It is not “Business as usual”. We are in the midst of epic government intervention with Quantitative Easing by the Federal Reserve at the forefront. Mal-investments are not allowed to fail and cleanse the system. Instead, the government claims that they are too big to fail and prop them up with our money. On the other hand, you and I are in the “too small to care about” category. This is why unemployment is officially 9.8% with the true rate much higher.
Why aren’t we seeing the same results as the 1930’s? It is because our infrastructure is more advanced and people who are still working have sufficient assets to help those without. This reality does not change the fact that we are at risk. Complexity evokes a more severe contraction once it fails.
Alternative energy is not working. The concentration of energy contained in oil and gas are much greater than most of the alternatives. More agencies are admitting peak oil occurred between 2005 and 2006. The cost of energy will continue to rise and unless there is a global depression, expect gasoline prices to remain strong. Rail base transports will do well. Government subsidies of ethanol are simply throwing away money that could be used for better purposes. We all love the farmers but subsidizing ethanol will only delay the inevitable.
Ben Bernanke will continue to depreciate the Dollar and he will defend an inflationary path. This means that he must keep rates low to encourage consumer spending. Absent that, the government must spend which is occurring at an epic pace.
Christmas spending was up but I believe it was do to pent up demand by families holding off until the Christmas season. Now we are back to removing debt from our balance sheets. Everyone needed a breather over the Christmas holidays and many of the restaurants were full again. After New Year’s Eve, the restaurant lines had vanished, once again.
Oil will be the hot topic among the press. A former Shell exec is making the rounds on the TV circuit laying the groundwork for expected higher oil prices. We have been warning about this for some time now. Prepare yourself for $3-$4 gas at the pump. See: http://www.washingtontimes.com/news/2011/jan/2/dramatic-spike-in-gas-prices-forecasted/
Nobody knows how to manage this global economy except Our Heavenly Father. It is simply too complex. In the meantime, expect volatility of commodity prices. The gold bull market is still intact and will try to shake off all timid investors.