Economic Turn-Around Leads to Slow Recovery

Yesterday, on April 1, 2009, not as an April Fools Day gag but as a serious forecast I posted my Quarterly Forecast for 2009 Q2, titled "Economic Turn-Around Leads to Slow Recovery." As far back as my 2009 annual Outlook article and video for 2009, I have run counter to the prevailing wisdom on the length of the current global recession, by suggesting that it will bottom out sooner than most expect, and that by year's end we will be on the recovery.

Events of this very day, April 2, 2009 are already supporting this forecast, events such as the G-20 agreement, an increase in factory orders, and a recovering stock market.

At the same time, I encourage you to read the full article, or the press release that went out over PRWeb, because I explain how the situation is more complicated than a simple headline suggests.

A recovery will begin sooner than most experts thought because of three interrelated factors - a build up of available cash via increased savings and months of withdrawals from the equity markets, national and international economic stimulus efforts beginning just now to have an impact (which will grow over the next six months), and a growing understanding by investors, with available cash, that investing in new technologies and business models is the way forward. Check out a recent Business Week for an exploration of game changing ideas for business.

The downside, which I explain in the article, is that to say we will begin a recovery does not imply that we will snap back to some kind of old normal. On the other side of a turn-around is something new, a revised economy will take a long time to develop. To understand this, you must begin to grasp how the current deep economic recession is not caused by the financial crisis - rather the financial crisis is a symptom of deeper causes, which include disruptive trends in energy, technology, and global culture that have been building for decades, and converged in the global casino we have called the financial system. We can fix the financial mess, difficult though that may be, but the disruptive trends remain - ever more expensive energy and technology developments capable of disrupting traditional industries and global culture.

The bottom line in my Q2 2009 Forecast is this:

We have entered a new energy era, in which global economic growth is necessary to fix the debt problem, but the same growth will drive up energy prices, which will lead to a new bust, in a probable cycle of rinse and repeat for the near future.

In addition, Internet and wireless technologies have developed and spread globally to the point that their long-forecast disruptive effect on publishing, music, sales activities of all kinds, as well as organization structures, are now coming to a bifurcation point.

On the other side of this recession will emerge different ways of conducting business and pursuing economic development.

Read the full Forecast, here. Read the press release here, or at PRWeb.

While you are at it, check out this slide deck from a recent speech on the Future of Technology, receiving good viewership at SlideShare.

Glen Hiemstra is a futurist speaker, consultant, blogger, internet video host and founder of Futurist.com. To arrange for a speech contact Futurist.com.

Economic Turn-Around Leads to Slow Recovery: Glen Hiemstra Quarterly Forecast Q2 2009

By Glen Hiemstra, March 31, 2009

The world economy, mired in recession, will reach a turn-around point sooner than expected. However, anyone waiting to get back to doing what they were doing before the recession will be disappointed.

As I said in my first speech this year, on January 8, 2009, to the Cobalt company, “This is not our father’s recession, but will become our children’s renaissance.” This prediction is coming true.

Economic Turn-Around, but Long Recovery
Current consensus views are that the recession will be deep and long-lasting. This view is overly pessimistic. Instead, the downward spiral of economic production will bottom-out between late third quarter 2009 and late fourth quarter 2009. By the end of the fourth quarter global economic growth, and U.S. national economic growth will shift to neutral or positive territory. However, this turn in direction, while a relief, will not signal a mere return to a former way of doing business.

Rather, the recovery will be a long and challenging one because it involves adjustments to disruptive technological and energy developments, and adjustments to a new global value infrastructure. The recession is, in other words, about more than financial market mistakes or regular business cycles.

A more rapid than expected turn-around is probable because of three related factors: pent up cash accumulating from increased savings and massive withdrawals from the equity markets, a shift to opportunity thinking that can occur when investors see that innovation will be necessary to drive a recovery, and effective government interventions beginning to take hold now.

However, a long and uneven recovery is probable because a new reality has emerged that is not directly related to the debt crisis.

Disruptive Technology and Energy Developments
Observers believing that financial markets caused the current recession are missing the whole picture. The mortgage and derivatives markets were symptoms of the core problem, which will not be solved simply by returning a sense of normalcy to the credit markets. The root causes of the current economic downturn lie more in volatile energy prices that have disrupted both manufacturing and auto-based development patterns. We have entered a new energy era, in which global economic growth is necessary to fix the debt problem, but the same growth will drive up energy prices, which will lead to a new bust, in a probable cycle of rinse and repeat for the near future.

