By Edward Leone Jr. DMD MBA RFC
Contact Information: leonee@vzw.blackberry.net
So here we are at the door step of a new year. Looking back, depending on your experience, 2011 was a total disaster or an outstanding success. So many have offered predictions on the direction the economy will take in 2012, that I feel a need to add my own prospective.
First off, I must state that 2011 was a struggle for my business interests since consumer demand was down for the 4th year in succession. It is my judgement that the factors which put us in our current situation began to have an effect much earlier that their impact was being reported. It is likely, from my prospective, that 2012 will be another year of slow growth as measured by GDP performance. We are likely to see a very slow but gradual decline in unemployment numbers . I must admit that I am very suspicious of the reporting on this number since it is calculated on a base which in my opinion, does not represent the true dynamic of what is going on in the job market. We are likely to see a continuing decline in commodity prices as a result of stagnant to declining growth in emerging economies around the world. Please accept the fact that we are a part of a global economy and can not isolate ourselves from the effects that other economies have on US GDP. Based on the chatter from the Federal Reserve, interest rates are likely to remain at low levels and inflation should also be modest since there is still much surplus capacity in the economy. The housing market it still a bit of a puzzle to me. I am hopeful that we are coming out of the trough. The US economy is likely to continue to grow as I stated, but at a slow recovery rate of between 2.5 and 3%. Keep in mind that at a GDP of $13.4 trillion, the US economy is as large at it has ever been. What has become a factor of great concern for many, is the fact that our national debt is going to exceed $16 trillion shortly. Over the years, US debt has been a strong and trusted investment around the world. Are we about to lose that status? It is clear that we as a society, and our government as policy makers and leaders, have not learned a thing from the recent history of the Japanese experience and the current situation in the Euro Zone. It is disturbing that political leaders in the Euro Zone have not yet engaged the measures necessary to get sovereign debt under control and strengthen their central banks to deal with this crisis issue. This is likely to be a continuing cause for a turbulent global economic dynamic. It will clearly take some time for the Euro Zone issue to be resolved. Make no mistake, the US will have to make many adjustments in the business of government to get debt issues under control as will other governments around the world. What may be our saving grace in the short-term is the fact that many other economies appear to be in ever worse shape than ours.
It is not likely that the US Congress will take long-term fiscal policy matters under consideration until after the elections are accomplished. I would be very disturbed if a lame duck Congress took action on such matters after the elections but before the installation of a newly elected Congress. We will have to wait until 2013 to see action on these issues and probably not see material effects until 2014 and 2015. So much for long-term planning if that is necessary for your personal and business economic model. I would not be at all surprised to see some short-term gimmickry come out of Washington to make the economy look better going into the election season. Predictions are just that. We will have to wait and see what really happens.
A Wells Fargo & Co. survey recently revealed that those contemplating retirement are more focused on available retirement resources than structuring retirement to occur at a specific age. 80 is the new 65 according to Joseph Ready of Wells Fargo. The survey respondents indicate that 74% of them plan to work beyond the age of 65. 39% say it is because they need to do so while 35% say they just want to remain in the work force. It is clear that current economic conditions are reflected in this survey result. It also reveals great concern among those saving for retirement regarding selection of investment vehicles. Volatile equity markets and meager fixed income returns creat challenges to building wealth.
For The Record:
DJIA 12,359.92
NASDAQ 2,674.22
S&P 500 1,277.81
Suggeste Reading: “Ethics and the Conduct of Business” by John Boatright
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