Today on MoneyLife with Chuck Bentley
Monday, December 7, 2009
Economic Outlook for 2010
I got an email recently received from a listener who is a missionary in Papua, New Guinea. The man shared how a MoneyLife interview with John Nardini about his blog FreeMoneyFinance.com, inspired him to start his own financial blog. The man's family lives off one income and is debt-free except for their house, and they plan to have it paid off in 2010. This a great testimony of what we want for all MoneyLife listeners!
Back in March, Rusty advised listeners to get back into the stock market. The Dow has climbed 66% since then. Rusty got it right. It takes courage to invest in a down market, but Rusty’s experience told him the market would rally. Looking ahead to 2010, the market outlook is more uncertain now than it was back in March. The market is actually at normal valuation right now, so there's no clear indicators where it will go. The stock market and the economy have vulnerabilities. Rusty expects the global economy to steadily improve, but things could go wrong. There are some potholes in the economy that could get bigger. People on a fixed income or those who don’t have money to invest shouldn’t be conservative even if you miss out on another rise in the market. The Dubai government borrowed to finance commercial building and got itself in trouble. They violated a Biblical principle. God won’t be mocked. There’s always a price to pay; it may be delayed, but eventually it will come. Crown's late Co-Founder, Larry Burkett said in 1992 during the Clinton administration, that if the U.S. government tried to offer healthcare to everyone it would be the death of the economy. That’s what’s being considered again today. Rusty says no one believes getting the government involved in health care will reduce costs or reduce the deficit. Estimates on the cost of Medicare, when it was started, turned out to be 10-12 times less than actual costs. Government programs naturally expand. Socialized medicine will cause heavier taxation to be needed which also hurts the economy. Rusty remains optimistic about the economy next year, although I'm concerned about the possibility of another housing crisis. So many homeowners are upside-down on their mortgages and are trying to refinance. Rusty says the way to avoid another housing crisis is for the global economy to grow and grow quickly. We need the demand for houses to pick up which will lead to increasing prices. If the economy doesn’t grow rapidly, there will be more mortgages underwater. If that happens, the banking system will have problems again, maybe not as much as last year, but significant. Banks need to be healthy for the economy to grow. Banks must lend for businesses to expand. Any stress in the financial system likely would cause the stock market to tumble. A French bank warned wealthy customers of another global financial crisis because of western governments having too much debt. The U.S. is borrowing money from China, printing money, and only getting by because of low interest rates. If rates go up and there’s inflation, the interest payments will be staggering. Our national debt is bigger than a pothole. Contact your elected representatives. They only respond to pressure and crises. The President has finally begun mentioning the issue. I hope when he’s finished with healthcare that he will turn his attention to the deficit and jobs. Canada went through a similar experience, the government there made changes to bring their budget into surplus when fear caught up to it. The U.S. is at 80% debt to GDP, and approaching threshold crisis. We're $12 trillion in debt. The Administration's health care reform proposal doesn’t make economic sense. Rusty says it takes a crisis to get the attention of most government leaders. Voters must force them to deal with the issue. Unfunded liabilities for Social Security and Medicare are even bigger problems than the current debt. The government is either going to drive off the cliff or make a sharp correction to deal with its debt problem. Rusty says it will be several years before disaster strikes. There is still time to make changes, but the crisis is coming and if it’s not corrected, our economy will completely collapse. It will take years to correct; we will have to cut spending and raise taxes. This is necessary pain. Our first goal must be to turn the budget deficit into a surplus to prepare for unfunded liabilities. Meanwhile, the dollar will continue to be squeezed. *** You can become part of Crown's effort to teach biblical stewardship by making a gift online or by calling 800-722-1976. Thank you! |
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7-Step Solution to the Economic CrisisIt is time we stop looking to the federal government and mobilize the grassroots of this nation to bring about the economic change that is desperately needed. |
Is Welfare Scriptural?Welfare was transferred from the church because the church neglected it. It can be recovered, and the church can become a leader in caring for the needy. |
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Morality and EconomicsThe decline in moral standards and values not only affects our spiritual and emotional welfare, but it directly influences our value system. |
Federal Reserve SystemAlthough the Federal Reserve may not always operate in the best interest of the nation, it’s regulatory use is presently the law of the land. |
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Other Resources: |
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Our guest today is Rusty Leonard.
Rusty is always very optimistic in his view of the economy.
He can find good even in bad economic news, and that keeps me encouraged
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Rusty Leonard is the Founder and CEO of
