Where is the Economy Going?

The media is full of predictions by all sorts of people about where the economy is going. Some are making good money selling books and newsletters with these predictions. 


There is some common ground in most of these predictions. There is near agreement that the US dollar will continue to weaken as the US prints more money and incurs more debt. Business will likely remain sluggish in the US for the foreseeable future notwithstanding all the claims made by politicians. 


Meanwhile some foreign economies will continue to thrive and grow stronger. Predictions are good for Brazil, Russia, India, and China, the so called BRIC nations. 


On the fringes some are predicting hyperinflation while others think we are in for a deflationary period. Some predict the imminent collapse of the dollar and its replacement with other currencies as the primary currency of trade. Some predict a continued sluggish growth while others see a second collapse of the US stock market as inevitable. 


What does one make of all this? That is very hard to say. First remember that those who predict the future do not have a crystal ball. At best they are making educated, or in some cases, uneducated guesses. Also remember that most of those who make predictions are selling that information in some form. Drama sells, and the more dramatic the predictions the more people will buy and read them. 


The US economy and the world economy have always been in some degree of flux. The one certain thing that we can predict is that current conditions will invariably change. It is also safe to say that no matter what direction they go, after some period of time they will move in yet another direction. 


It would be foolish to ignore some of the clear signs of economic danger including the expanding US debt and the fact that we have not recovered from a recession which is now moving into its sixth year. Harry Dent, whose books have been uncanny in their accuracy, has long predicted that this period will last a decade or more and that we will not see a strong economy until the early 2020s. While Dent’s track record makes him hard to ignore and the last several years seem to prove him on the right track even Dent does not have a crystal ball. So much can happen in the coming years that we might not even imagine. 


We do know this. The history of our economy and to a large extent the developed world’s economy for the past century and a half has been a continuous cycle of ups and downs. When things are good people lose sight of the inevitable down side and believe it will last forever. When things are bad people become pessimistic and anxious and fail to recognize that it will at some point turn around and get better.


While we cannot predict what will happen with any certainty there is little profit in panicking and doing drastic things. Putting all your cash in a mattress or liquidating all assets and buying gold for example are highly risky ideas. Sure, they might work for a while, but they also may not.


One thing that makes it so difficult to predict where we are headed is that the economy today is more global and interconnected than ever in history. It is not just what happens in New York or London that drives the world economy. It is equally what happens in Brazil, India, China and many other nations that have a major effect. 


It is worthwhile to continue watching, reading and studying what is being said but more important what is being done. We know, for example, that we cannot continue to incur major government debt as the US and much of Europe has been doing without consequences and those consequences could be grave. 


These are uncertain times, but then all times are uncertain. The best advice still seems to be to keep a cool head, proceed with caution and avoid extremes and wild ideas. Investing should still be a careful process based on long term return and diversification. 


Let us hope for the best but prepare for the worst – and remember that just as winter leads ultimately to spring, our current economic winter will one day turn into spring.

Wishing you success and prosperity,

Daniel R. Murphy
Helping People Learn to Build Wealth

Wishing you Success and Prosperity,

Daniel R. Murphy

Wishing you well,

Daniel R. Murphy
Educating people for building wealth, adapting to a changing future and personal development.

Please note: I reserve the right to delete comments that are offensive or off-topic.

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