I think it's going to go something like this...
1) Interest rates will keep rising, slowly, for the next couple of years. Average people with high consumer-debt burdens will be hurt.
2) The housing bubble will stop inflating and "investors" chasing quick profits will move into stocks again. People who have to sell homes bought in the last ~3-5 years will be hurt. The stock market will go through another mini-boom, fed by mergers and acquisitions. "Day trading" might even see a renaissance, but as before small traders will lose their shirts.
3) Heavy manufacturing, airlines, auto manufacturing, home construction, etc., will continue to be under heavy pressure. Union jobs in manufacturing and in government will be under increasing pressure to accept lower wages and greater financial contributions to benefits.
4) Immigration will continue to put pressure on wages in the service and construction sectors, and off-shoring will continue to put pressure on white-collar wages.
5) We're sending huge amounts of money overseas every day. E.g. In September, the average cost of an imported barrel of oil was [link|http://www.eia.doe.gov/pub/oil_gas/petroleum/data_publications/petroleum_marketing_monthly/current/txt/tables01.txt|$58.79]. In that month we imported about [link|http://tonto.eia.doe.gov/dnav/pet/pet_move_wkly_dc_NUS-Z00_mbblpd_w.htm|10.2 Mbbl/day]. That's $600 M per day. There is no indication that that number will do anything but increase in the next few years.
Many of these changes are probably inevitible, but that doesn't mean we don't have a responsiblity to think about what it means for the future and what we should be doing to preserve our standard of living.
I don't think the next few years are going to be a good time economically for the country. Those who have money to lose and who can afford to be in the stock market may do very well. JQ Public who has 20 years in at John Deere or Ford or Boeing is going to be hurting.
Many areas of the country are hurting very badly now. E.g., Dayton, Ohio is suffering terribly due to problems with General Motors and Delphi and due to problems with the city government. Many parts of the midwest have a terrible problem with methamphetamine addiction and crime. We shouldn't just shrug it off and tell everyone to move to Alabama to get a job at Hyundai or to Mexico to work for VW.
We, as a country, need to be thinking about how we make the transition from manufacturing and services with $50-$75/hr wages (with benefits) to $25-$30/hr wages. We're not going to keep our standard of living by having huge swaths of the workforce have to take 2-3 jobs to have the same income.
We need to be investing in new technologies - and in more than just medicine, better CGI for movies, and music players! We're not going to win by racing China, Afghanistan, Mali and Burma to the bottom of the wage scale. We've got to invest in our strengths - smart people; invention; the world's broadest technology base; innovative capital markets; etc.
Why don't we have an efficient, modern, fast, nationwide rail system? Why don't we have an electrical grid in the nation's capital that doesn't suffer from frequent [link|http://www.washingtonpost.com/wp-dyn/metro/specials/manholes/|manhole explosions] and a sewer system that doesn't [link|http://www.wtopnews.com/?nid=451&sid=608547|dump raw sewage into the rivers when it rains]? Why don't we have traffic lights that adjust for increasing traffic flow during the day? Why do we have to cross our fingers every summer that the electric grid will survive a heat wave or that an ice storm won't cut power to hundreds of thousands of homes for weeks? Why? Because we have been too short-sighted.
I think this time is different than the previous few decades. Just looking at the raw inflation, GDP growth, unemployment, etc., numbers doesn't show the stress that the economy is under. Japan is coming out of its doldrums. Germany is getting back on its feet, and China continues to grow like gangbusters (one has to wonder though, how long will it last?). When our economy slows down again, as it will, the rest of the world won't have to wait for us the way they did in the past. We could easily be left behind unless we invest in our future.
My $0.02.
Cheers,
Scott.