In addition, Internet and wireless technologies have developed and spread globally to the point that their long-forecast disruptive effect on publishing, music, sales activities of all kinds, as well as organization structures, are now coming to a bifurcation point.

On the other side of this recession will emerge different ways of conducting business and pursuing economic development.

New Energy, Transportation, and Developments Needed
In order to recover, on the long time line that I am predicting, three related areas must be the subject of new discovery, new investment, and new models. First is a shift to intensive sustainable energy development, something we have waited too long to accomplish in a painless way. Second is a shift toward transportation technologies and most of all systems that are integrated, less auto-centered, and reliant on renewable energy, primarily electricity. Third is a new model for community development that shifts away from an auto-centric to a people-centric focus, and which captures the need for rethinking basic local agriculture. Each of these is a revolution its own. Together they would lay for the foundation for the renaissance of at the beginning of the year.

For additional information on an alternative view of the future of the economy, as predicted in Glen Hiemstra’s Quarterly Forecast, please contact us .

Glen Hiemstra is a futurist speaker, author, consultant, blogger, internet video host and Founder of Futurist.com. To arrange for a speech contact Futurist.com.

How Long Will the Recession Last?

A topic on everyone's mind is how long the current recession will last? That this recession is steeper and deeper than any since the early 1980's, and it looks now like any since the Depression, is becoming fact. But when do we turn around?

I have been addressing this question and the economic meltdown for some time, here, and in my Outlook 2009. Recently I discussed the question with media futurist Gerd Leonhard in a video we produced for our ongoing series, whereisitgoing.com.

Gerd, based in Europe, believes as of now that we have a long way to go before a recovery begins. I argue in the video, as I have here at Futurist.com, that a turn-around is coming sooner. The amplifying effect of the 24-hour news cycle and mostly the Internet has had several effects - exaggerating our sense of what is happening, and speeding up the down cycle. This amplifying effect will work on the up cycle as well, and while this is not the only factor, it is one of the factors that will lead us to turn-around by year's end. A turn-around does not mean we have recovered, but that the bottom has been reached and a recovery has begun.

Now, what comes out the other end is not the same economy as we had prior to this recession. Gerd makes the case in the video that the recession is partly the culmination of several disruptive changes, the Internet chief among them, now deeply impacting business models. On the other side of this recession is a changed set of business rules, and a new cultural outlook. Watch our conversation, recorded via Skype video, below.

65,000 is a lot for one day

Readers know that I am pretty relentless in finding how and why things are going to work in the future. Current realties make that a challenge. Today's announcement by Caterpillar, Home Depot, Sprint, Texas Instruments, and others of total job cuts, just today, Monday, of 65,000 is stark.

It means that time grows shorter by the day, really, to take action on the U.S., and by extension, the global economy. In their columns or blogs today, both Paul Krugman and James Kunstler help us to understand the options. Krugman explains why fiscal stimulus is the best, nearly the only positive action possible right now. Kunstler explains, as he does almost every week, that what is ahead is not merely a few policy adjustments to get back to an old reality, but rather the beginning of a long-term process of shifting our priorities and life styles to adjust to new economic and energy realities.

Let's call on the U.S. Congress to step up to the challenge, and not devolve into snafus.

Glen Hiemstra is a futurist speaker, consultant, blogger, internet TV show host and founder of Futurist.com. To arrange for a speech contact Futurist.com.

Futurist Speaker Glen Hiemstra: Outlook 2009

Outlook 2009

Watch the video of my Outlook for 2009 as a futurist, speaker, and consultant.

This is my final blog entry of 2008, before we take a couple of weeks off. I am cautiously optimistic about 2009. This may surprise you. Here is why.

Future of EEE – Economy, Energy, Environment

Economy: When I recorded Outlook 2008 in December of 2007, I predicted that the economic slump driven by the debt crisis would be worse than experts were suggesting at that time. In fact I had just heard Steve Forbes say in a speech that the debt crisis would be a minor inconvenience in 2008 involving a couple of billion dollars and was nothing to worry about. But of course it was a huge iceberg, into which we have crashed.

However, all is not lost for 2009. The key drivers in how the world deals with the economic crisis will be 1) the amount of the U.S. stimulus (plus that of other nations), 2) more importantly how this stimulus is applied, and 3) the psychological impact of the new U.S. administration. As it looks now the stimulus package(s) will be very large by historical standards, and critically, will be applied in the U.S. to job-creating endeavors rather than simply being poured into banks as most of the money so far has been. Assuming the money can get flowing to real projects the impact will begin to be felt by year end.

