Experts Who Predicted the Economic Crisis & Financial Crisis See Economic Recovery in 2010

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		IIM Press Releases 2009 To: Business, Economic and Financial Editors Expert Who Predicted the US Economic Crisis & Financial Crisis See Recovery in 2010 January 13, 2009 - Las Vegas, NV, International Institute of Management (IIM), today announced that its President, Med Jones, was recognized by World Finance Magazine as “One of the few who predicted the current US economic crisis. IIM challenged the US President’s State of the Union Address in Jan 2007, the Federal Reserve Chairman and the popular opinion of US economists and media analysts at the time. IIM published a policy white paper outlining US economic risks and strategies for the next decade." The detailed analysis paper can be found at http://www.iim-edu.org/u.s.economyrisks/ Following the publication of the policy white paper, Med Jones was quoted in March 2007 in worldwide media including Reuters, Fox News, MSNBC, Financial Post Canada, Handelsblatt Germany, Le Point France, China Times, Malaysia Sun, New Zealand Herald, and Scoop Independent News. According to Fortune Magazine, the list of prominent experts and business leaders who missed the signs of the economic crisis includes Alan Greenspan, former Federal Reserve Chairman; Ben Bernanke, the current Federal Reserve Chairman; Hank Paulson, Treasury Secretary; the financial industry analysts of Moody's, Fitch, Standard & Poor's; Wall Street CEOs including Stan O'Neal, the CEO of Merrill Lynch; James Cayne, CEO of Bear Stearns; Chuck Prince, CEO of Citigroup; Zoe Cruz, CEO of Morgan Stanley; and Angelo Mozilo, CEO of Countrywide Financial. According to Med Jones, "We warned most of them about 2 years ago, yet no one was willing to listen until the markets took their first hit in early 2007. Since that time, the policy white paper was viewed more than 250,000 times by researchers, media analysts, and investors. The 4 most common questions regarding the economic crisis are: (Q1) How did we get here? (A1) The US economy got here due to spending money we do not have and not producing enough to pay back the credit. It’s like luxury-living on credit cards, at some point the lenders want their money back. Not to forget that in a new open global economy, the US does not have a competitive monopoly on knowledge, technology, manufacturing, or marketing anymore. Therefore, the growth rate of US production (cars, airplanes, electronics, IT ..) is not keeping up with the growth rate of the debt. (Q2) How did the top American experts miss the crisis? (A2) Experts missed the crisis because of the groupthink mindset, and the lack of information and misinformation in the mainstream media. In such an environment, few have the insight and the courage to tell it as it is, and risk being ridiculed by other industry experts. (Q3) What is the best strategy to rescue the economy? (A3) As for the rescue plan, the current economic stimulus package will cost taxpayers more than a trillion dollar over the next 2 years, and there is no guarantee it will achieve its goals. The plan will more likely soften the fall but it will not correct the economy, it is merely delaying the correction, and therefore, the recovery too. The most cost effective and quickest method to stimulate the U.S. economy is to support job creation through US small businesses and innovation development. U.S. Census Bureau statistics show that 98 percent of all U.S. firms have less than 100 employees. These 27 million small businesses create over 85 percent of all new jobs and employ over 56 percent of all private sector workers. The main focus of development programs should be innovation development, export and employment support. This solution would be a much less burden on the taxpayers, it can be implemented without too much new legislation, and would have a much faster positive impact on the economy. It can be based on existing federal programs designed to direct federal funds to small businesses. The Small Business Reauthorization Act of 1997 stipulates that a minimum of 23 percent of all federal prime and sub-contracts be awarded to small businesses. Oversight is critical to the success of the implementation of any rescue program. The effective and efficient program execution is necessary to avoid waste, fraud, and the abuse of loopholes to divert these funds to special interest programs. If the objective of President-elect Obama is to lead the economic recovery through the middle class, the job creation initiative through small business and innovation development, would be hitting 3 birds with one stone (sustainable job creation, middle class support, and increasing US businesses competitiveness through innovation development). This initiative would have a significant, and immediate positive impact on the national economy. The European Commission has invested hundreds of billions of dollars in innovation and enterprise creation since 2002. The result of their innovation and small enterprise creation initiatives is that they quantum-leaped US companies in Telecom, Aerospace, and several other industries. The Euro today is almost 50% more valuable than the US dollar, compared to 2002. (Q4) When do you think the economy will recover? (A4) The timing of the economic recovery depends on several factors, the most important are the effectiveness of the new economic policies in establishing trust in the US economy (such as reducing budget and trade deficits, etc.), and the performance of corporate America (profits, job creation, etc.) . The markets need at least 2 consecutive quarters of business growth and profits, so that CEOs, investors and consumers