I’m simply amazed at how bad of a job that the United States and Europe have done at managing their economies.
On Sunday night, Federal Reserve Chairman Ben Bernanke was interviewed by “60 Minutes.”
He said that it could take four to five years to get back to normal employment levels (which he deems to be around five percent to six percent). That’s a very long time.
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So, you mean the trillions of dollars that have been spent isn’t enough? I mean, the Fed is buying another $600 billion worth of Treasurys through June. Yet so far, none of this has materially moved the needle on the unemployment rate.
According to “Bubble Ben,” it takes GDP growth of about 2.5 percent (which is where we’re at now) in order to keep employment stable. That means it takes more economic growth than that to spur hiring.
Evidently, they’re scared that we won’t even maintain that level of growth in the U.S. economy or they wouldn’t be buying bonds like they are going out of style.
That tells you that America is still beaten up and banged up economically. We’ve fumbled the ball.
But then there’s Europe.
You know, typically when the United States is in trouble, Europe is able to take up the slack (and vice versa). Right now, both economics are stuck in the pit.
As I’m writing, European finance ministers are meeting to talk about expanding a fund (that is already at about $750 billion to $1 trillion) to help stop the contagion in Europe. Their shaking in their boots because the eurozone’s unemployment rate just ticked up to 10.1 percent.
My friends, when a trillion dollars doesn’t cover your “economic sins,” you’ve got problems.
So Europe, as a whole, has fumbled the ball as well.
As you know in football, when one team fumbles the ball, it opens up the opportunity for the ball to be stolen and the other team to gain control.
Since these two economic powerhouses are licking their economic wounds and will be doing so for some years to come — it opens up the door for other economies to be the beneficiary of investment inflows.
Everyone didn’t go out on the end of the limb economically. For instance, Canada’s banks didn’t get into the trouble that the U.S. and European banks did.
Australia’s banks didn’t either. In fact, Australia’s top four banks are performing so well that they are back to pre-credit crunch levels. Also remember that Australia was the only major industrialized nation that didn’t go into a recession which much of the rest of the world.
New Zealand and Brazil are two other economies that could pick up the ball that the U.S. and Europe have fumbled. These two countries have fared much better than most of the other G-8 countries too.
What do all of these economies have in common? Their banks didn’t go out on the end of the limb and get into trouble — and they’re also all commodity-exporting nations.
Even though unemployment has remained high, and economic growth tepid, commodities have still continued to rally higher. We could see a re-enactment of the 1970s all over again where high unemployment and high inflation both co-exist.
What can you do about it to protect yourself and your family? Well, first of all: pay off debts and save like never before.
But after you’ve done the obvious — get invested in foreign currencies that have superior fundamentals to that of the euro and the dollar. Gain exposure to the Australian, Canadian and New Zealand dollars and Brazil’s currency, the real.
How can you do this? Follow my trades in the Money Matrix Insider newsletter and we’ll dodge these economic bullets together. Together, we can usher our families into greener economic pastures as we gain exposure to countries that actually have solid fundamentals. These solid fundamentals will be reflected in their currencies over time.
Those that are buyers of the good economies and short sellers of the ailing economies at the same time, have a huge chance to prosper.
While America and Europe have a long way to go before they are out of this economic upheaval, it doesn’t mean that you and your family’s future have to be tied directly to that. If you take proactive steps, you can change your future and the future of your family economically.
If you want to do something for the holidays for your family, give them a better economic start for Christmas. Give them a “Happy New Year” by taking charge of your economic future by gaining exposure to the economies that are on the “up and up.”
About the Author: Sean Hyman
Sean Hyman is a member of the Moneynews Financial Brain Trust. Click Here
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