The Macro Economic Forecast - August 2011

I am not an investment advisor I do not want the responsibility of guiding investors by answering their specific questions That is not my expertise My expertise is discerning longterm trends and developing longterm forecasts Of course these longterm trends could affect their specific investment If questions are shaped in macro terms I am happy to answer as I feel some certainty and firmness of footingDuring the last few weeks of the debt debate debacle in Washington I was asked every day what I thought might be the outcomes or consequences In the week leading up to the August 2 deadline I was in Australia and New Zealand where it seemed everyone wanted my view Other than the immediate statement that as an American I was totally embarrassed by the prioritization of party and special interests over the national interest I did make some predictionsI said that if the debt reduction was not significant amp8211 with at least 80 percent spending cuts combined with 20 percent in revenue increases amp8211 the debt rating of the US would be put in jeopardy I stated that the total package should be 4 trillionplus for it to be considered serious Further I said that it had to be at least a total of 3 trillion to avoid possible downgrading of debtWell we now know that the reprehensible reality of the Democrats and Republicans once again kicking the can down the road proved me rightHere are some additional short and longterm economic forecasts probabilities and trends on the horizon that we need to pay attention to relative to the depth and length of this global economic situation and that you should pay attention to relative to how and where you put your money and what your business strategy might beThe US debt situation The failure of Congress and the president to do what was necessary will have cascading negative effects both in the country and around the world Uncertainly will most definitely go up and stay up A lack of leadership combined with political sniping will only increase the sense of anxiety Americans and people around the world will feel This will drive the US back into recession Not that many of us have felt a quotrecoveryquot It will be gutcheck time in global equitiesThe European Debt Crisis This is no longer amp8211 and for at least a year has not been amp8211 the Greek debt crisis It is a crisis of the Euro Since the second quotbailoutquot of Greece I have been saying that it could well be the death rattle of the Euro The end of an illconceived poorly implemented regional financial experiment created at the end of the 20th century I cannot really say what the probability of that is but my instinct says it is in the 3060 range of probability A collapse of the Euro will cause profound negative disruption and uncertainty and will drive equity markets down significantly I have spoken to a number of residents from the UK who are happy they still have the pound I can only imagine what percentage of Germans are getting nostalgic for the Mark It must be growing dailyComing economic disruption in China The central planning of the government that has helped create the modern economic miracle that is China is coming up against itself and market conditions Inflation is up property prices are falling and the financial disparity between the affluent in Shanghai and the poorer provinces continues to increase dramatically Chinese I have met in my global travels tell me they and those they know no longer believe the government There will be at minimum a major hiccupThe global commodity boom Commodities are on a longterm bull market ride There will be a lot of volatility which at any time can be of great benefit or great harm to national economies depending on their exportimport relationship to a specific commodity What I can forecast with some certainty is that the price of oil will stay high long term Except for a shortterm drop that might last for a few months due to fears of a doubledip recession it will largely trade between a low of 90 and a high of 120 for the foreseeable future The quotArab Springquot means that OPEC will need to flow significant oil revenues to building up infrastructure and institutions to keep their populations from incitement I do think gold will go higher and will bounce around at high levels but there will be selling pressure to offset the negative flight to it caused by fear At what price to sell will soon become the question The larger problem is that the increasingly weird weather and population pressures will keep most food commodities at historically high prices The combination of high food and longterm high oil prices will cause a significantly negative reality for less developed countries and will put a lid on consumer spending around the worldFinally there is a trend of significant force around the world relative to consumer spending In 2007 I coined the phrase quotthrift will be the new coolquot and of course this has proved true Since early 2009 I have been saying that any recovery would not occur because of a strong increase in consumer spending as that simply would not happen In 2010 I stated that there was a new deeply entrenched consumer trend that I called the quotless is morequot trend amp8211 where need has largely separated from want We used to buy because we wanted something now we tend to buy only if we need something and even then we try to postpone the purchaseIn earlier columns I described the economic collapse as the quottoo much stuffquot recession We all stopped buying faced our closets and houses and realized how much stuff we had We realized that not only could we no longer purchase with abandon but that we already had too much stuff that we hadn39t worn read watched or used As we started to deleverage financially we also started to get rid of our stuff Baby boomers started their stage of lifedownsizing at the same time that the lessmaterial Millennials only were keen to purchase technology and experiencesThis quotless is morequot trend which started in earnest in 2008 in the US has now spread to many of the developed countries of the world Along with the deleveraging of debt that is going on this will completely change consumer behavior at least for the next few years Economists have to finally wake up and stop talking about quotwhen the consumer starts to really spendquot because they simply won39tWhat is the good news Connectivity is ever increasing The Accelerating Connectedness of humanity is continuing to wreak havoc on ignorance dictators old business models and all walled gardens It also drives down prices due to attacking placebased retailing We are at the dawn of explosive growth of alternative and renewable energy This is creative destruction time Two of my favorite quotes come to mindquotThe major advances in civilization are processes that all but wreck the societies in which they occurquot amp8211 Alfred Lord WhiteheadAndquotAny serious restructuring of business must directly attack the organization and the entire system of power based upon itquot amp8211 Alvin TofflerI promise to check back on all this at year39s endNote This column was recently published in my Shift Age Newsletter Please click here to sign up for a free subscriptionDavid Houle is a futurist strategist and speaker He has always been slightly ahead of the curve Houle spent more than 20 years in media and entertainment Most recently David is a featured contributor to Oprahcom Check is out here wwwoprahcomdavidhoule David can be contacted at DavidDavidHoulecomRead all Davidamp8217s MediaBizBloggers commentaries at Evolution ShiftCheck us out on Facebook at MediaBizBloggerscomFollow our Twitter updates MediaBizBloggerThe opinions and points of view expressed in this commentary are exclusively the views of the author and do not necessarily represent the views of MediaBizBloggerscom management or associated bloggers MediaBizBloggers is an open thought leadership platform and readers may share their comments and opinions in response to all commentaries

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The Macro Economic Forecast - August 2011

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