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3 Year Future Economic Timeline

Posted on March 25, 2009 by Adam

I wanted to spend some time thinking about the future. Where will we be in three years? Based on the recent monetary policies our government is employing in the scope of today’s global economic climate, I have some ideas. I have already posted about how the Dollar is dead, which will be a catalyst for a lot of the change we are about to see. Have a look at this hypothetical timeline to see how things might shape up over the next three years:

March 25, 2009 - The Federal Reserve begins buying one trillion dollars worth of US Treasuries. Tim Geithner announces that he is “open” to replacing the dollar as the world’s reserve currency. Gold spikes on the news, the dollar continues its plunge in the wake of the Federal Reserve’s announcement.

1 month later (April 25, 2009) - Gold reaches $1000/Oz. Crude oil trades up to $60/barrel ahead of the summer driving season. The dollar continues to weaken, which sends equities higher. With the weaker dollar, the S&P reaches up to 950 before turning lower again.

6 months later (September, 2009) - Gold trades at $1500/Oz., as weakness in the dollar continues to fester. The world continues to call for a currency to replace the dollar. The weaker dollar has helped the S&P form a base at the 800 level, and with fear removed from the market, a new bull run in stocks begins. Crude oil is stable at $60/barrel.

1 year later (March 2010) - General Motors announces record profits, brought on by rising exports due to a weak dollar to countries like China and India. Gold trades to $2000/Oz., but sells off hard when the International Monetary Fund introduces a new global currency in place of the Dollar. Meanwhile, stocks are trading at new relative highs. Although prices have not yet exceeded their 2007 highs, President Obama declares the recession “over”.

2 years later (March 2011) - The Energy Information Administration announces that world crude oil production has peaked, allowing the price per barrel to rocket past $150. Analysts predict crude will trade at $400/barrel by the end of the year. Although it does not reach that level, increasing global demand outstrips waning production capacity, driving prices higher in a seemingly endless spiral. In the height of the “energy crisis,” the S&P 500 tops out at 2000. From that point onward, higher oil prices are bearish for equities. President Obama calls on America to develop and utilize sustainable energy sources. Big cars and trucks disappear. Producers of clean energy technology, notably solar power, wind power, and natural gas liquification, thrive amidst the global thirst for energy resources. Sales for this technology soars overseas, helped by a weak greenback. Gold is stable around $1500/Oz.

3 years later (March 2012) - The 2009-2012 bull market is over. Unable to cope with the high energy costs, businesses lay off workers and scale back production. Borrowers struggle to pay back loans with pathetically weak currency. The Federal Reserve takes aggressive steps to combat inflation, but they are too late. A new bear market begins.

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