It has been a while, but I am back!
The job I am working is taking up a lot of time and energy! But given the forecast I am about to give, I am glad I am working it! One of the things I have done from time to time is give an economic forecast, most of which have been pretty accurate, notably the US housing crash made in 2005, the major downturn in 2008, and most recently, the horrible US economic numbers that are now being given. They are given in an IF-THEN format, usually going from quarter to quarter. If you want one for a year from now, please consult your nearest accurate crystal ball. There is simply no way to know exactly what is going to take place then, other than an approximation.
Q3 2011 will be dependent upon what happens here at the end of Q2 in June, and another major event to take place that I am seeing during the summer.
Now you will find a major reference to the Federal Reserve and what it is going to do, as well as what congress is going to do concerning the debt ceiling. See, it all comes back to what I said before in my third ever blog entry.. It is the private central bank, the Federal Reserve, that writes the blank check that congress spends. Without the central bank, that would fall back to the US Treasury who's revenue steam was coining money and tariffs on imported goods. (which by the way, was sufficient for the first 130 years of the country's existence!)
Now we have the "end" of QE2 (quantitative easing, another word for "credit expansion" and "money printing") here in June. That I expect to end with no QE3 or 5 or 10 or 75432. However, given the fact that the US economy is obviously still in shambles, it is possible that they will do QE in some other form. If this is the case, then scenario #1 will play out in early summer as opposed to later.
The other event we have is going to be the US debt ceiling. I have strong reason to believe that if that debt ceiling is raised, it will have large, protracted downside effect on the US dollar and thus scenario #1 will play out as if QE were to continue.
So we have actually three scenarios (note that we could see a combination thereof as well!):
#1 - Start of a hyper-inflationary collapse. The continuing of QE and/or the raise of the debt ceiling will be a huge neon sign that says to the world "NO FISCAL DISCIPLINE HERE!" The numbers in a debt-usury-fiat currency system set up the hyperinflation and the political side is the trigger. No doubt I will be watching this as closely as the Chinese are, who have already complained loudly about the fiscal state of the US back in early May.
#2 - Start of another dis-inflationary (like 2008) or a deflationary collapse (like 1929). Both scenarios will be very bad for US asset prices, including the equity, labor, and commodity markets. This scenario seems unlikely since the pain will be immediate and will cause riotous political upheaval in the United States sooner than that of #1, which also will cause upheaval, albeit a bit slower that that of #2.
#3 - The one where the markets shrug this all off and we continue the bottom bouncing like we have from 2009 until now, at least until some other event takes place that will send markets higher or lower, depending upon the circumstances. It is possible that the world will continue to be transfixed on problems in Europe. These problems are very real, but when all you hear in the mainstream media is EUROPE EUROPE EUROPE EUROPE EUROPE EUROPE EUROPE EUROPE EUROPE EUROPE EUROPE EUROPE EUROPE EUROPE EUROPE EUROPE EUROPE EUROPE, it is hard to pay attention to the problems in the United States, which are also real and most definitely bigger that that in Europe!
I wish I could come up with something better, but this is the best case that I am seeing. I wish I could have number 4 where all is well and we truly begin to recover, but I do not think either party has any clue as to what to do about this mess. They both follow the same broke ass economic model. As my late step-father might of said as a computer programmer: "GARBAGE IN = GARBAGE OUT." It is no different than the fact that your financial results will only be as good as the advice you take and act upon, PERIOD.
