Sunday, November 22, 2009

I Believe these Events are Inevitable

After watching the new administration over the past 10 months, I believe the following will happen in the next few years:

  • High inflation. The high level of deficit spending by the government is bound to create significant inflation. The more dollars that are printed, the less they are worth. In addition, as the dollar is devalued versus other currencies, the cost of imported goods will go up.

  • Higher health care cost, lower quality. I have yet to see our government reduce spending, cut costs, or improve efficiency in any area and I don't expect it to be any different for health care. If the recent dispute over the use of mammograms is an indication, I also expect health care to be worse for the users of the government health care system.

  • Taxes will be higher for everyone. Only taxing the rich can't work, because the rich don't make enough money to cover all the additional government spending, even if they were taxed at 100%. The government will figure out a way to increase taxes on the broader population, even if they aren't call taxes.

  • Recession recovery will be slow. In my opinion, the government has used to recession to create political programs, instead of delivering the necessary economic programs. For example, about 25% of the $787 billion stimulus package has been spent to date. If it was so critical to rush the legislation through Congress, why has only such a small percentage been spent over the first 9 months?
  • Based on the direction that our government is taking, I see these outcome being very possible. I would be very happy to be proven wrong. In the meantime, we'll be modifying our financial plans to account for the possibility of the above scenario.

    For more on New Beginnings, check back every Sunday for a new segment.

    This is not financial or economic advice. Please consult a professional advisor.

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