept devaluation due to systemic risk (and because I’ve already changed my own investment strategy)—it struck me that if they were concerned enough to send out such an email after-hours on a Friday in August, then maybe I should panic.
The markets after all, like Mother Nature, are incapable of emotional irrationality. They are the final arbiter of value and instantaneous purveyor of consequence. They are the highest expression of our collective expectations. They reveal the (stubborn) truth that is (finally) piercing the veil of denial embedded in the advisor’s call for calm. Panic may actually be a rational choice for a Boomer who is facing this truth. After all, the timeframe for capitulation and recovery may exceed the Boomer’s lifespan. Indeed, the market meltdown that followed on Monday suggests panic may be the new norm. Of course, many financial analysts and pundits immediately rolled out their feel-better rhetoric claiming what we had seen was an aberration or “disconnect,” which is their unwitting acknowledgment that they have no idea what is happening. One thing is certain, however: leaving your money in their hands is in their best interest.
The truth the markets have expressed can be summed up as follows: while most of us know what the right thing to do is (setting aside those addled by ideology, misplaced faith, or engaged in modern-day piracy), we lack the will to do it. This is and has always been the case for Americans. As Winston Churchill once observed, “The Americans will always do the right thing after they’ve exhausted all the alternatives.” The most glaring historical example is slavery. The Founding Fathers—evidenced by their own writings—knew that slavery was inherently wrong, yet they did nothing about it (notwithstanding presidential aspirant Michelle Bachman’s twisted historical interpretation). It took nearly one hundred years to breach the legal threshold and emancipate slaves, then another hundred to leap the moral threshold and get rid of the racist work-arounds like the Jim Crow laws.
What is required to clean up the financial and political mess in the United States is relatively easy to identify, but impossible to execute. There are four things that must be done. We must make at least $4 trillion in expenditure cuts including restructuring Medicare and Social Security, endure increased taxes in the near term, overhaul/simplify the tax code, and redesign Congress (starting with term limits). Failure to do all of these things will accelerate the precipitous decline of the United States as the wealthiest and most powerful state in the global system, but none of these things will be accomplished; at least not as a matter of will. The consequences of this are dire and probably worth panicking about.
Today’s obvious and unbelievable stupidity displayed by our elected representatives is no different than the stubbornness that protected slavery and segregation, except this time we all—not just slaves—will suffer. It would be ahistorical and irrational to believe we will act better or more quickly in dealing with our financial woes than we did when committing prior sins or facing crises. While democracies are arguably inherently good, they are not designed to exalt morality or pre-empt crises. Our lesser selves do not assure better governance via aggregation. In open systems, the best one can hope for is that crises will produce creative destruction, which is what is happening now. There is, however, an alternative for Boomers to limit their exposure and preserve their long-term well-being.
Boomers must re-imagine and restructure their lives. Succeeding generations have less baggage to shed and are (sigh) more attractive to employers. The winning strategy since World War II has been to align one’s self with big companies, big governments with big militaries, and big markets. Get a job with a large enterprise—public or private—and climb the ladder. Invest in big money-center financial markets and count on a 7% after-tax return. Expect the government to provide healthcare and a financial safety net beginning at age sixty-five. That strategy is not only dead; it has become dangerous because of its exposure to systemic risk. Now is the time to simplify, disconnect, and sustain.
Simplify. Get small and remain flexible. Reduce your footprint and keep your running shoes nearby. Eliminate stuff; sell it or give it away. Invest in yourself first, especially your mind and body. Get things right in your head and heart: smart and content. Next, invest in things you control. Then, invest in companies that play at the edges—that rely on their own balance sheet to fund their future and which are highly adaptive. Leverage wisdom. Avoid the whiz-bang dreamers. Boring companies make more money, longer. But remember: it’s not about wealth; it’s about well-being. Take time to appreciate nature, art, music, and literature. From simplicity comes peace-of-mind and well-being.
Disconnect. Minimize your exposure to systemic risk. Focus on the quality of your connections and relationships, not the quantity. Size and scale are no longer de facto advantages. De-leverage your own balance sheet as much as possible. If able, move to a town that has a history of self-reliance; where services are few but the basic stuff works, and Boomers are still employable. If you must live in a large city, form small communities (actual or virtual) within the city or within your neighborhood, but do not be constrained by geography or borders. Whenever possible, leverage technology to create your own reliable world. Alliances are still important, but choose your cohorts carefully. Large collectives will be unable to avoid systemic risk. Again, think small to evade collateral damage.
Sustain. Within means and with respect. Channel your inner hippie. Feed your soul. Embrace an ethos of sustainability. Ask yourself when making large and small decisions: is this option sustainable? Am I using resources in a manner that respects their origin? The so-called “permaculture movement” is worth exploring to identify ways to support sustainable agriculture and urban food gardening. “The ethic of permaculture is the movement’s Nicene Creed … care of the earth; care of the people, and a return of surplus time, energy, and money, to the cause of bettering the earth and its people.” This may sound a bit squishy until you realize sustainability is essentially what our grandparents called self-reliance.
The foreseeable future in the United States is grim. We lack the will to do the right thing. Our system of collective action is broken. But, we can always act on our own to re-imagine our lives, form new alliances, and make a new future for ourselves.