The United States is seeing more and more people who think critically are realizing the serious economic and financial problems facing the country and the lack of a path to solve them. Although it is easy to see the problems, many people choose to ignore them or listen to politicians who promise everything will be fine.
Why is a real estate note such a concern? Because economic trends and decisions by the leaders of the country will greatly impact my success as a buyer and such. Your investments and business may also be affected.
These predictions are not political. There won’t be any major differences regardless of who wins November 2012’s presidency election. Contrarian views are not common among many media outlets. I don’t see any economic news that could cause optimism. To my friends and colleagues, I have suggested that they save money and invest conservatively.
Although no one knows when the financial tsunami will hit, I’m certain it will. Until then, most people will not see the changes coming because they are too busy focusing on other “interesting” topics such as immigration and gay marriage.
Forecasts and predictions are dangerous, especially in economics and real estate, where there are many moving parts and the possibility of political interference. Here are my educated guesses about what’s coming down the pipe.
The U.S. Congress will temporarily raise the debt ceiling, but not make any real progress towards reducing the nation’s budget deficit. That was the easiest prediction.
It is smart to place bets against politicians doing the right things. The feds, states and cities will raise fees on anything that moves…or doesn’t move. As bureaucrats try to protect their favorite groups of voters while causing pain for others, we can expect more political posturing.
In July, Greece will be able to pass its austerity budget and receive the bailout loan from Europe. This is continuing their “extend and pretend” strategy. If I borrowed $1000 from your company and said I would only repay you if you loaned $500 more, would that be a problem? No. But that’s exactly what the Europeans have done for Greece and possibly soon for other PIIGS (Portugal. Ireland. Italy. Greece.
The predictions for the longer term (2012-2015) are more challenging, but here’s what I expect.
- The U.S. stock markets will fluctuate throughout 2011, but generally trend down. It will recover partially in the months before the election, but then it will plummet precipitously.
- Most areas will see a drop in property values, both residential and commercial. Some areas may experience drops of 20-30% in the next two years.
- Consumer confidence will plummet within months of the November 2012 election. Cynicism towards politicians will rise to new heights and civil unrest may begin to develop as people feel they don’t get what they “owe”.
- Under-employment and unemployment will rise, living standards will fall and the average income for all other than favored political constituencies – mainly – will drop.
Wall Street and some unions - Greece will default and be followed by at least one other PIIG. The Euro’s value will plummet like a rock.
- Both the Chinese and Canadian real estate bubbles (especially Vancouver’s) will burst, affecting both economies directly.
- Inflation will be a major problem for developing countries. Civil unrest could recur in Egypt and other places that import more of their goods or commodities and have less stable governments. Even though more developed countries will be affected by inflation of food and commodity prices,
The consequences will be milder. - The U.S. will look more like the zombie economy Japan experienced over the past 20 years. There will be little growth as governments attempt to prevent the economies from collapsing completely.
Although I cannot guarantee the above and acknowledge that there are valid pro and con arguments to many of my statements, it is clear that the trend in developing countries is towards a less stable environment and more dangerous. It will be difficult to invest in any type of business because of all the surprises that will come along the way.