11 Money Prophecies for 2011

  • 11 Money Prophecies for 2011

    America had a rough year. Unemployment remains high, the housing market is still a mess and national debt in the U.S. climbed past $13 trillion. Given the mercurial state of our economy, Americans must certainly wonder what next year has in store. To find out, MainStreet consults three economists, a psychic and a Magic 8 ball Coke bottle. Photo Credit: James Cridland
    Will the unemployment rate drop significantly?
  • Will the unemployment rate drop significantly?

    Newly-released job stats seem to hint at a recovery, but our economists said no one should be fooled into thinking the unemployment rate will improve significantly. “There will be a false optimism as temporary jobs increase,” Mark Lieberman, a private economic consultant and former senior economist for Fox Business Network, told MainStreet. Once temporary work runs out, Lieberman said, these employees will exit the workforce again and the unemployment rate will continue hovering around its current rate of 9.8%. Anand Bhattacharya, an economics professor at the W. P. Carey School of Business at Arizona State University, offered an outlook that’s slightly less bleak. “The unemployment rate will hover around mid nines for the first half of the year, and start getting closer to 9% by the end of the year,” he said. Eerily, the Magic Coke bottle (unable to secure a Magic 8 Ball at press time, we used the closest app our iPad could offer) agreed: “Nien. The answer is nine.” Photo Credit: slushpup
    What industry will thrive in 2011?
  • What industry will thrive in 2011?

    Marcus Goodwin, mystic, investor and author of The Psychic Investor and the forthcoming book The Buddha and the Green Taxi, predicted the banking sector will be on its own in 2011. “Uncle Sam did what he could to prop up the banking sector and get people borrowing and spending again,” Goodwin said, “but that idea will be old hat in 2011 and beyond.” What will be big? According to the mystic, food, precious metals, natural resources and commodities will all appreciate. “So, too, will the tech wars continue and prosper,” he said, adding, “eventually alternative energy will lead the charge but that’s five or 10 years out.” Lieberman, the economist, believed the health care industry will continue to thrive in 2011, but administrative workers will be the ones to benefit from the continued upswing, not medical personnel, such as doctors or nurses. “Office personnel are lower-paid,” he said. “Insurance companies will need to staff up in anticipation of new clients and customers.” Photo Credit: ernst
    Will housing show signs of recovery?
  • Will housing show signs of recovery?

    Sadly not, according to economics professor Jay Butler, who is also with the W. P. Carey School of Business at Arizona State. "Heading into 2011, it's still going to be difficult to get a home loan,” Butler said. “Underwriting guidelines are going to remain tight. Interest rates may go up, and I don't see things getting much better than 2010.” Lieberman agreed the housing market won’t stabilize in 2011, pointing out that foreclosure overhang will limit new home building, and that concerns about mortgage interest deductibility will scare off prospective buyers. Photo Credit: woodleywonderworks
    Will Americans downsize their credit card debt?
  • Will Americans downsize their credit card debt?

    The economists were optimistic. “They already are and will continue to do better on this front,” Bhattacharya said. “This Christmas, cash was the new credit card.” But Goodwin, our mystic, didn’t foresee the same outcome.  “Not this year,” he said. “People continue to drag their feet and pay the minimums.” Photo Credit: Andres Rueda
    Will the rate of inflation decrease or will deflation become a bigger problem?
  • Will the rate of inflation decrease or will deflation become a bigger problem?

    Goodwin said it’s all about “deflation, deflation, deflation,” but unlike the Federal Reserve, he didn’t see this as a bad omen. “Deflation is not necessarily a serious problem for all. It’s actually a healthy redistribution of wealth,” he said. “Only for the people who initially controlled the lion’s share of wealth is it serious because the monetary difference [less consumer spending] comes out of their poc Lieberman expects inflation rates will remain low. “Retailers will remain reluctant to raise prices,” he said. “Deflation will remain a threat, but not become a problem.” Photo Credit: Serge Melki
    Will the national debt rise past $16 trillion?
  • Will the national debt rise past $16 trillion?

    The national debt hit $13 trillion for the first time in our nation’s history back in May, but our experts believe that it may be controlled in 2011. Bhattacharya said there will be serious--and possibly, bipartisan--attempts at reducing the deficit next year and Goodwin agrees … sort of. “The current level of government spending is unsustainable,” Goodwin said. “So the national debt is about to top out here for a while.” Photo Credit: Digiart2001 jason.kuffer's
    Which state will really shine in 2011?
  • Which state will really shine in 2011?

    “All boats will rise and fall with the same tide this year,” Goodwin said, adding that no state will stand out in 2011. Lieberman, however, thought the Lone Star state might shine. “[George W. Bush’s] library will spark tourism, the equivalent of a pilgrimage,” he explained.  And Bhattacharya picked Utah, though he offered no explanation for the state’s predicted windfall. Photo Credit: Scott Ellis
    Will America re-enter a recession?
  • Will America re-enter a recession?

    Lieberman estimated a 40% chance the U.S. will re-enter the recession in the new year as “one shot props to the economy disappear,” and federal aid to state and local governments declines. Bhattacharya, however, said there is no shot at a double dip in 2011. Goodwin agreed because, unlike the National Bureau of Economic Research (which announced this year that the recession officially ended in June 2009), he thinks we never really left the last one. “[The U.S. is] just experiencing an ecstatic bounce off the lows that will eventually come back down to earth,” he said. “It’s a ‘cyclical bear’ if you will.” Photo Credit: valeblos
    Will Americans splurge more in 2011?
  • Will Americans splurge more in 2011?

    Sorry retailers, but the profitable holiday shopping season isn’t a sign of good things to come, according to our economists. Lieberman said people will avoid shopping sprees as they continue to struggle with buying the basic amenities. “Not everyone is Cliff Lee,” he pointed out. Bhattacharya, keeping with his cautious optimism, predicted Americans will start to spend more incrementally in 2011.  However, “it will be awhile before anybody splurges.” Photo Credit:   mahalie
    Will any tablet challenge the iPad?
  • Will any tablet challenge the iPad?

    “Nothing,” Bhattacharya said definitively. “There was no serious competitor for the iPod, and none will emerge for the iPad.” Still, Lieberman predicted Apple may in fact have an adversary in the New Year. “The iPad has limitations,” he said, citing its lack of Adobe Flash and other connectivity issues. “An Android-based device will leapfrog [over it], while offering almost as wide a range of apps.” Goodwin was ambivalent. “The iPad is innovative indeed, but until we get a single piece of plastic in our hands that does the work of all these machines – computer, phone, tablet, camera, video – the tech wars will rage on,” he said, before hinting that Apple may have the upper hand by indicating that he expects its stock to “rage” up. Editor’s Note: We did not consult the Coke bottle as it represented a conflict of interest. Photo Credit: Renato Mitra
    Will there be another Wall Street scandal in 2011?
  • Will there be another Wall Street scandal in 2011?

    None of our experts were keen on this question. “I’ll leave the scandals and mud-slinging for the pundits in election 2012,” Goodwin said. “They’ll have plenty to talk about.” Bhattacharya felt that after this year’s passage of Wall Street reform, 2011 will be, well, boring. “Maybe municipal debt?” The Magic Coke Bottle was also tight-lipped. “That’s just illegal,” it said. We doubt Goldman Sachs knows that.
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