BETWEEN THE LINES: Is U.S. headed for new depression?

The economic boom that ended the 20th century is over and will not return anytime soon. Let me explain the scope of our dilemma.

Scottish historian Thomas Carlyle is credited with the term "dismal science" to describe the study of economics. Perhaps the 19th century essayist was influenced by Thomas Malthus’ depressing theory that population always grows faster than food supplies.

Economists are criticized for the inconsistencies of their forecasts. In their defense, predicting future outcomes is a challenge, especially with so many variables.

The problem with many economists is all too often they represent special interests, and it is human nature to tell people what they want to hear. Investment firms look forward to good economic news, which will make their clients eager to buy stock.

The new year is a pivotal turning point for our nation. Our country is on the clock to correct the abuses of the past. Time is running out. The historic debt our national, state and local governments have taken on ultimately has to be accounted for, as does  the private sector’s. Debt has doubled in 10 years, dramatically so in the past four years.

Avoiding pain is not a cure. Harry Dent in "The Great Crash Ahead" does a wonderful job of educating his readers on the problems, what caused them and what to expect. For his predictions, he supplies countless data and also uses demographic studies.

Those who see inflation ahead believe the creation by the Federal Reserve and the federal government of money out of thin air will lead to higher prices. Deflationists such as Dent and Robert Prechter feel otherwise. Both present strong arguments.

Peak spending years for adults typically end from 46 to 50 years old. As the baby boomer population — born 1946-1961 — nears retirement, they are going to change spending habits and save money while preserving assets. The days of buying bigger homes or sport-utility vehicles for themselves has ended.

The prosperous past two decades of the 20th century were driven by the spending binges of baby boomers, who couldn’t say no. And as they retire or near retirement, this will put an added burden on future taxpayers to fund Social Security and Medicare. Increased taxes to pay for these benefits will further reduce spending.

Adding fuel to the fire, the country faces the unknown costs of paying for Obamacare.

Another problem that will adversely affect the economy is the troubled assets still on the books of both the nation’s banks and the Federal Reserve not being listed at fair-market value. When the dust settles, these assets must be written off by those who own them. The end result will be deflation.

Any attempt to prevent this from happening will delay the inevitable and make matters worse in the long run, according to the advocates of deflation.

My generation has not experienced anything like the Great Depression. Our parents did and it left a lasting impression. We will learn our lesson the hard way.

Laughlin is a Christian Libertarian. He is an economist, teacher, father, husband and most recently a grandfather. He has written a weekly column for The Tribune for 13 years. He and his wife Gina reside in Meadowlakes. To contact him, email ablaughlin@nctv.com. He is an independent columnist, not a staff member, and his views do not necessarily reflect those of The Tribune or its parent company.