My “New Year’s predictions” post I did last week was not received well by everyone. In an homage to the Amazing Criswell, fake psychic of the 60's and 70's, I offered a mix of possible scenarios mixed with outright absurdity. You can count on me to mix absurdities with what I hope are astute observations of the human condition and the current situation.
Here is one of my "predictions" that I actually think likely.
All the goldbugs will continue to predict economic collapse. They will be wrong. The strength of the economic system will continue to amaze the naysayers. The dollar is headed up. In the US things will actually improve with modest growth. What do you expect to happen with the Fed printing 1 trillion dollars? Japan will implode, but not in 2013. Europe will implode as well, also not in 2013. The can will be kicked. Buy gold anyway. (Note I am not an investment advisor, but an unpaid satirist.)
This is the most likely outcome, decades of malaise. This actually makes me an optimist. Unemployment will be stuck at 7 to 9% for the foreseeable future. Government deficits will continue in the $700 billion dollar range. Inflation, official inflation, will continue but at a slightly higher rate, 5% or so. Revenues will increase faster than spending so the deficit will gradually decline. The Republicans will be blamed.
But tipping points cannot be anticipated. So another scenario is along these lines:
If Bernanke can pull off a recovery, he is a superhero! I do not think this scenario likely, but it can not be ruled out.
Another scenario is that the Great Recession is actually just a normal business cycle recession. Krugman would be in heaven. The one trillion dollar money printing added to the one trillion dollar fiscal stimulus, the deficit, will actually work and save us all. Right.
Ben Shalom Bernanke would deserve canonization if he pulls this off. The world is full of odd coincidences, the fact that Ben Shalom in Hebrew means "son of peace" is one of them.
On the off-chance that the Son of Peace fails, what should we do as individuals? Reduce debt and increase your personal financial reserves. Do it now, for as bad as the situation is right now, it could get worse.