This is Part 5 of an article series which takes a look at a 7 steps to lift yourself out of the recession, no matter how deep it gets.
The question is who is going to have the vision to start building a business today that will be in high demand in a few years?
When the phony economy 2.0 that I explained in Part 1 falls apart, consumers will still need to eat, sleep, buy clothing and many other things.
No Jobs In Sight
They will also need jobs to purchase these things. The reason unemployment remains high is because the governments bailouts and stimulus packages are keeping prices at inflated levels and not allowing the deleveraging process to lower prices.
That means that wages need to remain at inflated levels or perhaps need to increase in order to continue paying bills and account for rising inflation. But keeping wages at inflated levels causes unemployment to remain high.
This is all because of the government stimulus packages that are trying to stop the deleveraging process from taking place.
If the government allowed prices to fall, people could go back to work for half their previous wages and still be able to afford to live, and if people could afford to work for much lower wages businesses could afford to hire them again.
But until the phony economy 2.0 collapses and the government stops trying to inflation its way back to prosperity, we are not going to see this happen and unemployment will remain very high.
After ‘Phony Economy 2.0’ Collapses
The failed government policies are showing their true colors and people are not happy. As a result, major policy changes have begun and will continue for several years.
The change in government policies away from easy money and inflation will allow the economy to face the recession that is desperately needed to clear the market of the decade of credit expansion and consumer debt that has not been paid for.
After much needed government policy changes, the economy will begin to re-employ the labor force at much lower wages. The economy will look much different then it does today in which true consumer demand will be much more measurable and predictable.
This is unlike consumer demand in the past which was primarily driven by government programs and the expansion of credit. Consumer demand is going to be solely driven by the wages of consumer - as it should be.
Perhaps the most difficult time will be the transition from old jobs to new jobs. As consumer demand begins to create new trends, new businesses will be formed to meet those demands. Those new businesses will in turn create new careers for millions of people.
The tricky part is perserving the majority of your wealth during the transition.
The Future Economy
The future economy will consist of much lower real wages in terms of inflation and at the same time will be suffering from massive inflation from the trillions that the government poured into the economy in the last two years of failed stimulus packages.
Consumers are primarily going to be interested in buying essential goods like, food, water, clothing, housing, entertainment, information, education, furniture and basic household supplies.
These are the area’s in which successful businesses will be found. These are the areas to think about starting a business in today so that your business will thrive in the future. Consumer demand is going to shift from non-essential goods and services to essential goods and services.
This process is already taking place as many of the businesses that produce or sell non-essential goods are going out of business by the droves - while some of them are being temporarily preserved by the government.
Imagine Yourself Working at or Owning a New Business in the Future
Which sector of the economy will you be working in? Perhaps you could start a clothing repair business or a training center that offers short classes to people looking for new skills or perhaps you could create a custom furniture business or a gardening business to help people grow more of their own food.
There are endless possibilities of new businesses that will thrive in the new economy, the question is, are you going to start one of them or wait for someone else to start one and work for them?
It is with this clear vision of the future of the economy that you can start building a business today with bold confidence that customers will soon be coming and when they do you will be ready for them.
Even if you are not interested in owning your own business, I suggest that you consider setting up the foundation of a small business as a backup plan.
You could start your business as a hobby and slowly start adding customers. If you get laid off or your wages get cut, you would have the foundation setup and a small customer base already in place.
This gives you the option of either returning to find another job or focusing on your small business for income. A small business could be your insurance policy – reducing your risk of a financial hardship.
Of course, the best insurance policy against a financial hardship is a large savings account with no debts – but that is unlikely in the US.
Savings Rate and Exports
The economic uncertainty, loss of wealth and the increase in demand to fund new businesses will all increase the demand for real savings. This will also help drive up interest rates.
And the savings rate in the U.S. will finally start to increase after decades of decreasing. This will also temporarily reduce consumer spending to a much more normal rate - which is a good thing for the long-term growth of the economy.
Exports will also need to increase until we return to a positive monthly trade deficit. This will drive a lot of jobs, from production to transportation to shipping.
The engine for growth in the next decade will likely have to come from an increase in manufacturing goods for both domestic consumption and exports to pay for the goods that we import, especially oil.
In Part 6 of this article series, I’m going to discuss how to start a business based on true demand, which is very difficult to realize with all the money that’s currently being created and spent in the economy.