What’s the Outlook for the US Economy?

by Wes Bridel on November 5, 2009

in Stewardship

Where are we going?

Where are we going?

We’ve covered the spiritual side of what’s about to happen (over the next decade) in this country, and now we’ll begin a series looking at the financial basis for this. Spiritual realities and truths are always controlling physical events, but you can see signs in the physical events themselves. Actually, God very often teaches us through natural events and realities (Romans 1:20).

If you pay attention to the news, you’ve seen over the last week or two “signs” here and there that the economy is improving. This has been the ebb and flow of the economy for many decades. The economy is good, and then goes into recession for a time, and then improves again. If this is simply another recession then we should expect to recover (as we have for so many decades before) – and perhaps these are the first signs of this recovery. The government and media are definitely painting this picture.

For instance, advance GDP (Gross Domestic Product) numbers were released recently which show the economy grew at an estimated annualized rate of 3.5% last quarter. This is good! A great sign of recovery. But what’s behind the numbers?

First of all the numbers are always revised later, sometimes significantly, so it makes me wonder what the value in commenting on them is. It’s in the government’s interest to put out beefed up numbers to get people feeling good and spending money again.

Of course, a big part of this number comes from the government’s “Cash for Clunkers” program. Does this count? If next year’s car buyers were convinced to buy a car early because the government gave them $4,000 to do it now, is this good or bad for the economy? Doesn’t it mean that next year they won’t be buying cars?

I don’t mean to bash the numbers too much because I actually believe the US economy will improve in the very short term. It seems almost impossible to me that the government’s printing and borrowing binge would not have some short term positive effect. It’s like asking you if you would have fun if you got a new credit card with a $100,000 limit and went and maxed it out over the next month. Would you have fun?

Absolutely you would. But would it be good for you? Well, yes in the short term you could do everything you wanted to do. But in the long term you would pay handsomely for the short term fun. And in the long term it would be very bad for you.

This week we’ve seen manufacturing numbers and housing numbers also show positive signs. I expect to see more of these positive signs over the next few months to a year before our credit card bill comes due.

On the flip side of this, the US economy is still shedding jobs. Recently, the stock market rallied because the economy “only” shed 521,000 jobs – which was lower than expected. That’s half a million people who lost their jobs and it’s being spun as good news! Unemployment is now at 10% the way the government calculates it, and much higher than that the way they used to calculate it.

Corporate earnings are also giving very mixed signals. Many corporate earnings are showing nice gains but when you look into the numbers you’ll see that sales are down and the “gains” are coming from slashing expenses (such as jobs). It’s good for companies to always strive to be more efficient, but that’s not a sign that the economy is improving. So we have to be careful what numbers we pay attention to and what they mean.

You should be aware that corporate “insiders” (the people who run the giant public corporations of America) are selling stock at unbelievably high rates. In a recent week, insiders sold $846 Million worth of shares while buying only $14.7 Million. Insiders always sell more than they buy because they are paid in shares, but this buy/sell ratio is extreme. They know what their companies are earning and what they expect moving forward and they’re selling now!

Again, I do think we’ll see lots of good signs in the days ahead before the next wave of really bad news hits, but I actually don’t know for sure. That’s just what I think will happen.

We’re going to spend the next several posts looking at the problems facing our economy and what could happen when these problems are actually confronted. It’s not news to say that our government spends more money than it brings in or that it has promised benefits to its citizens that it can’t possibly pay for. But there are some very real factors that are hovering over this country right now that could make these theoretical futuristic problems very real very soon. I hope you’ll join us as we look at these and we hope that this will enable you to prepare for what’s coming.

You’re invited to a free event this Thursday in Austin to discuss these things in greater detail.

If you would like more ideas on how to prepare for this coming storm, please sign up for our free newsletter here. If you’d like to read more about the spiritual realities behind what’s happening, read the series we just finished on Daniel.

This post is Part 1 in the series Financial Outlook of the United States. To continue with this series, click on Pt 2. To gain more insight about this coming storm that is hitting the U.S., you can read about it here.

Photo credit: drpep

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