Because it is the last day of 2010, it’s time to look ahead. New Year’s Eve Day here in Ohio is usually cold and sometimes features nasty weather so it offers a perfect environment for reflection and hopeful thinking. A steaming cup of coffee (in my world it represents “hair of the dog”) and a bowl game on the telly provide the ideal background for looking…over the horizon. There are two main areas that I wish to examine although they are intertwined with one another and with other concerns. They are the economy and the world of domestic politics and governance. Certainly international affairs, domestic social policy and the global economy are important sectors worthy of consideration, but I am not Nostradamus so I will not overreach.
As an relatively small time investor- Buffet (neither Warren nor Jimmy) doesn’t call me for advice,- I’ve been struggling in recent months and years to develop a strategy for the forthcoming short ter. For a while I was torn between expecting radical deflation followed by streaking inflation, but it seems to me that for the short term, the deflationary movement has become less likely. Deflation will be hovering around, however as local communities, state governments and ultimately the federal government face the prospect of financial collapse…default and bankruptcy. The impact of such a scenario would be immense as thousands or hundreds of thousands of vendors and recipients receive no payment. But in the immediate future (indeed, it’s already begun), I anticipate a rather aggressive inflationary movement.
There are three primary reasons and several ancillary ones for my expecting inflation in the near future. The first is the most obvious. The Federal Reserve Bank has indicated that it will be pursuing a modulated inflationary policy in the months ahead. One reason for this approach is that it allows the federal government and others to repay indebtedness with cheaper dollars which in turn may provide some easing in the GDP/debt ratio. A second reason that I expect marked inflation is the weakened dollar. The massive debt of the federal, state and local governments and the corresponding printing of dollars by the Fed have caused the value of each dollar to decline. As a result, it requires more dollars to purchase goods and services. The third primary impetus for an inflationary period is our nation’s misguided and radically stupid energy policy. Green solutions for our energy needs have not yet proven to be sufficient and efficient, yet we have ample resources of coal, oil and gas within our national boundaries. Misdirected environmental concerns have hamstrung our national energy production. Energy costs affect every transaction in our economy, and they will rise dramatically….and have a corollary impact on food prices.
Allow me to state here that I’m not antagonistic to the green movement or unconcerned about environmental issues. A growing vibrant economy provides the capital for research and development to find solutions for some hazards. I believe that petro chemicals are a reliable and efficient energy source, but I don’t want to spray them on my fields or my crops.
Politically speaking, there will be a few pitched battles between the President and the GOP. Those Congress watchers who anticipate a massive shift in attitude in D.C will be dismayed. There are just enough wobbly RINO’s in the Senate to blunt most of the House initiatives. I fully expect the Republican House to win a few early battles, but eventually the GOP Senators will beg for comity and compromise away more of our freedom. There will be hundreds of opportunities to advance the cause of freedom, and they will fail on most of them. The campaign for 2012 will begin in about three months (or fewer), and we will be back in the silly season again.
Comments: earl4sos@gmail.com or cearlwriting@hotmail.com
I agree with your prediction of inflation going forward. It amazes me that so many people are digging their head into the sand about this probability.
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