The psychological and emotional impact of a new direction is generally underestimated at this time. Last night I saw video of the election celebration in Grant Park, Chicago, on November 4, 2008. While not all shared in celebrating the Obama victory, I do not think we can accurately calculate how large the positive feeling will be when the new administration finally takes office and begins communicating its full plans.

When combined, these three drivers – amount of stimulus, its application, and psychological uplift will, I believe lead to such increased confidence that the economy will turn faster than assumed by the end of the year. This applies particularly to consumer and equity markets.

The housing market is another matter, as we have far to go before housing values match actual incomes. It is in the housing arena along with transportation that we face an important realization. The recovery that begins in 2009 will not return us to business as usual but to a new kind of economy, one that is more modest, more sustainable, and more equitable. If this is not the direction we go, then things will get worse instead of better, for the long run.

Energy: In Outlook 2008, I suggested that we’d see $140 oil by mid-year, which we did, followed by falling prices. But no-one, including me, anticipated a crash in prices like we have seen. Now, however, it appears more likely that by the end of 2009 we will see oil prices climbing to $80 rather than falling further or staying stable. In fact, do not be shocked if by the end of 2009 we are again talking about, if not quite yet seeing, $200 oil. The simple fact is that discovery and development of new oil does not keep pace with oil usage, and has not since the 1970’s. The slightest increase in economic activity will shift prices upward again, while for the time being new investment is stalled.

Environment: The new U.S. administration promises a sharp turn in environmental policy, toward paying attention to climate change. We will see lots of positive action within the stimulus plan and via general investment, in making the built environment more sustainable (retro-fitting public buildings, schools), taking steps to enhance the electricity grid for increased used of solar and wind power, and we will see more breakout activity in nanotech solar energy.

Future of Health Care

The U.S. economy cannot fully recover until and unless the health care crisis in the U.S. is addressed. This crisis includes 50 million uninsured, and health care expenses which on average are up to two times those of the rest of the industrial world, for quality of care that by many measure is no better. The underlying issue is that U.S. health insurance is still mostly attached to employment. Lose your job, lose your insurance. Individual policies are hard to get, and very expensive, as much as $12,000-15,000 per year. In addition, U.S. employers are burdened with the expense, in comparison to international competitors, as we can see in the comparison of U.S. auto makers to their competitors.

Here is the critical issue for 2009. Health care reform will be at the head of the table. But, I was there in 1992-1993, early in my futurist work, when health care reform failed under the Clintons. It failed because the entrenched professional lobbies fought it off. The same result will occur in 2009 and beyond, if the current terms of the health care debate do not change.

The one item so far claimed to be “off the table” is universal coverage in the form of something like Medicare for all. If the policy debate is formulated only around re-arranging the pieces in the health care system, and not fundamentally changing the players, do not expect much change. What deserves at least serious exploration is a Medicare for all approach, with private companies providing supplemental insurance, and removal of health insurance as an employer expectation. I do not know that such a system can ever be designed and approved in the U.S., but it ought to be considered.

Future Technology

The most exciting tech areas in 2009 will be 1) continued development in mobile Internet, via the array of phones now accessing the net along with nearly universal wireless access, and 2) growth in touch and gesture based interfaces, as with iPhones, the HP touch screen and the Microsoft surface computing initiative. Expect more and more Internet access to be mobile and touch/gesture based.
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Glen Hiemstra, futurist speaker, is the author of Turning the Future Into Revenue: What Businesses and Individuals Need to Know to Shape Their Futures, from John Wiley & Sons, publisher, 2006. Glen is the Founder and Owner of Futurist.com, a website in the public interest, a blogger, consultant, and Internet video host. He lives and works in Kirkland, Washington, providing presentation, consultation, and research services. For more information contact: www.futurist.com
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Media futurist and Outlook 2009

I'll be writing my Outlook 2009, to accompany the video already up. But getting a head start, Swiss-based media futurist Gerd Leonhard just linked to it as his blog, mediafuturist.

You can get a look at Outlook 2009 here, in our upgraded video pages.

Bottom line: 2009 may be just a bit better than what we are believing right now, though it will be an adventure.

Glen Hiemstra is a futurist speaker, consultant, blogger, internet TV show host and founder of Futurist.com. To arrange for a speech contact Futurist.com.

