Economics and Investing:

I’ve recently been asked by several blog readers and consulting clients about my predictions for the economy for the next few years. Here they are, in a nutshell: The US economy will remain weak for for at least five years. Both the commercial and residential real estate markets are unlikely to recover before 2018, especially as interest rates begin to increase. Noticeable inflation should begin around the Spring of 2011 and will become uncomfortably high by 2012. If the announced Federal income tax and capital gains tax increases do indeed go into effect, they will stifle the economy for the foreseeable future. Continued financial instability in the periphery of the EU will continue to keep the Euro weak versus the Dollar, but in the end, both currencies are doomed. Global credit market chaos will probably continue for several more years, as will the Mother of All Bailouts (MOAB) here in the United States. I’d say that there is a 25% chance of a Dollar Panic and devaluation in the next four years, and a 5% chance of a hyperinflationary Dollar Collapse. But regardless, some inflation is coming. Its severity is difficult to predict. The bull market in precious metals is nowhere near its end. I still predict that spot price of silver will eventually exceed $50 per ounce.

Reader Susan Z. was the first of several readers to mention this: Fed set to downgrade outlook for US.

From The Daily Bell: Desperate to Get US Economy Moving.

Reader American Expatriate (AmEx) sent this: Fighting a Double Dip: What Weapons Does the Fed Have Left?