I hesitate to prognosticate about 2012 if only for the simple reason that those in power are so out of touch that I can’t predict the behavior of irrationality. That being said, I think that there are several things that we can predict with certain level of confidence … so here goes:

The situation in the European Union will only worsen. The central banks are playing a shell game now and eventually the game is up. In 2012, at least one and maybe more countries will leave the EU either literally or figuratively. Greece has pretty much left already but will probably make it formal later in the year.

The GDP of the United States will be virtually nonexistent for the year. It is almost impossible to have economic growth in an environment where so much money is allocated solely to interest on the national debt.

Speaking of national debt, it will be raised a couple of times this year and it will be done very quietly given it is an election year and we don’t want President Obama to look bad.

Any increase in the national debt will be deemed Bush’s fault and both parties will let that be the story since neither wants to take responsibility for reducing it.

The Federal Reserve will continue to “print” money by the truckload and may be forced to issue debt in a foreign currency.

In order for the government to try and maintain its power and control you will see a greater erosion of our rights and liberty in the name of trying to fix the economy. History has shown us that police states, fictitious enemies, a total loss of privacy, capital controls, higher taxes, etc. will all become the normal course of business.

More and more human and financial capital will migrate away from these situations and land where they are appreciated and allowed to develop. This will eventually force the entire system to reset and eventually develop properly (Read “Atlas Shrugged”).

Changes will take place rather gradually at first and will then accelerate very quickly, and cause radical changes in the pace of decay. History is full of examples of societies that have gone down this path. Rome to the Soviet Union have experienced this decline and what happens is always the same, human and financial capital leave and don’t come back for a long time.

Most recently, Europe has been going through these changes. Look at the speed of decay — for several months all we talked about was Greece, then eventually we started talking about Portugal, Italy, Ireland, Greece and Spain — then we reached a point where we were within hours of a total monetary collapse. Now almost every day something happens in the world that is reported as being a tipping point and an irreversible situation that needs the producers to sacrifice more and more.

So, with all of this, one might ask how is it that I am slightly optimistic regarding 2012?

I have often said there is nothing I can do about the collective stupidity of government other than figure out how to exploit it to my advantage. The corollary to this is that you can always count on stupid people and organizations to do stupid things.

As long as I know what they are going to do, I can take advantage of it.

As the situation in Europe gets worse, I can count on the central bankers and the governments to do exactly the wrong thing so I can invest accordingly. I can and will short the euro, I will not buy their bonds, and I will watch where the human and financial capital goes and follow it.

The same goes for the United States, as the debt keeps going up along with taxes and increased regulations, I will simply follow the money. There will be economies around the globe that will benefit and that is where I will be. Many American companies are already following this same strategy and we will invest with them.

Inflation will start to rear its ugly head and I will look to counteract this with various sectors that benefit: Energy, agriculture and transportation to name a few. Also, precious metals of course, various currencies, and base metals.

To fully take advantage of the economic shift that we are in and preserve your capital, you need to be dynamic with your strategies. Buy and hold simply will not work. In 2012 we will need to be very attentive to the movement of the economy to survive and thrive. This is why I am optimistic for 2012.

Gary L. Rathbun is the president and CEO of Private Wealth Consultants. He can be heard everyday at 4:06 p.m.  on After the Bell with Brian Wilson and the Afternoon Drive, and every Wednesday and Thursday evening at 6 p.m. on Eye on Your Money both on 1370 WSPD. He can be reached at (419) 842-0334 or email him at garyrathbun@privatewealthconsultants.com.

Tags: A View from the Gulch, Atlas Shrugged, Gary Rathbun, Greece

This entry was posted on Thursday, January 5th, 2012 at 5:15 pm and is filed under A View from the Gulch, Toledo Business Link.
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