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Sunday, January 2, 2011

2011- Look into the Crystal Ball

Yearly predictions, like opinions, are much like rear-ends.. everyone has one.  And every mainstream news website and economic blog seems to make them- some are overly optimistic and some are deeply pessimistic.  Usually the truth is somewhere in between.

Rather than offer tired, stale predictions on the same topics as everyone else, here are some thoughts A&G has as to the upcoming year on topics not much talked about currently, but will by year's end--

#1- The Debt Ceiling-  The big political battle of the first half of 2011 will be whether or not to raise the debt ceiling which currently is at $14.3 Trillion.  The national debt is at $13.9 Trillion at the moment so if it is not raised by springtime, the US will end up defaulting on its debts.  

* Think of debt ceilings and national debt as you would a credit card-  if you had a card with a credit limit of $3000, that would be the 'debt ceiling'.  If you owed $2850 on that card, it would be your debt.  Now whereas you the individual would have to beg and plead for your credit card company to raise your debt limit, the US Govt simply does it on its own, any time it feels.  This is partially why there's never an urge for politicians to have fiscally responsible governance.    If you could extend your credit card limit indefinitely without any immediate consequences, wouldn't you?

Prediction-  There will be a lot of grandstanding and fear-mongering by both Dems and Reps- ultimately the ceiling will be extended-- Again..  Our national debt will Grow and then Congress will raise it Again & Again & Again whenever it is needed.

#2-  Professional sports lockouts-  There is a realistic chance that come autumn, there will be no NFL football or NBA basketball being played.  Both leagues want to restructure their collective bargaining agreements with respective players association and are willing to lockout the players (i.e. no games played) until the leagues get the concessions they want.  The loss of income would ravish cities and municipalities.  The NFL players association speculates that an NFL lockout, could lead to an average lost revenue of $20 million per game that is not played.

Prediction-  You're dealing with fights between billionaire owners claiming they're either losing money or not making enough vs multi-millionaire players with big egos who don't want to lose what they have.   Expect lockouts in both sports though I believe the NFL's lockout will be shorter because it is America's #1 sport and the pressure to settle will be immense. The NBA lockout will be more protracted.

#3  Higher taxes- state & local level-  Many states, cities and municipalities are facing severe budget crunches.  The chances of the Federal government giving them bailouts is less likely with the Reps. in control of Congress. They actually Want these entities to go bankrupt so that it will break the Unions and let them off the hook to pay all the promised pensions currently owed to hundreds of thousands, if not millions of workers.

Prediction-  Everyone celebrated the Bush tax cut extensions: the person making $20k who saved $900  and the person making $20 million who saved $900,000..  Now expect to pay more on the local level.  State governments will begin raising employment taxes.  Discussions will certainly begin to raise state sales taxes, and expect in many communities, a fight between local governments wanting to raise property & school taxes vs citizens who believe the taxes should be Lowered to match the lost value of their homes since 2007.

#4  Escapism-  While I do not feel complete doom & gloom pessimism over 2011, I do believe things will get much worse financially  for many people, including those who've remained so far unscathed by this current recession and especially those who never took any preventive steps like budgeting, cutting back personal consumption/ holiday shopping expenses, etc...

Prediction- You will see increased revenues for Hollywood- first run movies and DVD sales.  You will see overall increased ratings for TV when including cable channels and people spending more hours per day in front of the TV or internet.  More people will be buying books, especially on portable electronic devices.  People will do anything and everything possible to tune out the negative things being reported in news and going on in personal lives.  You will also see increased sales in alcohol and larger total consumption of drink and drugs- both legal (anti-anxiety Rx) and illegal,

#5  Life is what you make of it-  A&G was never designed to be a blog of despair and fear.  It won't start now.  Its goal is to inform people of a reality that mainstream media glosses over, and do what it can to prepare people for the economic winter that is coming.  But that does not mean life is to be lived or experienced joylessly. The sometimes 'corny' adage of "When you get lemons, make lemonade" is actually a Very good attitude when mixed with an understanding of reality.  That mindset will be the difference in how you face and overcome adversities.

Prediction-   People are adaptable and fully capable of overcoming adversities if they have the right mindset.   I predict those who actively take control of their economic lives- budget well, make economic sacrifices like dramatic cutting back on Christmas shopping,  watching network TV instead of $100/mo on cable,etc..  and refocus by prioritizing what is meaningful in their lives- religion perhaps, friends, family, free time used productively, etc.. will be emotionally and psychologically strong and in the very Best position to weather any financial "storms".  This is not the time to be an ostrich.

May 2011 be as good a year for you as you make it.

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