Monday, October 12, 2009

US Consumer Expectations - Next 5+ years

I created the following chart to help individuals visualize (in 30 seconds or less) what we (as US consumers) can expect to see over the next 5 or more years. I hope it helps to clarify some of the issues in play and assists you in making the right decisions when preparing for your family's future. (Disclaimer: see sidebar - this is not investment advice - merely my learned opinion)

Bottom line: The US Dollar is in a very precarious situation and when we combine our Gvt's excessive monetary printing (to offset a deflationary economy) with a total loss of international confidence in the world's reserve, the dollar WILL FALL (mid-long term) - causing our cost of living to significantly rise and our standard of living to fall (precipitously) - ultimately leading to a hyperinflationary depression.

Click chart for larger/sharper image

Excerpt below from my 2006 post - American Wakeup Call:

Ultimately, this adjustment of the dollar will be painful for the world, and the average American’s standard of living will suffer significantly (much lower). Many Americans will become unemployed early on, but those who live through this era will eventually be put back to work and things will begin to get better… However, the trivial issues we concern ourselves with today (Politics, American Idol, Survivor, keeping up with the Jones’, etc) will no longer be the forefront of our daily lives, as we struggle to keep food on the table and a roof over our heads. The ACLU-type concerns of today will also become irrelevant and family values/religion will become the center-stage of the new America.

Another bright side to the issue: This dollar devaluation will allow the United States to eliminate much of its foreign debt and American citizens will demand that our government leaders LEAD (rather than today’s sickening ego power plays, rampant corruption and partisan politics). Welfare will probably become a thing of the past, and people will have to work to earn an honest days pay. Companies and the Government will again start to invest in infrastructure, American expectations will begin to rise, factories will once again start to billow smoke, and ultimately, our country will be competitive in the world once again…

I personally believe it will be a long, very difficult ride ahead, but in the end, it will probably make us a better, stronger nation. We, as a people, have become way too self-centered and soft, trivial issues have become important, important issues are ignored, people are completely ignorant to the world, values are gone, family means little, government is completely out of touch and ineffective, everyone wants something for nothing, etc. This wake-up call will probably do us some good.

Another relevant article if interested: Dollar: Faltering foundation of US Economic Strength

One more link as "food for thought": Social Consequences of an Economic Meltdown

Best Regards



Robin said...

I truly hope you are right.

Randy said...

FWIW Robin - I really hope that I'm wrong, but feel strongly that I won't be...

Alex said...

It's been a while since I was at your site Randy, welcome back. It's a pleasure to see you again... and to learn that I have some reading to catch up on.

I too hope you are right. I was speaking with a family member that lived through Germany's occupation by Hitler. He explained how they had carts travelling through his town to haul those dead from starvation. His family stole to eat and made friends with select Russians who would give them potato peelings and table scraps to survive on. Your probable scenario is much more comfortable than theirs. At least we'd have the option to work for a living; in communist Germany, they lacked even that.

Anonymous said...

"Welfare will probably become a thing of the past, and people will have to work to earn an honest days pay"

The insinuation is that people who accept welfare are scammers and dishonest to the lot, that welfare has no place in a society where people want to work.

I think you'll find an awful lot of people today who are wanting to work but unable and are glad to have the help of our society at large in the institutionalized form of welfare to keep them going.

A society that didn't place value on those who are unable to be an immediate labour resource would be a horrible place, and those of us who see welfare as only a drag on our system should re-evaluate the scenario.

On a related note, do you think corporate welfare and tax breaks will be a thing of the past as well?

Anonymous said...

Interesting perspective Randy. One thing that I believe many people fail to consider is "war". World War Two rose from the Great Depression. That depression will prove to be insignificant compared to the present one.

We live in a world overran with thermonuclear weapons amongst a host of all sorts of other vastly lethal weapons. We live in a world where America (the so called beacon of Freedom.) has been in the sack for some time with a nation we know as China. Clinton even granted it most favored Nation status in 99. The only thing that has changed since Chairman Mao's good riddance is a bit of window dressing. Still the same powers ruling in China just as it is in Putin's Russia/U.S.S.R.

When one does the homework on China and Russia there is blatant evidence that they are building up their arsenals at break neck speed. It would be naive to simply dismiss such things as a mere buffer to American military dominance . These two Nations have strong and well focused intentions as they patiently prepare for the opportunity that is currently knocking louder and louder.

There is a raging war all across Africa right now for resources. This war is between China and America and is not out in the open for all to see. Why do you think they created AFRICOM? China is making inroads both there and South America.

America as a whole is the most arrogant Nation on earth. Not surprising considering her ability to consume nearly half the world's resources while making up a mere 5 percent of it's population. America's top export is undeniably inflation. Wow, talk about entitlement. The whole of it's citizens believe that She is IT and no one else will ever be.