The real future fear driving Wall Steet?

Is this part of the real fear that drove Wall Street banks and backers to seek government relief? I would not rule this out, far fetched though it may seem.

Glen Hiemstra is a futurist speaker, consultant, blogger, internet TV show host and founder of Futurist.com. To arrange for a speech contact Futurist.com.

Preferred Debt Future: Slow down, do nothing now

The debate continues in Washington DC about the proposed $700 Billion (really much more) bail out of Wall Street investment firms and banks. Objections are being appropriately raised about both the need to do this so quickly, and the need to do it at all.

Our best reading now is that the best course is to wait, develop a considered comprehensive approach, and do not attempt to pass it until after the election, if at all.

Writer Chris Bowers summarizes: there is no crisis now...

1. Why did the Bush administration declare a crisis to coincide with the last two weeks of the current Congress eager to leave for the elections, when...
2. It turns out the emergency plan has been in the works for several months, and...
3. The plan actually aims to "bail out" many banks that are actually successful, and...
4. Secretary Paulson is misleading the Congress about oversight, and...
more at his blog.

I am not convinced that the credit market will freeze up if this bail out does not go into effect this week.

If Congress must be railroaded into acting in the next week or two, then the Chris Dodd plan at least makes more sense.

Urge your Congresspersons not to respond to this request from King Paulson.

Glen Hiemstra is a futurist speaker, consultant, blogger, internet TV show host and founder of Futurist.com. To arrange for a speech contact Futurist.com.

Future of Wall Street – A futurist perspective

The 500 point drop in the Dow today, 6th largest drop in stock market history, is indicative of three interrelated social-cultural-economic factors. First, in response to 9/11 various economic actors cooperated to loosen credit as a way to prop up the economy. Ironically, in retrospect this response perfectly enabled the fulfillment of the prime goal of the 9/11 attack, which was to financially destabilize the U.S. Second the mortgage problem at the root of the current Wall Street debacle is itself a continuation of a two-decade long trend in which the financial sector became not the enabler of U.S. productivity, but a primary economic activity unto itself. Rather than earning money, we have simply borrowed it, or created it from rather thin air with creative but ultimately fictitious financial instruments. Finally, the mortgage problem is also the ultimate expression of a cultural trend in which we have valued gluttony over frugality, a lesson that people apparently have to re-learn on a continual but painful basis. The primary example of the latter is the build out of far more $600,000-$800,000 houses than any objective analysis of household earning power could ever support, under standard banking practices. We fooled ourselves.

These three factors are also examples of one of the primary tools of systems-oriented futuring processes, which is to consider not just first order (or primary) consequences of things, but also their second-order consequences. Attempting to use easy credit to off-set economic problems did stimulate the economy, but had the second order consequence of eventually destabilizing things. Attempting to spread risk with creative financial instruments did spread risk, but hid true values, and spread the fallout when the risks proved too risky. Attempting to raise standards of living to heights not supported by actual income will have the eventual effect of lowering standards of living.

Ahead we will see several more major institutions wobble and likely fail or fundamentally transform into shells of their former selves, including obviously AIG and WAMU. For consumers and home buyers, the news is not good. House prices will continue to fall well into 2009 or 2010, or until values have fallen at least 20% from the 2007 highs, more in some markets. It will be several years until prices recover to earlier values. There is even reason to suspect that values will not return to earlier values for a generation, reasons having to do with further impending economic problems caused by peaking oil supplies without enough lead time for new supplies or substitutes, and by continual financial blows from climate change.

What can we do? Get smart, get frugal, start innovating again, start producing real things again. I will have more to say about that tomorrow.

Glen Hiemstra is a futurist speaker, consultant, blogger, internet TV show host and founder of Futurist.com. To arrange for a speech contact Futurist.com.

Outlook 2008

Here is my outlook for 2008, recorded December 21, 2007.

Overview – 2008 will be a year that feels like a whip-saw. Promising innovations. Economic turmoil. Large events

The Economy 2008 - Paradoxes

2008 will be one of paradox, innovation balanced by turmoil. Because of the tremendous interconnectivity of researchers, the availability of money for innovation investment, the technical tools available, and the urgency of certain needs, there will be more opportunity for innovation in 2008 than ever. Innovation is needed in energy, in health care, and in so many fields. But, innovation will be balanced or held back by turmoil in the financial markets. Some 2 million more “teaser rate” mortgages will re-set in the next 18 months. The resulting debt crisis is not near its end, not even near the mid-point, but still in its early stages. One estimate is that 5.6 million home owners in the U.S. are upside-down, owing more than their house is worth. If prices fall another 10-20%, as some predict, then perhaps 10 million home owners will go upside-down. This would drive losses from $100 billion to nearer a trillion dollars.

