Are you prepared for the 21st century?
The Advocate, Wednesday December 13, 1995
In just four short years, we will be there. The rapid pace of change will accelerate. I recently went to a meeting to hear futurist Harry S. Dent, author of "The Great Boom Ahead." He said that over 50 per cent of the products available ten years from now don't even exist. We are entering the information age, spurred on by the computer and the information highway known as the Internet. I logged onto it the other night with a friend of mine. Although very interesting, it is also very time consumming. It absorbs you and hours can go by without you hardly knowing the passage of time. Except for the pros in computers, it will still take a few more years before it becomes user friendly. For now, it is impractical for most of us. However, once it matures into a practical usable format, it will be one of the major tools in acquiring wealth.
The information age will blossom into full bloom. Those who harness the power of information in the next century will also harness the power of wealth. The correct use of information will translate itself into power and wealth.
Identifying early the shifting cycles and trends that occur in the financial world and positioning yourself before they happen will be of paramount importance in acquiring wealth in the future. The trend is your friend only if you have the correct information and position yourself accordingly. John McCallum, senior vice president and chief economist of the Royal Bank of Canada gives us his views on "what the next century holds for you and your money."
1. The World Will Continue to Shrink. Powerful economic forces will continue to push toward greater economic integration. National governments will find their authority diminish as they are forced to adhere to international standards. Our link via the free-trade agreement with the United States will grow much closer. Goods will move freely across the border subject only to a common external tariff. This will help improve the Canadian standard of living but make it harder to preserve a strong Canadian identity.
2. The Economy Will Flourish. Our cities will become more spread out as technological advances permit more people to work from home. Canada should enjoy strong economic performance thanks in part to trade liberalization and increased access to U.S. and Latin American markets. Natural resources will continue to be a major component of our well being due to the build-up of the infrastructures of the developing nations. The Canadian dollar, badly battered in recent years, will be much stronger as we enter the 21st century. Tax relief at last. Good news! The 21st century will see an end to the spiraling tax burden imposed on Canadians in recent years.
3. Your Home Will Be Your Castle. "Cocooning" will be a major lifestyle tend. As the old concept of cities weakens and technology expands, people's lives will centre on their homes. Your house will be work-place, an entertainment centre, and a shopping centre. Instead of commuting to work for hours each day, more Canadians will walk downstairs to their office and spend their time in front of a computer terminal like I do.
4. Your Retirement : Your Responsibility. Government support for the aged poor won't disappear completely despite deficit problems. But Canadians will have to rely more on their resources to support themselves. The 21st century will see more movement between jobs and more people working for themselves. Pension plans will become more portable and increasingly will nor guarantee a specific income level at retirement. Retirement will come later. The dream of stopping work before age 60 will give way to economic reality and increasing life expectancy. Programs like the Canada Pension Plan will add impetus to this trend by raising the minimum age for drawing benefits.
The Investment Scene. Mutual funds have been the investment of the '90s. This trend will continue as Canadians strive to save and invest more effectively to deal with the rising costs of retirement and education. People will take a more active role in managing their money. Fewer dollars will flow into low interest, passive savings instruments, and more into high growth, higher risk securities. Expanding regions like the Far East and Latin America will capture an increasing share of investment dollars. Canadians will increasingly realize that a home should be purchased to live in, and not for real estate speculation. Stocks will remain the best performing asset class, as in this century. But, not all markets will rise, nor will all stocks. Selecting the winners will still be a challenge, and many people will respond by opting for equity mutual funds.
6. The Challenge. Canadians will enjoy an improved standard of living, lower taxes, and more personal freedom in the next century. But they'll struggle with their identity, be forced to save more of their income, and stay at their jobs longer than they may wish. The middle class will shrink as wealth becomes more concentrated in the hands of the informed investor. Expect dramatic changes on a worldwide scale. For Canadian investors, it will be a time of great challenges, and potentially great rewards. Will you be ready to take advantage of the opportunities ahead and reap the rewards?
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