Paul’s Economic Corner:
The stage is being set for the U.S. recovery to go from trivial growth to big growth in 2013. The Federal Reserve came out last week stating they would raise the interest rates when unemployment reached 6.5%. In 2013, unemployment rates should be at 6.5% due to the government dropping unemployment benefits for people who are not looking for a job and due to explosive energy job creation. When the Federal Reserve raises the interest rates, U.S. banks will finally have the incentive to lend the 11 trillion that they have been sitting on for the past 3 years. Over the last three years private businesses (70% of U.S. GDP) couldn’t go to banks to get short term loans, so they have been stockpiling 3 trillion dollar to deal with their cash flow issues. When the interest rates raise and banks start lending money again, businesses will immediately buy property, buy capital equipment, higher people, start taking risk and immediately invest the 3 trillion dollars they were holding on to.
The dollar is going up. The U.S. Private Sector is going up (70% of U.S. GDP), while all other currencies and economies are contracting. Investment capital around the world is shifting back to the U.S. Dollar and the U.S. Private sector. Again, this provides more investment capital for U.S. Businesses to expand. Energy is leading this growth in the U.S. economy. Sideways drilling and fracturing are profitable at $65 per barrel. We should see oil prices at $65/barrel by the end of 2013. Transportation, manufacturing, and agriculture will become super competitive around the world at these prices. Energy intensive manufacturing is also already moving back into the U.S. economy.
We have three bumps in the road. The Fiscal Cliff, the debt ceiling limit, and the Executive Branch regulations that will happen between now and March. The dollar and U.S. private sector (70% of U.S. GDP) is strengthening in spite of the Executive Branch, Senate, Blue State’s spending and the Federal Reserve’s foreign currency protection policies. All of the bad and inefficient companies were gone over a year ago. The remaining businesses are the leanest and most efficient companies probably in 30 years. All they need is investment capital and energy prices to go down. We should see all of that by the end of the 2013 summer oil spike, at the end of September.
The dollar will become “King” and if all of this happens, gold prices will collapse to around $600 to $800 an ounce. It is time to start doing some research on alternative investments and start moving your portfolio around. This is the time to make your moves. Good Luck.
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