The global economy is going to get worse before it gets better, according to the author of a new book that predicts we're on the cusp of a second Great Depression.
Economist Harry S. Dent, author of "The great Depression Ahead," told CTV's Canada AM that the large number of baby-boomers who are approaching retirement, and the over-stretched U.S. banking system, means the worst is yet to come.
And U.S. President Barack Obama's costly stimulus package likely won't solve the problem -- either for the U.S. or for the rest of the world, he said.
"The government doesn't understand that over 100 million baby-boomers in North America are switching from being spenders to savers," Dent said from Vancouver.
"People earn and spend more money until about age 46 when their kids start to leave the nest, then they spend less and less and save more for retirement. On top of that we've had the greatest housing bubble ever, more so in the United States that in Canada, in history."
Obama's stimulus package might cause the economy to spike, but probably won't lead to a permanent fix and could actually make things worse in the long run, Dent said.
"The stimulus is so massive that if we only have a minor rebound it's probably likely the markets are going to say 'oh my gosh, the economy really is mortally wounded,'" he said.
That "rebound" could last until the end of 2009, but by early next year the economy will be in a deeper downturn than it is now, Dent predicted.
"In mid-2009 it will recover, but it's the calm before the storm," he said, predicting that the hallmarks of depression -- double-digit unemployment and a falling consumer price index, will be seen in 2010.
Stock markets will bottom-out in mid-2012, he predicts, before picking up again in mid-2013.
Dent said he is telling his clients to take advantage of the temporary recovery that will come in anticipation of the stimulus bill, by selling their stocks and converting their investment to cash, then waiting out the slump.
"This was a synchronized global boom -- one of the greatest in history in the 2000s -- and now it's a synchronized global bust," he said.
Until now, Canada's economy has been largely protected from the economic fallout by stronger banking regulations than those in the U.S.
However, Dent said it could be 10 years before Canada is out of the woods and the economy is back on solid footing.
"The bigger problem you're facing is a 29- to 30-year commodity cycle is also peaking here...and that means commodity prices are probably going to be down for a decade before they turn up again so that is probably the bigger challenge in Canada," Dent said.
