Why Both Economic Extremes Are Wrong
It seems like you can’t get on TV and talk about your views of the economy unless you’re either in one extreme or the other. Either the American economy is great and the Dow is going to 15,000 or you’re a gloom and doomer and think the Dow is going to 5,000. The reality is that neither camp is right in my opinion.
I’m of the opinion that there are structural problems with the economy. First and foremost, there’s too much debt. The debt overhang of the general economy and at the individual level will be a burden preventing future sound growth. Think of it this way, the debt service at the individual prevents you from investing in other activities or buying other things. More of your money going to banks versus productive investments or consumption is good for the banks, bad for the general economy.
Second, because of advances in technology and cheaper labor overseas, American workers are too expensive and under-skilled. This means that high unemployment is here to stay.
Now, does this mean the economy is going to crash or the dollar will crash or some other catastrophic event? I don’t think so. First, the policymakers are very good at extending the problem and preventing an all out collapse. This doesn’t mean there aren’t consequences to “kicking the can down the road”. There are. But, the reality is that America still has more leeway on this than most other nations because of the power of America. Is this power and dominance deteriorating? Yes, I believe so, but it is a very slow process.
Expect the US government to continue to prop up the economy and offer various deficit spending programs to infuse cash into the economy. Debt will keep increasing at the national level, and inflation will likely continue to increase at a measured pace. Yes, your dollars will likely continue to buy less and the standard of living will likely decrease for the masses over time. But the key here is “over time”.
If you’re hiding out in a bunker waiting for chaos, I think you’re wasting your time. Find opportunities out there to make money. It’s not easy and they aren’t obvious, but there ARE opportunities. The economic conditions just warrant being more cautious and more frugal and might make you have to work harder to get ahead. So be it. And yes, have a little emergency stash just in case I’m wrong and the world goes to crap next year.
Image from Goldbarsandguns.com