Over the course of my career in the financial services industry, I have guided my clients through a number of severe market downturns and near financial meltdowns.
In the past, I often used phrases and terms like, economic rebound, recovery and bounce back. This time around I’m fairly certain those are not the words I’ll be using to describe our path out of this COVID-19 crisis.
I think a better description might be America 2.0, a term I first heard used by billionaire Mark Cuban. Our economy is probably going to look much different this time because the current downturn wasn’t caused by a tech bubble, poor banking practices or anything financially related.
It was fueled by a pandemic that not only adversely impacted our nation, but also virtually every country in the world. Looking forward, it appears the entire world will be functioning a bit differently than it did just a few months ago.
During the pandemic, countries worldwide have borrowed money at an alarming rate. Our own debt is now so large that it’s literally beyond comprehension. I can already hear the political bickering over tax policy to repay the debt. And loudest of all, I hear the phrase, “Everyone should pay their fair share.”
I have concluded from listening to so many people complaining about high tax rates that when people refer to “fair share” they generally mean that somebody else should pay more. Not themselves. Realistically, I believe we will all soon be paying higher taxes.
America 2.0 will most certainly have more people permanently working from home. Obviously, major manufacturing will take place outside the home, but thanks to technology, we’re learning that a lot of people can be productive from home. I think this is a trend that’s here to stay.
Another surprising situation in America 2.0, for now at least, is the strength of the housing market. In this area, I’m seeing homes disappear in a matter of hours. While that’s a good thing, there’s also a negative side. Those who are just launching their careers or forced into lower paying jobs are finding very little in the way of affordable housing.
That, I fear, is the portent of a widening income gap. An issue America 2.0 will have to address, and I suspect there will be much debate on how best to resolve the widening gap.
Finally, I think America 2.0 is going to be a lot more expensive. Currently, much of what’s in our medicine cabinets is manufactured overseas. I’ve been preaching to my clients and readers to mentally prepare for a price spike in the near future. And as manufacturing returns to the U.S. it’s inevitable that prices will increase.
New domestic manufacturing means new factories must be built, re-tooling costs will be incurred and higher wages will be paid. Again, inevitable.
America 2.0 and the rest of the world will soon undergo significant changes. With these changes we’re likely to see higher taxes and an increase in the cost of living. In the years ahead that means it will be even more difficult to save enough for a comfortable retirement.
America 2.0 will definitely be a more challenging place to make sure you don’t outlive your income. But with proper planning, I’m confident you will prevail.