Article DetailsForget Change in the Economy, Get into Survival Mode! |
| Date Added: March 17, 2010 06:00:00 PM |
| Author: Elisheva Wiriaatmadja |
| Category: Blogs: Finance and Investment |
| In spite of reassurances from the US government that the economy is on its way to recovery, certain indicators point that the realistic economic forecasts are far from rosy.
To begin with, the rate of unemployment continues to grow and is expected to increase further. For the past two years, total unemployment has doubled. At the end of 2009, unemployment reached double digits. In fact, in many cities like Detroit, unemployment is described to be hovering at around 50%. The same trend is also to be expected for the underemployed. More layoffs are also expected to happen this year. In California 100,000 jobs will be lost by the end of the first half of this year. On top of all that, around 1.2 million unemployed workers will not be eligible for unemployment benefits if Congress does not act to change the American Recovery and Reinvestment Act (ARRA) benefits. The second wave of foreclosures and defaults on mortgages will also happen this year, certainly deeming economic forecasts. This time, it is the commercial real estate market that will experience a collapse. Banks have exposed themselves to greater risk with commercial real estate, even greater than their exposure to the residential properties that defaulted. Speaking of the residential real estate market, the downward trend will most likely keep on going. Even if incentives from the government will contribute in stabilizing the housing market, rising unemployment will eliminate whatever gains the government incentives will give. If the market is ever to recover, it will be very gradual and will most probably happen over a span of at least three years. Some trend analysts such as Gerald Celente forecast that there really will be no recovery in the near future. For them, any indicators of such are just a cover up. Taking the stimulus program as an example, jobs may be made in the short term but with the ballooning fiscal deficit, it is a likely scenario that things will get worse when the stimulus package dries up. A revolt of sorts from the people is expected to happen, especially coming from those in the extreme right and extreme left. The current administration’s base from the left is gradually waning as the wars in Afghanistan and Iraq that are costing taxpayers trillions of dollars already indicate no signs of ending. It seems that more and more people are howling for the blood of the banking industry, Wall Street, and the Fed. The fact that bailout money was given to the top people in these institutions is extremely unfair to the average American taxpayer. Regarding the government’s stimulus package, those who are lucky to have kept their jobs can expect to be rewarded more taxes. This is just one of the unwanted consequences of the stimulus package. Note that the fiscal deficit for 2010 is expected to reach $2 trillion; this will in turn push national debt to 100% of the U.S. GDP. The shifting of the global economic power from the United States will be more apparent in 2010. With the decreasing stock market and increasing negative sentiment against the Fed and Wall Street, the level of trust is at an all time low. Foreign countries are already buying less of U.S. Treasury and agency bonds and there seems to be no sign of this trend reversing. For the global economy, free trade and globalization will continue to rule as emerging markets in developing countries will continue to take advantage from these policies. Offshoring and outsourcing will continue to be dominant industries and will benefit countries with lower living costs as they can offer skilled professionals at competitive rates. It is expected that thirty percent more jobs will be moving out of America due to this. The global markets in commodities and precious metals are expected to be bullish this year. Due to the U.S. government’s monetary policies during the past two years and the trend to privatize gold and silver reserves away from central banks, the price of precious metals have risen. It is not just in the U.S. that investments in currencies decreased as resources are moved to stocking more gold and silver but also in other countries in Europe, particularly Ireland and Germany. To sum everything up, there are two general scenarios that America and the global economy will watch out for in 2010 depending mainly on the utilization of the stimulus package. Some economic forecasts have an positive view is that the recession will last for at least 3 more years. However, this is unlikely to happen. The worst-case scenario, which is more possible, is another crash some time this year since the bailouts just delayed the economic collapse from completely hitting the ground as it should have last year. |
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