Economics is a difficult science…if it's a science at all. There are as many different opinions about the future of the economy as there are economists to offer them. George Bernard Shaw once commented that if all economists were laid end to end, they still wouldn't come to a conclusion. To the best of my knowledge, he didn't recommend shooting them first but he might have preferred that.
I am not an economist! Nevertheless, I have about a thousand clients who expect me to keep up with what respected economic experts are saying and to try to boil all that often conflicting information down to something useful. I take that responsibility very, very seriously, so this matter is close to my heart.
Ann Landers once commented that democracy was more like a raft than a boat. A boat is generally better at keeping one high and dry but it can sink; on the other hand, a raft won't sink but the passengers may often get wet. I believe that analogy would apply to our American economic system as well. For most of the past two centuries, we have been a raft, not a boat, and we have stayed afloat even if the ride was at times stormy. Some experts believe, however, too much has been done in recent years to make the American economy more like a boat in an effort to keep everybody comfortably dry. The end result, they say, is an insecure craft with a hurricane brewing ahead.
Other experts compare the present American economy to an overloaded dam from which no relieving trickle has been allowed. They say economic gimmicks (for example, abnormally low short-term interest rates for too long time) have been used to prevent the dam from breaking but that these have only been stopgaps. When she does finally break, they warn, look out.
Not all experts are doomsayers, of course, but too many are for peace of mind, and clearly, as we look around, we see situations in the world that worry if not downright threaten. Consider these assorted examples of many possible issues:
When was the last time the General Accounting Office of the United States Government could certify that the nation's accounting books (consolidated statements) were in good order and “fairly stated”? 1998, six years ago.
How many times more money does GM owe than it is worth? About 15. It owes over $300 billion and its market value is about $20 billion.
How much total credit card debt does the average credit card holder owe? Over $8,000, the highest in history. And consumer debt in general is the highest in history, totaling per household approximately as much as the national average annual family income.
The good news is that steps can be taken in an effort to avoid your personal participation in nationwide economic difficulties. There are even steps you may take to profit from them potentially. In order to accomplish your investment goals, your best bet may be to seek out a financial professional who shares concern about dangers you believe exist and isn't the too typical Pollyanna, market cheerleader type. You do have choices.
“Your BIG Money Questions” For more specific and detailed guidance on preparing for possible dangers in the economy over the coming years, even potentially profiting from turmoil, you may wish to attend one of my seminars in early August. This BIG QUESTIONS series focuses particularly on the needs of retirees or investors retiring soon. Call 318-798-9022 or email ernie@mcdanielfinancial.net for more information.
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