Saturday, February 12, 2005

2020 Conclusion

15 years... not that far into the future. How will things be the same; how will things be different?

The same: the U.S. will still be the most formidable economic and military power in the world.


  • U.S. will face greater challenges in:
    • Education
      • Growing minorities population with less tendency toward high school/college graduation or PhDs.
      • Need to provide alternative to academic-oriented education
    • Economy
      • Continued pressure on manufacturing from both China and India
      • Real possibility of a currency crisis stemming from trade deficits
      • Trade focus may begin to shift to the "Americas" and away from Europe and Asia
      • High level of illegal immigration of primarily poor, undereducated Hispanics plus an aging White population will create enormous strains on social programs that will require significant changes in the programs or increases in taxes
    • International relations
      • Gradual reduction of military efforts regarding Middle East/Islamic issues in favor of increasing European Union/Russian responsibility as those areas become increasingly sensitive to the Muslim Influx
      • Recognition of China as both an antagonisic military and economic competitor may force U.S. to consider creating stronger ties with India... despite economic competition... because India will be seen as having interests similar to the U.S. regarding China and Islamic activism
      • Recognition of economic opportunities "south of the border" in Latin and South America leading to greater cooperation and trade in those areas

  • European Union faces new directions
    • Turkey's efforts to join the EU have an upside and downside
      • A large, growing market and educated population can be a major contributor to the EU
      • The "Muslim Influx" into northern Europe is a potential source of social upheaval that could set back the EU indefinitely
    • Other eastern European nations may press for membership which might cause both political and economic issues for the region
    • Relationship with Russia must be addressed

  • Asia faces growing pains
    • China is a major question mark
      • Will it become a "legitimate" business environment or continue as a place for pirates and opportunists
      • Will it seek to use its growing military power to coerce the rest of Asia
      • Will it seek to expand its influence more into the western hemisphere, including Latin and South America
    • India may become an economic superpower or collapse from internal and external pressure
      • China and India could become mutual markets for each other
      • India could become bogged down in escalating conflicts with Muslim countries and Muslim minorities within India
      • AIDS could become a sociological disaster among the hundreds of millions in poverty
    • Central and Western Asia will continue to be a source of Islamic issues for the rest of Asia and Europe

  • South America may become a major market and supplier to the world if social and political issues can be addressed

  • Africa will remain a backwater despite significant markets and resources due to political instability and AIDS
Nothing is set in stone... but the indication are all there for those interested enough to look.

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There is always an easy solution to every human problem—neat, plausible, and wrong.
Henry Louis Mencken (1880–1956)
“The Divine Afflatus,” A Mencken Chrestomathy, chapter 25, p. 443 (1949)
... and one could add "not all human problems really are."
It was beautiful and simple, as truly great swindles are.
- O. Henry
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Tracking Interest Rates

Tracking Interest Rates


SEARCH BLOG: FEDERAL RESERVE for full versions... or use the Blog Archive pulldown menu.

February 3, 2006
Go back to 1999-2000 and see what the Fed did. They are following the same pattern for 2005-06. If it ain't broke, the Fed will fix it... and good!
August 29, 2006 The Federal Reserve always acts on old information... and is the only cause of U.S. recessions.
December 5, 2006 Last spring I wrote about what I saw to be a sharp downturn in the economy in the "rustbelt" states, particularly Michigan.
March 28, 2007
The Federal Reserve sees no need to cut interest rates in the light of adverse recent economic data, Ben Bernanke said on Wednesday.
The Fed chairman said ”to date, the incoming data have supported the view that the current stance of policy is likely to foster sustainable economic growth and a gradual ebbing in core inflation”.

July 21, 2007 My guess is that if there is an interest rate change, a cut is more likely than an increase. The key variables to be watching at this point are real estate prices and the inventory of unsold homes.
August 11, 2007 I suspect that within 6 months the Federal Reserve will be forced to lower interest rates before housing becomes a black hole.
September 11, 2007 It only means that the overall process has flaws guaranteeing it will be slow in responding to changes in the economy... and tend to over-react as a result.
September 18, 2007 I think a 4% rate is really what is needed to turn the economy back on the right course. The rate may not get there, but more cuts will be needed with employment rates down and foreclosure rates up.
October 25, 2007 How long will it be before I will be able to write: "The Federal Reserve lowered its lending rate to 4% in response to the collapse of the U.S. housing market and massive numbers of foreclosures that threaten the banking and mortgage sectors."
"Should the elevated turbulence persist, it would increase the possibility of further tightening in financial conditions for households and businesses," he said.

"Uncertainties about the economic outlook are unusually high right now," he said. "These uncertainties require flexible and pragmatic policymaking -- nimble is the adjective I used a few weeks ago."

December 11, 2007 Somehow the Fed misses the obvious.
[Image from:]
December 13, 2007 [from The Christian Science Monitor]
"The odds of a recession are now above 50 percent," says Mark Zandi, chief economist at Moody's "We are right on the edge of a recession in part because of the Fed's reluctance to reduce interest rates more aggressively." [see my comments of September 11]
January 7, 2008 The real problem now is that consumers can't rescue the economy and manufacturing, which is already weakening, will continue to weaken. We've gutted the forces that could avoid a downturn. The question is not whether there will be a recession, but can it be dampened sufficiently so that it is very short.
January 11, 2008 This is death by a thousand cuts.
January 13, 2008 [N.Y. Times]
“The question is not whether we will have a recession, but how deep and prolonged it will be,” said David Rosenberg, the chief North American economist at Merrill Lynch. “Even if the Fed’s moves are going to work, it will not show up until the later part of 2008 or 2009.
January 17, 2008 A few days ago, Anna Schwartz, nonagenarian economist, implicated the Federal Reserve as the cause of the present lending crisis [from the Telegraph - UK]:
The high priestess of US monetarism - a revered figure at the Fed - says the central bank is itself the chief cause of the credit bubble, and now seems stunned as the consequences of its own actions engulf the financial system. "The new group at the Fed is not equal to the problem that faces it," she says, daring to utter a thought that fellow critics mostly utter sotto voce.
January 22, 2008 The cut has become infected and a limb is in danger. Ben Bernanke is panicking and the Fed has its emergency triage team cutting rates... this time by 3/4%. ...

What should the Federal Reserve do now? Step back... and don't be so anxious to raise rates at the first sign of economic improvement.
Individuals and businesses need stability in their financial cost structures so that they can plan effectively and keep their ships afloat. Wildly fluctuating rates... regardless of what the absolute levels are... create problems. Either too much spending or too much fear. It's just not that difficult to comprehend. Why has it been so difficult for the Fed?

About Me

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Michigan, United States
Air Force (SAC) captain 1968-72. Retired after 35 years of business and logistical planning, including running a small business. Two sons with advanced degrees; one with a business and pre-law degree. Beautiful wife who has put up with me for 4 decades. Education: B.A. (Sociology major; minors in philosopy, English literature, and German) M.S. Operations Management (like a mixture of an MBA with logistical planning)