Many a cynic has said that the stock market and the economy are crap games. In some respects, perhaps they are like games of chance, subject to the whims of fate. Any random, unpredicted occurrence such as a natural disaster, war, revolution or the discovery of a vast new oil field can drive the economy either up or down. (For more on the relation between the Market and the economy, check out How Economic Reality Influences The Market.)
TUTORIAL: Economics Basics
So far Las Vegas bookies don't take bets on the economy or the stock, currency and commodity markets, although that may soon change as Nevada gambling laws are changed to allow those bets. Bookies in the United Kingdom, however, will take bets on almost anything.
Assuming such novelty bets were accepted, below are the odds that might be quoted by a Las Vegas bookie. Although the odds quoted are arbitrary, and not based on any actuarial data, they are also based on knowledge and what seems like probability.
100 to 1 Against a U.S. Default on its Debt.
The U.S. has never defaulted on its debt, and will not default on August 2, when theoretically the government runs out of money. Some eleventh hour agreement will be struck by Republicans and Democrats to the raise the debt ceiling, and U.S. creditors and entitlement recipients may be assured they'll be paid.
Even Money Odds Favor a Recovery of the U.S. economy to Begin This Year or in Early 2012.
Although an exact date can't be pinpointed, the U.S. economy will begin a slow recovery – but faster than its current two, to two-and-a-half percent rate of annual growth – once the debt crisis is resolved. With that issue behind us, even temporarily but with the promise of a permanent solution to come, businesses will be less fearful and use their huge cash reserves for expansion, replenishing inventory, capital improvements and hiring. Banks, similarly, will be more inclined to loan money to start-up enterprises, thus further stimulating the economy.
2 to 1 Inflation Will Soon Kick In.
The staggering U.S. debt, even if reduced over the next five to ten years, is an unpleasant reality, and interest must be paid to service our obligations. A recovering economy would help pay down those debts, but enough revenue may not be generated to pay off those loans and obligations completely. So additional government borrowing will be necessary and higher interest rates on U.S. Treasury bills, notes and bonds may be required to attract buyers of that debt. And to pay the higher interest, the government will probably print more money – which equals inflation. (For some tips on how you can deal with inflation, read Timeless Ways To Protect Yourself From Inflation.)
5 to 1 Against New Taxes in the Short Term.
New tax legislation apparently has no chance of passage with anti-tax Republicans currently dominating the House of Representatives. But depending on the results of coming elections and future economic imperatives, new taxes may be coming in a variety of forms, including the plugging of tax loopholes, the elimination of certain deductions, an increase in the corporate rate, and taxes in Internet transactions. Some legislators have even floated the idea of taxing e-mails.
2 to 1 China Will Eventually Overtake the U.S. as the World's Leading Economy.
This won't happen in the short term, or maybe not even in the mid-term. Yet China's sheer numbers have created a currently unstoppable economic momentum. With an estimated population of just over 1.3 billion people, and an average quarterly gross domestic product (GDP) growth rate of 9.31 percent from 1989 to 2010, if China's economic expansion and population growth continues at average rates, or even less, expect China's economy to ultimately race ahead of the U.S. economy – unless U.S. economic growth takes a significant upturn.
5 to 1 The U.S. Will Eventually Become Energy Self-Sufficient.
This may not happen for a decade at least, and may probably take even longer. But odds that the U.S. will become energy independent have gotten much better lately. The U.S. Energy Information Administration recently announced that proven domestic reserves of natural gas has increased to its highest level in 40 years at 284 trillion cubic feet. This is enough energy to provide electricity to every household in America for more than 73 years. Fracking technology has also recently been improved, enabling a more productive, efficient and economically viable method for extracting oil and gas from rocks and rock strata. The term "fracking," is slang term for hydraulic fracturing. Add to these two recent events, a government push to encourage solar and wind energy development, an increased use of electric battery powered automobiles, and mandating increased mileage per gallon, and America's reliance on foreign oil imports for energy will become significantly reduced in the decades to come. (To learn more about natural gas, read Natural Gas Industry: An Investment Guide.)