Bye-Bye Miss American Pie (Part 3 of 3)

The US Fed has tried to jumpstart her economy with three (not one) stimulus packages – $168 Billion in February, the recent $700 Billion bailout, and now a $150-$300 Billion Democrat-led proposal. Matched with Key Interest Rate cuts (1/2% on October 8, and 1% on October 30, dropping it to 4%, a four-year low), they are designed to return money to consumers, stimulating spending and loans, to mitigate the Financial Crisis’ effects. But US Investment Banker Marc Faber disagrees: “The bailout package won't address the real problem, which is too much debt. The debt bubble has already burst."

The Financial Crisis is replacing America’s “upsize” mentality with an uncharacteristic, frugal mindset. But this is disastrous. Comprising 70% of her economy, recent drops in consumer spending, home prices and stock markets, estimated at $6 Trillion, are creating a “poverty effect” (i.e. loss of buying and spending confidence), that translates to $250-$300 Billion less spending over one to two years, over 2% of US GDP.

Faber has another take: “A U.S recession is not bad. Americans will eat 5% less, obesity goes down.”

But Americans must spend. It’s just about delivering substitute goods and services that fit their tightening belts and budget, which Filipino entrepreneurs can determine. Aside from the Baby Boomers, other targets are Generations X and Y: two powerhouses who can elevate the US economy.

Generation X (1965-1984, 70M)

Coined from Douglas Coupland’s novel “Generation X: Tales from an Accelerated Culture,” disenchanted X’er children became self-reliant, developing individual thinking that branded old-age wisdom, “nonsense,” while their Baby Boomer parents, seeking “self-realization”, questioned work and family as life’s centers. X’ers numbers and attitudes have sowed the seeds of crisis.

X’ers reacted to Boomer mansions’ opulence. Their demand for cheap credit for affordable housing seeded the 80’s Savings & Loan and Subprime Housing crises.

Weathering the 1973 and 1979 oil shocks, the Soviet Afghan invasion, and AIDS; they saw Russia’s collapse, and the Berlin Wall’s dismantling. They adored Madonna when she was “Like A Virgin,” and a young, Black Michael Jackson, who grew up White.

With X’ers 9 million fewer (11% less) than Baby Boomers, the repercussions to the US economy cannot be underestimated. Their fewer numbers imperil US Social Security and Medicare with fewer contributions. Heavily burdened by retiring Boomers with devalued Assets and reduced 401Ks, the system will collapse. Projections show Payroll Taxes (deductions) unable to shoulder all Social Security Expenses by 2017, and by 2041 only $0.74 for each dollar of benefits can be provided.

Many Management positions the Boomers vacated will remain unfilled. But X’ers aren’t “slackers.” There simply aren’t enough of them, creating as one author notes, the “Perfect Management Storm.” Our corporate managers could fill that demand gap, their much higher Managerial wages mitigating potentially shrinking remittances from blue-collar Filipino Expats. Bank managers earning P45,000 ($900) monthly here, would probably earn $6,000 in America!

Despite this, X’er creations currently shape cyberspace: Page and Brin’s (both born 1973) Google rules the online search industry and Bezo’s (born 1964) Amazon.com helped define e-commerce. Both accelerate globalization by linking buyers, markets and products.

Generation Y (1985-2010, estimated 100M)

This century’s first 25-year generation, Y’ers are the hungriest and most aware demographic. They are independent, and empowered by the Internet’s virtually infinite information supply, lying literally at their fingertips.

They are thus attuned in real-time to issues like African Poverty, Global Warming, and the Human Genome’s Mapping; and events like 9-11, and the Iraq War. This US Elections show the highest youth turnout ever: voters aged 18-29 compose 14.5% of 2008 electorates, compared to 2004’s 9.4% (a 53% increase).

It’s a culture of instant gratification, brought about by technology. They are blunt, and impatient; the embodiment of Nike’s, “Just Do It.”

Their culture blends traditional and technological. Timberlake exists alongside Techno, TV with TIVO, and Reality with Virtual Reality. They are bombarded with sex, drugs, and violence – from old and new media: Ads and Billboards, but also Wii, Xbox, and YouTube.

At a predicted annual spending of US$2.45T by 2015, they consume five times (in adjusted dollars) more than their Boomer parents, bankrolled by their entrepreneurship, and high-paying jobs created by previously non-existent industries (like Technology and IT). They are the second US economic powerhouse after the Baby Boomers.

Joint Ventures, packaged as “Ad-Ventures” (in BPOs, mining exploration, and Tourism) may capture their Entrepreneurial imagination. An online community – a Filipino LinkedIn - marketing Philippine business opportunity, incorporating blogging and networking, could send out the call.

Keynes postulated the paradox of thrift: a spiral where extreme savings and dampened spending can exacerbate a recession, causing further belt-tightening, and so on. America’s loss could be our gain, especially if our entrepreneurs can, by astute analysis of each US generation’s behavior and preferences, create products and services rooted to our core competencies.

Maybe it’s about a growing Buko Pie, than a shrinking American pie.

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