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Your Place in the New US And World Economy

July 26, 2011 | Comments: 0 | Views: 124

What is next for the economy? The economy defines the boundaries within which all businesses must operate.

Like the lines on the edges of the road, cross at your own risk. All businesses - and therefore all jobs in the private sector - must operate within ("length" and "width") of these boundaries. Business failures occur when companies fall behind the times and are too far ahead of consumer demand. Likewise, most business sectors have a relatively narrow range of successful operations. It's hard to survive if you are either the most expensive or cheapest in your market.

The 2010 book from David Wiedemer, PhD, Robert Wiedemer, and Cindy Spitzer entitled "Aftershock" examines the events that created the financial meltdown. In this book and the previous book, "America's Bubble Economy" the authors make the case that the U.S. economy was an illusion, only the interaction of "bubbles".

A bubble is created when an asset temporarily booms. The former (pre-2008) U.S. economy was comprised of bubbles in real estate, personal loans, credit card debt, the stock market, and consumer spending. On their own, each bubble can rise independently. But in combination, the bubbles accelerate and reach unnatural levels!

The financial meltdown felt around the world is the consequence of these bubbles popping, or as the authors describe it, a "Bubblequake". The first stage of the financial meltdown included the fall of the real estate bubble, private debt bubble, stock market bubble, and discretionary spending bubble. On their own, each would have been significant. Combined, these popping bubbles lead to "The Great Recession".

Amidst the economic turmoil, the U.S. government tried to intervene. Bailouts of automakers and investment banks were designed to compensate for "toxic assets". Then the government pumped billions into the economy as "stimulus" to try to offset the funds lost to "money heaven" as bubbles popped and wealth simply evaporated.

Looking back, we now know that such efforts were ineffective. The results were a dramatically inflated money supply and a devalued dollar. The aftereffect was that the government soon reached the "National Debt Limit" as a result of spending nearly twice as much as incoming revenue.

The authors label this current stage as the "Aftershock", defined as the popping of the dollar bubble and the government debt bubble. Their conclusion is that current economic conditions do not simply represent a down market cycle or a typical recession. The difference is the multi-bubble economy, with these inter-linked bubbles ALL on the descent.

The authors also conclude that inflating these bubbles again is simply not possible.

Instead, they predict what is called the "triple double-digit" economy:

  • Double-digit unemployment
  • Double-digit inflation
  • Double-digit interest rates

All in all, these make up some dire predictions. So what does this mean for you? How will you earn an income in the new, post-Aftershock economy.

The "Aftershock" authors predict:

1. Decreased demand for capital goods, including cars, construction equipment, and major industrial equipment. Lower demand means fewer viable firms and fewer available jobs.

2. Decreased levels of discretionary spending. This affects fine dining, entertainment, travel, fashion, jewelry, art and so on. Less total spending means fewer stores and fewer employees.

3. A decline (just not as drastic) in the "necessities" sector including health care, education, food, and government services. Even these areas will face some pressures to downsize because they are highly dependent on tax revenues. A smaller economy simply produces lower tax revenues. Some programs will simply need to shrink, regardless of the level of "necessity". Many jobs will be retained, however the wage growth and benefits will necessarily be constrained.

Conclusion: as many as 50% of businesses in some sectors may simply disappear. This means that job losses will be staggering after the dollar and government debt bubbles pop, and there will be a mad scramble for those jobs that haven't been destroyed. For most people it will be increasingly difficult to find a job - any job - regardless of your qualifications and experience. And for those lucky enough to be employed, keeping a job will mean putting up with less desirable working conditions, benefits, hours, and pay. In fact, as competition for jobs greatly increases, most wages will surely fall. After all the bubbles pop, people will accept wage cuts in most jobs for one simple reason: if they don't, somebody else will.

By necessity, the government will be forced to live within tax revenue limits. The world economy will not allow unlimited printing of "funny money" to allow for unlimited deficit spending. The quantity of currencies injected by numerous countries will have already added to inflation on a global scale. Too many dollars, yen, euros, etc. will be chasing a declining quantity of goods and services.

The OLD economy is gone; the NEW economy is here.

In 2011 the federal government is overspending revenue by 40%. Even a 10% decrease in the size and scope of the federal government would add hundreds of thousands of additional people to the unemployment roles (including government positions and supporting private suppliers and contractors.) This does not consider the same cascading effects facing state and local governments that have never had the ability to simply print money.

So one of the defining characteristics of the post-dollar bubble economy will be a shortage of jobs. Unemployment levels will be much higher, and people will remain unemployed for much longer. At the same time, businesses will be forced to reduce wages and benefits to remain competitive. Millions of Americans will accept cuts in pay.

Especially hard hit will be younger workers and older workers. Prospective employees under 30 will find it hard to compete against older, more experienced and proven workers. Likewise, workers over 50 will also face extremely high unemployment levels.

At the same time, loss of tax revenue will force the government to tax more and tax deeper. Remaining businesses and employees will be taxed harder! Most will rationalize that 50% taxation is better than not working at all!

Different people will look at the same facts and draw different conclusions. So what do you think? Do you believe the bubbles will miraculously re-inflate and good times are on the horizon? Or do you believe (as the authors of "Aftershock" have detailed) that the old bubble economy is gone and a newer, leaner economy is what we can expect?