Globally, China will continue to grow at a rapid rate, 10-12% per year. It will attract increasing investment and become more of an innovation center.

2008 will also see income disparity come to the fore as a social and political issue. The nature of the current economy is such that small groups of highly creative people can reap super rewards, while the large middle class sees little progress

Technology 2008 - Nano + Solar

The hottest tech areas in 2008 will be nano plus solar. Nanotechnology, particularly the work being done with nanotech batteries, will stand out. AltairNano will ship a 20MW stationary battery in 2008. Nanobatteries will impact the introduction of plug-in electric cars in 2008, and the supply of electric cars from Phoenix, Tesla and others will fall far short of demand. AltairNano will debut an electric garbage truck. In the field of solar, NanoSolar will, according to reports, complete its fabrication plant for printing thin-film solar cells, enough of them to be equivalent to a third to a half a nuclear plant per year.

Nanotech will also impact water filtration. Seldon Tech is using carbon nanotubes to manufacture water filters, actually printed on old newspaper equipment. The carbon nanotubes used to cost hundreds of dollars an ounce, but now have come down to 20 cents an ounce. The Seldon Tech water straw will appear in early 2008.

Beyond nano and solar, the IT development of note in the U.S. will be fiber to the home. Verizon’s FIOS product will challenge the cable franchises to move from the “triple play” (TV, phone, internet) to a quadruple (TV, phone, internet, wireless) or quintuple play (TV, phone, internet, wireless, home management). The question will be whether consumers want all these things bundled for convenience, or whether they care.

Energy 2008 - Oil Rising

As 2007 came to a close, oil was at about $95 a barrel. Some experts predict a dramatic price decline in 2008, following historical patterns. We disagree. The new floor price is about $90, and we will see $100 in 2008, and as much as $140-150 by mid-year. Why? Increasing global demand from countries like China and India, an obvious development. But the real hidden force is increasing demand in the oil producing nations. In fact, the key metric to watch is not oil production but oil exports. Countries like Russia, Venezuela, and Mexico see their exports falling faster than their production, as they use more internally. The same is true in Saudi Arabia. Oil prices are not coming back, and 2008 is the year we realize this is true.

[I recorded the video on December 21, 2007- and oil hit $100 on January 2, 2008.]

[Second Note: Oil hit $140 on June 26, 2008.]

Environment 2008 - The Big Stall

2007 was the year of the turning point as regards the global climate crisis. Thanks to Al Gore and the IPCC, co-winners of the Nobel Prize, even the die-hards like the U.S. President now acknowledge that global warming is real. But, will 2008 then become the year of action? No, not yet. Instead it will be the year of the big stall, as debate rages about what to do, and mostly all of the relevant institutions and decision makers have to wait until the U.S. administration turns over. We will see private initiatives in energy and transportation, but concerted global action will wait another year.

Population and Venture Capital 2008 - Oh to be Young

The leading edge of the digital native generation is now 18-25 or so. The first generation to grow up in the personal computing and internet age is now at work. The venture capital world increasingly focuses on this generation, the very young creatives, for the breakthrough ideas. Thus 2008 marks a change-over to the next generation for innovation leadership.

Wildcard 2008 - Iraq and McCain

I once heard Alvin Toffler say that predicting likely trends is of less value than is anticipating unlikely events that would really change things if they happened. The wild cards, in other words. Here is my wildcard for 2008: calm in Iraq, not just the level of violence but actual political reconciliation. Were this to happen, in time, the odds for John McCain becoming the Republican nominee, and later being elected U.S. President increase greatly. If four more years of Republican rule resulted, then progressive policy change in health care, taxes, and to a lesser degree the environment and energy becomes much less likely. Another wildcard may scuttle this possibility, regardless of Iraq. That is immigration. Conventional wisdom says a candidate must demonstrate an anti-immigrant stance to be elected. However, the large Latino vote in the U.S. could turn this assumption upside down, and thus work against a McCain win.

Glen Hiemstra is a futurist speaker, consultant, blogger, internet TV show host and founder of Futurist.com. To arrange for a speech contact Futurist.com.