Nothing lasts forever. Including Empires and Nations. The powers that be in the East are barbaric, plain and simple. The powers that be in the Anglo Saxon empire of the West are not what I would call out right barbaric. But they are disgustingly greedy and give a whole new meaning to the word "covet".

Power does truly corrupt. And I find it laughable to think that "The POWERS that be" will not take advantage of America's nakedness sooner rather than later.

Simply put, America is NOT invincible and She is severely stretched thin and then some.

Anonymous said...


I agree with everything you wrote about. One thing I'm not sure about though is a recovery. We do need lots of oil for our economy and with Peak Oil looming, plus a falling dollar, how will we have any real recovery at all? Thanks.

T Z said...

"This dollar devaluation will allow the United States to eliminate much of its foreign debt."

Let me put it in this way - the debt is not reduced or eliminated, but turned into a de facto payment via a loss of currency value and standards of living. As the US dollar loses value, foreigners will be able to buy key US assets on-the-cheap (in theory, because US has stringent laws against many such purchases). This is the way holders of US currency as reserve can regain its value as they get screwed by US inflation.

But it is entirely likely that the day will come US will need to relax laws restricting foreign purchases of strategic assets in order to earn great amount of foreign currencies. This foreign currencies can then be used to pay down debt and to buy imports.

At the end of the day, the net is the same. Either pay foreign debts now by raising tax (thus avoid monetary inflation), or pay later by selling the nation's core assets.

This is exactly how the US treated many 2nd and 3rd world countries when they were in trouble. Read history of the 1988 Asia Financial Crisis when US companies went in for a plunder after their currency devaluation. Now US deserves no different a treatment when it is on the slope to 2nd world status.

Randy said...

Thank you Alex - glad to have you back... and thanks for sharing the German occupation story - we certainly take much for granted in this day/age.

Anon 2:02 and Anon 5:00 - I wholeheartedly concur and cover both WAR and OIL in the linked post - here it is again - I HIGHLY encourage ALL readers here take the time to read it (one of my most informative posts ever)- Dollar: Faltering Foundation of US Economic Strength

TZ, I also 100% agree with you regarding foreign debt payoff through devalued currency and much lower standard of living... However, don't be fooled that foreigners don't ALREADY own large sectors of key industries (agree it will increase though):
Foreign Ownership of US Domestic Industries

BxCapricorn said...

Nice work on the graphic. I'm with you 70% of the way, because I know that traders will push commodities up and down over and over again, to maximize their gains. The overall trend will be up, but the traders will try to shake you out of your position regardless, with volatility.

The peak oil thing, is not as much of an issue as people think, now that natural gas reserves have skyrocketed. Literally, skyrocketed. That's why the stock TNF has been relatively stable, while POT and petrol based fertilizer companies have been hit harder.

and also check out this hard data from the EIA...

We could see a situation where we simply ignore the Middle East.

Remember this one...

It happened.

Wall Street wins during panics. They manufacture panics. I see it every day when I'm trading stocks.

BxCapricorn said...

Okay, I found it. This is the Iraq link I really wanted to show you.

Triple their output. I know you may not believe it, but I have no doubt that the improvements to their delivery infrastructure will make it so. Can you say Kurdistan?

Anonymous said...


I think you should check into Peak Oil a bit more. Natural Gas can not even remotely take the place of oil in our society. It will help, but not be a panacea. Also, check into Jeffrey Brown's land export model. It basically states, that within 9 years, most, if not all oil exporting nations will be able to export their oil. (See "the Cantarell Oil field in Mexico- 15 % depletion/year). Within 2 years, they won't be exporting to us. That's over a million bpd we lose out on. Also, with our weak dollar we won't be able to afford oil. Look at China, making all types of deals for energy. That's all less oil for us. Plus, with the SUPPLY destruction from the past deleveraging, puts us in a very rough predicament. Also, as far as Iraqi output tripling, who says that will go to us? Even if it does, in 7 years the demand/supply deficit will be so distorted that it won't matter much. I sincerely hope you are correct, but according to my facts I don't see how.

BxCapricorn said...

Thanks Anon, but I have read a ton on Peak Oil (Matthew Simmons, Stephen Leeb, The Oil Drum website, Life After Peak Oil website, etc.) I used to maintain a spreadsheet file similar to what you see on, and I've concluded that it's a scam to keep oil prices up. Every rise in price will create its own demand drop, deflation counter-trend. We in the US went from 18-19M barrels/day to 14M, like that. Our refineries (Shell, WNR, TSO, VLO) are getting crushed with debt used to expand production, increase efficiency, etc....and they got nothing in return but higher oil prices (due to trader leveraging) and lowered gasoline demand. Simmons is a shill, just like Cramer, and those guys on Financial News Hour are all shills as well. That's my opinion, but I've been watching this pretty closely for six years.