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Debt, Deleveraging and Demographics Mean Great Depression Ahead, Dent Says

Aaron Task
Editor in Chief
Fin - Daily Ticker - US

In The Great Depression Ahead, author and economic forecaster Harry Dent makes the case for why the worst isn't behind us, despite the economy's recovery and the stock market's revival.

In a nutshell, Dent's grim forecast comes down to the "deadly Ds": Debt, Deleveraging and Demographics.

"We have to go through the detox process of deleveraging debt," he says in the accompanying clip. "The government simply hasn't allowed it [but] it will come because the government can't stop this much debt from deleveraging."

How much debt? By Dent's estimate, there is $120 trillion of debt outstanding, including $66 trillion in unfunded mandates. That's roughly 10 times U.S. GDP and five times the levels during the Roaring 20s.

"The slowdown of Baby Boomers will continue to force deleveraging," Dent says, citing the demographic force behind his gloomy outlook. "92 million Baby Boomers will work less and save more no matter what [the government does]."

That, in turn, will put downward pressure on the economy and, critically keep the housing market in retreat. (See: "Housing Is Dead": Bubble Still Bursting Here and Abroad, Says Harry Dent )

Continued weakness in housing -- along with Europe's debt crisis -- will lead to a repeat of the 2008 credit crisis, Dent predicts, only this time the Fed and Uncle Sam won't be able to stop it. "We see a second downturn where the banking system will meltdown, real estate will fall further and a lot of debt will be written off."

Dent's advice to prepare for the coming deflationary depression is to sell financial assets -- including precious metals -- get out of real estate and get long the much-maligned U.S. dollar.

While it's tempting to dismiss Dent as a "gloom and doomer," he's not a permabear, as the titles of his prior books evince, including The Great Boom Ahead, published in 1992.

Aaron Task is the host of The Daily Ticker. You can follow him on Twitter at @atask or email him at altask@yahoo.com