There are a number of things I didn't write about, such as tax shortages in many states, that are results of the economic problems rather than causes. These shortages also contribute to the problems as states cut back employment and services to balance their budget. This is usually called a 'second order effect' and will aggravate the primary problem.
The primary problem, as listed in part I, is that the US has shipped knowledge and skills overseas and is reacting to the resulting competition by doing more of the same. Stated plainly, this approach is clearly not a recipe for success.
The ultimate cause of the actions that have resulted in economic decline is the dearth of long term planning at all levels of US society. Starting at the very top, the government has no long term planning group internally, nor do the outside consultants who are hired have much impact. Like most studies, the results and recommendations are put on the shelf. The typical response is "Oh, it's not a crisis? Then we don't need to do anything."
The government has lots of company in this area. With the exception of a very small percentage of businesses, most business' long term planning is three to five years, often done in a sloppy fashion which ignores side effects.
I don't mean to say that long term planning is easy - not if it's done right. Doing it right means taking the time and effort to look hard at where you want to go and identifying which factors may affect your plans. It is a cost with no obvious short term payoff, which makes it even less attractive to the instant gratification group. In addition, many people have heard this quote:
"No plan survives contact with the enemy,"
"Why then do we plan? How else can you measure where you have gone wrong and what things need to be fixed?"
The rest of Part II will outline my current and future expectations in general. How it will apply to any specific company or family must be evaluated by that company or family. The last section will outline a logical process to make that evaluation, and actions you can take to reduce your risks in our weak economy.
Planning is an investment in the future. You invest time and reap confidence in your ability to make your dreams and plans come true. Just as saving money is easy to overlook, planning for th future is easy to skip because its value is not obvious until later, when you really need it. I have learned this from my own experience and that of others, from both those who did and did not plan.
It's your future - Plan for it.
Planning problems aside, what can we conclude from our current situation?
I am reminded of a saying in a company I once worked for:
"Getting things done around here is like elephants mating - everything is done at a very high level, lots of trumpeting and screaming goes on, and it takes 18 months to get any results."
Once the real problem is recognized, it will take some time for companies and the government to take action, and even more time to cause effective change. I had those factors in mind when I wrote this problem will be with us for five to ten years. Hopefully, the second five years will be improving.
I'm not optimistic about shortening the time it will take, but it could be as short as seven years total. It all depends on how soon the cause is recognized, and how effective the changes are.
I expect housing prices to decline, but the perennial optimists in this industry will keep building beyond real needs. There will be fewer of them in the future. Forclosures will continue to rise for some time, setting all sorts of new and ugly records. This trend will result in loss of real value.
Individuals with large credit card bills are vulnerable to bankruptcies should a major income producer loose his or her job. This is one of the really bad side effects of easy credit and easy access to credit cards. Just when you are least able to pay off the bill, interest charges, often around 20%, will make that even more difficult.
New employment opportunities will be hard to find and harder to get. On top of that you can expect the jobs to pay less and be liable to change or disappear at any time. Many people will have to become self employed to survive.
I originally write that as 'Steps you can take', but it is clear that you really should take them now.
Even though the process will look too obvious to require spelling out, the real difficulty is not the process. It is that people usually find it too difficult to start and too easy to put off because 'We don't need this now'. When the unexpected crisis happens is exactly when you will need it, and it is the worst possible time to create it.
The steps in the process are specific and simple. The process is easy if you take them one at a time, one step per weekend. A few hours per week for a month or two will reduce your risks and the stress that comes with worrying about the future. Plus it's cheaper than tranquilizers and more effective because it deals with the problem, not the symptoms.
It is important not to try for perfection on any pass through the steps below, or on any specific step. Make the first pass a quick rough cut - get the major items down and leave refinement for a second or third pass. Remember, the plan is a guide and too much precision is as bad as too little. Don't make the plan too rigid because:
"The only thing we can be certain about the future is that we cannot be certain about the future."
I hope this article and process will reduce your stress in dealing with our current economic uncertainty. If you have questions or feedback, please email me at: bwrite .at. ywave.com.