I made a confession to our Boom & Bust subscribers last month. While I generally advise against owning most real estate, I have a secluded property in the Caribbean. It’s the only property I own (I rent my home in Tampa) and I know for a fact that its value will likely depreciate in the great real estate shakeout I see ahead, although likely by half as much as a high-end property in Florida.
The reason I own this property is because I see rising chances for civil unrest in the inevitable downturn ahead, especially in the U.S. I want a place to go if things get really bad, and it looks increasingly likely that they will.
The evidence for that is piling up in this year’s presidential race…
What we have now, surprising to most political analysts, is a genuine voter revolt against the rich and the establishment. Trump is taking over the Republican Party, and Sanders is threatening Clinton beyond what almost anyone would have forecast a year ago, even if he can’t quite seem to win.
And it doesn’t matter if Trump can back up most of his statements with facts, or if Sanders’ policies have any chance of being viable economically.
They understand what the pundits don’t. The people are angry and they want change.
When the U.S. came out of World War II, it emerged with the strongest and most successful middle class in the decades that followed. Never before had there been such a middle class emerge in all of history.
We had a vibrant workforce with higher wages… a baby boom… startling innovation…
But now we have led the decline of that middle class, with wage competition from Asia, Mexico and other emerging countries, and the rapid rise of the professional and speculative classes.
Meanwhile, many higher-paid manufacturing jobs have moved overseas, and even service jobs like call centers have moved to places like India. More immigrants have come in and competed as well.
That’s why a silent “near” majority of Americans are anti-immigrant and free trade…
But here’s the real rub. Higher incomes help you survive at a better standard of living, and real wages have only been declining since 2000. They’ve barely risen even back to 1970s levels. That’s enough to be mad about.
The ability to live as you want, to retire longer term, and to have power in society comes more from wealth – and that is way more skewed towards the upper class. And that’s where the middle class in America has lost the most ground.
Look at this chart from a recent study by Credit Suisse of the share of wealth held by the middle class. Look at how we compare to the rest of the top countries.
The U.S. is the worst!
No wonder the middle class here feels the most dis-empowered!
It explains why America’s electorate either wants to nominate a political outsider who talks tough and promises to restore our power in the world… or an avowed socialist to combat income and wealth inequality by attacking Wall Street and the top 1%.
I have said for a long time that the two countries I most expect to have the worst potential for civil unrest are China… and the U.S.
China because it created the greatest over-expansion and urbanization bubble in modern history. Now, it has 250 million unregistered migrant urban workers from rural areas that will be stuck without jobs (and nowhere to go) after they can’t keep building infrastructures for no one.
But the U.S. has the most polarized politics of any major country, and the greatest income and wealth inequality in the developed world. The politics are more polarized than even the Depression and more like the Civil War – and we have over 300 million guns in this country.
There’s also a 250-year cycle of social and political revolutions like the American Revolution in the late 1700s and the Protestant Revolution before that in the early 1500s. Now we’re in the early 2000s and we’re right on schedule for another shakeup. And add to that the 80-year winter season of debt and bubble deleveraging that started in 2008, and which will finally hit more strongly between 2016 and 2022.
This is when the people stand up and say, quoting Popeye: “That’s all I can stands, I can’t stands no more!”
Take the current signs of greater violence at Trump rallies as a sign of much more to come in the U.S.
Trump warned that there will be riots if he doesn’t win the nomination, and that would apply even more if he were not elected president. Whether elected or not, he and Sanders will have strong support groups for years to come, and more so if the economy turns as bad as I forecast in the months and years ahead.
The economy will likely worsen into the conventions in July and the election in November. That will only increase the support for such non-establishment candidates among an angry middle class that has already lost so much ground in the last few decades.
Europe and perhaps China will collapse sooner as we are still the best house in a bad neighborhood. But when the global slowdown and bubble collapse hits the U.S. more dramatically from mid-2016 through late 2017 (and beyond into 2022 or so), expect more widespread civil unrest in the U.S., especially in the latter half of 2017-forward.
Now you see why I have a getaway on an island in the Caribbean. It’s the only place I own real estate that I know may decline somewhat in value for years. That’s what I mean by only owning real estate that is strategic to your life or business.
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