The Economy Will Crash. Don’t Say I Didn’t Warn You.

Within 10 years we will experience a crash the size of 2008 or bigger. Don’t believe me? Then put down your PokemonGo and read on, I dare you.

It starts with student loan debt.

Like in the Plagues of Egypt when water turned into blood, we are already witnessing the first sign of whats to come. U.S. student loan debt totals nearly 1.3 trillion dollars and as of 2016 the average graduate had $37,172 in student loan debt. Up 6% from the previous year. Let those numbers actually sink in. Those are kids in their early 20’s that have already made one of the largest financial decisions in their life. Instead of feeling like they can conquer the world and take risks, they often feel like indentured slaves that can only hope to have freedom one day. Trust me, I was one of them.

If you think our nation’s student loan problem is isolated then you’re wrong. Opinions aside our youth’s straddling debt will affect us all in a big, big way and we should pay attention to it.

Remember the game dominos? Well it’s sort of like that. Today it’s student loans, tomorrow it’s housing and the next week it’s the auto-industry and then your company! It’s all connected and each piece stands fragile, if one falls it can very well all fall. Here is how I see it playing out.

77.7 million millennials are just the tip of the spear. A study found that the share of first time home buyers fell to just 30% in February 2016, 10% below historical standard. And due to the current high cost of homes, higher credit restrictions from lenders, and ridiculous student loan payments most millennials will need up to 28 years to save for that 20% down payment. 53% of millennials surveyed say they are delaying the purchase of a home (and I think thats very conservative).

So what happens when home sales come to a painfully, slow halt? Well, supply and demand tells us that prices drop. If prices drop fast or irrationally then that can cause mortgages to default too. Sound familiar?

And it’s not just student loan debt we need to watch. Americans seem to have an insatiable appetite for a lifestyle they cannot afford. Over 38% of American households carry credit card debt and the average balance carrying household owes $16,048 in credit card debt! What’s even scarier is the chart below outlining how disproportionate the credit card debt to income ratio is.

Homes are most Americans single largest asset and if the prices go down then the dominos can start to fall fast and every sector will feel it. Nobody will be safe. People will spend less, businesses will suffer, currency will not circulate. Money is like water, without circulation it can’t be consumed. Can you say pop?

What’s funny to me is we’ve been through this before, less than a decade ago. But how quickly we forget when times are good. Jobs are growing, markets are at an all time high, home values are reaching record prices! Yet… our debt is bigger than ever.

It’s like we’re collectively partying and drinking champagne we can’t afford. Sure, it feels great now but here is the thing, tomorrow we’ll wake up with a hangover and a bill with more zeros than we’ve ever seen. We pay for it, we always eventually pay for it.

This dominos game of loan defaults will of course take years to play out, maybe even a decade. If you saw the “Big Short” then you will understand how it can take so long for a bubble to pop even when it seems so glaringly obvious. Yet there is a wild card that can speed this up in a heartbeat.

Here comes the robots!

Like adding wind to a fire, AI can be the catalyst that speeds up our market crash timeline. Perhaps this is for another blog post. But add quick unemployment numbers to our national debt crisis and you have one helluva doomsday cocktail!

So what are your thoughts? Do you agree or disagree with my thesis? If you agree what do you think is the best way to get ready for the next big crash to either limit the damage or prosper individually? What national policies should we put in place to solve our credit crisis? Please discuss.

About the author.

My name is Charlie Ansanelli. I’m a Bay Area, CA dad and 3 time entrepreneur. I like to write about business, the economy, fitness, and health. I believe that certainty is dangerous but confidence is key.

Want to connect? Follow my Medium page and add me on LinkedIn.