Friday, January 3, 2014

Economic Forecast 2014

As there is always two sides to a story, the US economy will be affected by either the continuation of all the stimulus to a full recovery and, with events in the global community enacting similar ideas or an event could alter both economic projections. I have two indicators that could trigger an event. Nevertheless, the "free trade" powers have finally reached a transitional point in both the US economy and the global sector where their influence and policies are the dominant aspect as to whether our nation sees growth, and or, the same scenario for the global nations.
I see 2014 as the first time when discussing economies of scale that distinct world regions and trade alliances will be distinguished as opposed to the normal mentioning of the individual nation influence. This is part of the free trade powers plan. As they add layers upon layers to mask individual economies, they will slowly evaporate sovereign identity just like central bankers have eroded the influence of gold, deficit spending and balanced budgets.
If I had to label the make-up, I would describe it as follows: North America(US, Canada & Mexico), South America & Central America(all nations except Brazil which is a BRIC member), ECU and UK, Asian Rim, which will be broken into two parts:China and its new trading partners whose nations will have a carryover because of the two powerful economies of Japan and South Korea. In addition, the Arab Emirates will have a carryover in OPEC, BRIC members, new African associations except South Africa which will join the BRIC and Australia will have a major influence on China. Russia will open pipelines to the East and seek to grow its economy with its old satellite members.
The second trend that I see is the establishment of debt as king. Central bankers will continue to oppose gold and balanced budgets. They will offer plans centered around debt guidelines as the new paragon for running an economy. While this policy will never be stated, balanced budgets for governments will be out with debt guidelines that fall within a specific range will be the new normal. This will hide what I've been saying for years that the US does not have a real economy, but by the use of debt, stimulates enough to maintain the status quo. However, demographics will begin to under mind this policy. In fact, recent civil unrest will grow from "flash mobs, and knockout gangs" to looting and riots, due mainly to youth unemployment. I do not want to get into this at the moment, but continue with the influence of central bankers.
At the moment the US, Japan and Greece have debt-to-GDP ratios that surpass safe economic levels with the US over 100%, Japan over 250% and Greece at 156%. Funny thing about Greece, they were the only EU member to lower their debt ratio as all the other members grew their economies with debt. They forget that debt must be repaid which will bring gold back in fashion at a later date.
by central bankers and world institutions state that the US and world economies will grow in 2014. Have they ever predicted a recession? Don't be silly, of course not!
My Forecast
as stated above, I see two possible red flags that could alter the world economies. The first is the continuation of the currency wars with individual nations seeking to devalue to gain market share which will help their domestic economy. This flight toward the bottom as already caused distress in world trade, especially to Brazil and India. They face more currency disruptions due to the falling in their national currency reserves.
The other big danger is rising interest rates. Both of these indicators are easy to follow because the info is published. Use the ten year bond on US treasuries as a starting point. If they continue to rise and surpass 3.5%, domestic markets will suffer with a ripple effect to the global community. Housing, dear reader, is central to every domestic economy. In addition, real estate bubbles could pop in Finland, Netherlands, China and Australia. Do I have to remind you that the current interest rates are below normal and the present cost of money is in a deviant mode. Jobs are still needed in every economy irregardless of what is reported about the health of any particular nation.
There are many other little problems that could develop out of control like the Arab Spring. After central banks, the military complex is the most dangerous entity that could alter the future.
In a related theme to flare-ups, the search for natural resources will continue, but not yet in a dangerous zone. World oil supplies are abundant with the notable addition of US supply.
Alternative energy will still be more rhetoric than fact. Natural gas will have a greater effect, especially in manufacturing, transportation and production of electricity. Nuclear will try to resurface with a big push in Japan and emerging nations.
Obamacare will be front and center. It will cause the US debt to explode.
The central meme of this forecast is that the confluence point in the US economy and the global community has been reached and whether central bankers can continue to mask problems with debt as more revenues will be needed to cover past and present shortfalls.
In the US the first crack will appear in retail because demographics will show falling revenues. This will cause companies to close stores, cut jobs. They will continue to hide these points by buying back stock, but time will tell and the market will suffer.
Ghetto Nation
 closing of stores will have a domino effect. This will take time, but once it starts, the ending is predetermined. The loss of anchor stores to malls and shopping centers will lead to business foreclosures. Many areas will relive the early 60s and 70s when the first national haircut took place with the ramifications to numerous to mention here. If this occurs we will reenter a recession, however if stagflation appears, the picture turns ugly with a depression. At the moment this is not on the horizon, but central bankers have no answer for demographics. If there are no buyers, prices fall. We are already in a disinflation environment which is only hidden due to stimulus. Like I said, we are at the confluence point . We could grow or fail to grow depending on the two main danger aspects.