I concur with the conclusion that we are now experiencing the "aftershock". I always knew that an economy based on 20% appreciation in housing values, pensions exceeding 100% of wages while working, whole shopping centers selling completely unnecessary novelties and decorations, and unbridled government deficit-spending had to "pop" eventually.

And yet I am also believe 100% in the viability of the free enterprise capitalist model. So I going to make some suggestions:

First, if you are under the age of 30 or over the age of 50 you are in danger of becoming a statistic. You either need to make yourself invaluable to your current employer or prepare yourself for the high possibility of a layoff.

Second, identify some necessary service or product that you can get excited about!

You have arrived at a "fork in the road". You have two choices, plus a combination. You can take the wide road and do whatever it takes (training, cross-training, adult education, apprenticeships, etc.) to become superbly trained for the job you have or would like to have. Remember, there are going to be too many people seeking each job. You are going to need be impressive in every way and probably over-qualified to get noticed.

The second option (the "road less traveled") is to design your own occupation. Now this can be a retail, service, or skilled occupation. Each has its attractions to certain people. My personal choice is to provide a product or service on a nationwide (or even global) basis. Again, these offerings should fall in the category of "necessities" rather than novelties. Luxuries offer a much smaller but profitable niche if you can cater to the affluent.

Even in tough times, fortunes can be made by satisfying needs. The time-proven formula for success is to identify a problem and provide a solution. In the post-bubble Aftershock economy, providing alternative income opportunities is one legitimate solution!

Now owning your own business includes the hassles of regulations and structure that you completely avoid if you stay in the employee category. But your own business also provides a degree of freedom not possible as an employee. The single biggest benefit is that you have no cap imposed on your income, especially if you are selling a product or service and not your efforts by the hour. Operating a business also allows you to deduct expenses before taxes. A higher potential income and tax advantages results in a win-win.

And then there is the combination of the two options, and this may be a viable option for the majority of Americans. If you have a steady job there is added security in building a part-time business on the side. You gain income and can offset a portion of your expenses that are now cutting into your after-tax personal income (such as a home office deduction, travel expenses for errands, office supplies, etc.) You also gain the security of a income cushion if your regular job evaporates or you face a cut in wages.

Of course, many small businesses eventually grow into large businesses. You then have the choice of making your part-time business a new full-time profession, hiring some employees to manage the extra work, or selling the business outright at a profit. Again, many advantages and few disadvantages (if designed with some forethought.)

The "road less traveled" provides increased potential rewards for assuming personal responsibility. At the same time, millions of Americans have learned that "job security" is a contradiction. We have entered the new age of job insecurity in an increasingly lean and competitive global economy.

So where do you start? Here are my recommendations for the ideal business:

1. Unlimited income potential. This is only possible if you are selling a product or service. If you are selling your time, you are limited by the number of hours you can work each day, week, and month. When you stop working you stop earning, and this is true even if you can bill your time at $200 per hour. Also, you want to have at least some products or services which generate repeat sales - unless what you are providing is incredibly profitable in the initial sale. Likewise, if your business allows you to leverage the efforts of others to provide additional streams of income, so much the better!

2. Time and location freedom. The ideal business will take advantage of current technologies and allow you to be located anywhere, and sell to anyone. These technologies will also allow your sales to recorded 24 hours per day, 7 days per week. Some products or services may have limitations which restrict the sales area to one location. But many products and services - especially digital products - allow sales to be made on a worldwide basis instantaneously!

3.Small initial investment. While many downsized employees have bought franchises and other fixed location business opportunities, I can not recommend this option. For one, the start-up costs can be very high, literally hundreds of thousands of dollars with no guarantees. Then you are faced with the reality that you have assumed the job of full-time personnel director and you spend all your time either managing employees or hiring their replacements. Instead, I would recommend an opportunity with a low start-up cost. This allows you to begin

part-time. It also means you won't have to qualify for financing, which may be next to impossible for a new business in the post-bubble economy.

In my opinion, network marketing fulfills all these criteria. There are literally thousands of products and services that are marketing by networking. Combined with the power of the Internet and social media, networking has entered the mainstream and is a viable option for a full-time or part-time business.

Millions of Americans have used network marketing to produce extra income. The company provides all the support functions, from billing and credit card processing to accounting for commissions. Networking includes the creation of a downline that produces additional income. And consumable products provide residual income, often from several generations of customers that you have never even met.

There are no restrictions based on age, experience, location, or net worth to join a networking company. People from all walks of life - including unemployed - have become successful in network marketing. In fact, many thousands of networkers are literally unemployable after experiencing the freedom and income potential of network marketing.

If you decide that networking is right for you, there are countless resources (both free and low cost) that are available to shorten your learning curve and help you succeed! There are also turnkey marketing systems designed to automate the process of locating customers and claiming your slice of the Internet!

Randy Reek writes articles about making money from a base of over 30 years of business success. Randy has been a top salesman in retail and wholesale sales; consumer and business-to-business settings. He has also operated his own successful mail-order business.Visit for information and opinions on making money, saving money, and your place in the global economy. For more information on specifically on income opportunities in the new world economy, see the Making Money section of the blog.

Source: EzineArticles
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