will establish the confidence to invest again and reverse the negative cycle. However, we will not see the hugely inflated stocks and real estate prices anytime soon. The Economic Outlook for 2009 In general, 2009 will see more economic decline and financial markets volatility, and financial shocks and losses. This is caused by the economic cycle correction, speculative and short-term investing, and the global ripple effect. Jobs will be lost at a rapid pace. Businesses and consumers will reduce their spending. The inventory of homes will rise and the prices of real estate and stocks will fall further. The damage to collective psyche of the investors, consumers and businesses will be significant and the economy will take time to recover. This vicious downward cycle requires painful socioeconomic actions in order to make the necessary corrections. Obama’s fiscal stimulus package, bailout and other economic policies can soften the fall, but are unlikely to reverse it anytime soon. We expect to see the bottom fall out around late 2009 or early 2010. Most analysts tend to underestimate or overestimate the growth and decline cycles. Our analysis indicates that 2009 will have mixed results for different industries, the hardest hits will be in the financial, real estate, auto, retail, construction, furniture, airlines, advertising, and disposable income industries (tourism, gaming, hospitality, and travel). The relatively unaffected or growth industries are the export industries, food, alternative energy, education, new technologies, and healthcare. The general economic decline cycle will bottom in 2009 and we could see stability sometime late 2009 or early 2010, then we will be back to modest recovery in late 2010 or early 2011. However, the real estate, construction and financial industries will bottom in 2010, the recovery could start in 2011. Jobs The jobless rate could rise to more than 9%. This is not counting those who cannot find jobs or who have stopped looking, or those who work part-time or who have received pay cuts. Obama’s job creation plan, through infrastructure investment, can reduce the jobless rate in 2009/2010, However, the cost will result in a larger budget deficit and a negative economic outlook for years to come. While investing in a new infrastructure creates new jobs, these investments do not create new income or self-sustaining jobs. Only new successful businesses can create and sustain jobs. Real Estate The real estate market will hit bottom in 2010. The exact timing and recovery of real estate prices depends, in part, on foreign investments and how strong the government program is in stopping the foreclosures and improving liquidity. Investments The best time to invest will be in 2009 & 2010. The foreclosed real estate market and undervalued stocks market will offer historical and unheard of investment opportunities. New wealth will be created through investing in the right opportunities. Consumers Consumer spending will be reduced significantly. Consumer spending accounts for about 70% of all US economic activities. Loss of home equity and tightening credit could result in an increase of consumer’s bankruptcies. Low oil prices will not last for long. Retailers and discretionary spending industries will be hit the hardest. Business spending accounts for about 10% of US economic activities. It is not unlikely to see the reduction of capital and operation expenditure by 20% or more by the end of the cycle Interest Rates The Fed will slash the Interest Rates and maintain rates near zero. Inflation/Deflation Prices will deflate in general, especially for national products and services. Imported material costs will rise, due to the weakening of the dollar. This is a minor risk of inflation tied to wrong Fed policies. Exports and Trade Deficit Export industries and US-based multinationals will benefit from the decline in the dollar value and will have an edge in competing globally. However, if the government makes more policy mistakes, causing the dollar value to fall significantly, the investors could flee the dollar-dominated investments and this would further hinder the recovery effort. The 6 key variables in determining the timing of and the rate of the recovery are: The effectiveness of the new US economic policies in establishing trust in the US economy The health of America’s innovation and entrepreneurship engines (financial performance) the global political and security climates the oil and commodities prices the dollar exchange rate the interest rate Behavioral Finance tells us that these factors are the key elements of the investors and CEOs' confidence that are needed for recovery. For more information visit US Economic Crisis - A Special Report by CEO Q Magazine Interviews and detailed media Q&A are available via email media2<at>iim-edu.org About International Institute of Management International Institute of Management is a US-based research and education institute. Government and business leaderships leverage IIM's research and think tank services to help them develop new strategies, systems, and tools to solve complex business problems in a rapidly changing environment. About World Finance Magazine World Finance is a leading financial magazine, produced by World News Media from its global Headquarters in London, UK. For article reference please visit: http://www.worldfinance.com/companies/companies/article1013.html Available topic experts: Med Jones http://www.iim-edu.org/associates/medjones/ IIM media relations: Lena Dietrich Phone: 702-696-8003 Email: media2<at>iim-edu.org Website http://www.iim-edu.org Address 10161 Park Run Dr. # 100 Las Vegas, NV 89145 USA

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