INDIANAPOLIS – All the recession talk in 2008 represents “merely the band warming up,” warns economist Alan Beaulieu of the New Hampshire-based Institute for Trend Research.

Speaking at a Vistage-sponsored conference at Butler University in Indianapolis on Sept. 9, 2008, Beaulieu claims that economic signs presently indicate “there’s a recession of note coming. We have on hand a ‘perfect storm’.” Beaulieu punctuated his somber analysis with well-placed humor and solid advice for weathering the storm.

The economist – whose institute claims to “forecast economic indicators with 96 percent accuracy” – asserts that the global economy has reached the proverbial tipping point. He says a “hard landing” is in store over the next 26 or so months due to emerging or established trends in “debt, interest rates, demographics, inflation, the equity crunch, China, oil and home prices”.

“We have really screwed up,” Beaulieu declares while emphasizing that the epistemology of this potential global trauma can be traced to two main causes: “greed and incompetence”.

While the current president owns his share of emerging economic woes, Beaulieu lays a considerable amount of blame at the feet of Congress and federal regulators. He added to the crowd of Midwest CEOs and senior executives: “The answer is not going to be found in electing a new president. We’re in a mess because Congress has run amuck.”

“The most prosperous and most blessed nation is a debtor nation,” he intoned. Beaulieu says the United States government has to sell about $2 billion worth of treasury bills every business day just to stay afloat.

Citing the recent popularity of the euro against a weakened (but slowly strengthening) U.S. dollar, Beaulieu asked: “What happens when other nations don’t want to buy [treasury] bills?” He says the inaction of Congress and federal regulators to thwart greed has created a national security risk where malevolent economic actions of other nation states can threaten vital American interests.

While treasury and economic officials are justified in worrying about the U.S. banking industry (as evidenced by the recent bailout of Fannie Mae and Freddie Mac), Beaulieu maintains that sufficient fiscal horsepower and innovation exists to bring the American economy through the next 24 turbulent months. It will, however, “be a long time before it’s business as usual” in the banking realm, he said.

Future federal policy should adopt a traditional “pay-as-you-go approach”. Beaulieu predicts that a future new president (Democrat or Republican) and Congress will “probably allow the Bush tax cuts to expire” in 2010 and possibly raise taxes. While those actions won’t have a happy effect on what Beaulieu expects to be a full-blown recession at the time, they will be deemed necessary for long-term fiscal health.

According to the New Hampshire economist, the coming recession will be consumer led and will be global in nature. He says it’ll hit Europe hard as the dollar gains against the euro and consumer demand softens. Amid all this gloom and doom, the U.S. economy has continued to grow at a tepid rate throughout 2008 despite a turbulent bear stock market.

With the growth (albeit small) indicated by comparing U.S. industrial production rates to the U.S. gross domestic product (GDP) over the past year, the U.S. overall economy has remained out of “official” recession. Still, some vertical industries clearly have already plunged downward. That will change and change soon, according to Beaulieu.

In 2009, he said to the assembled CEOs that “there will be no place to run and no place to hide”. However, all business cycles turn upward and much remains to be done for companies that want to both survive the coming deep recession and profit at the upturn.

U.S. manufacturing productivity (an Indiana lodestone) remains a bright spot in stemming economic disaster. While a myth still exists that the U.S. is losing the manufacturing war to China, Beaulieu pointed out that “the manufacturing economy in the U.S. is roughly the same size as the entire Chinese economy” (the latter of which serves some 1.3 billion people).

Controlling 25 percent of the global economy, U.S. technological, fiscal and industrial capacity will drive the planet out of its financial woes toward the end of 2010, he predicted. The energy industry will be all but recession proof during the next two years as the economist remains confident that the world has already taken strides away from an oil-based economy and new technologies will drive short- and long-term growth.

What can Midwest companies do now to prepare?

If the recession is as bad as predicted, cash will be king. Small- to mid-sized companies should already be cleaning up their overdue receivables and considering postponing both long-term purchase commitments and capital expenditures. Those companies offering commodity services or products – where price-point consumption reigns and many alternatives exist – could well be hard hit.

Now, Beaulieu emphasized, is the time to weed out inferior products and reduce inventories. He added: “Stay out of denial and cross-train key people” to prepare for work force reduction. Prepare now for possible layoffs and identify in advance where reductions will be made if cash flow drops below a set threshold. “Quick fires and slow hires,” he said.

“Business owners have an obligation to stay profitable,” Beaulieu declared. This won’t be the first major recession to hit America and the world and it won’t be the last. Prudence, preparation, common sense and action can and will drive successful companies straight through and up in hard times.

Michael Snyder is principal of The MEK Group, a marketing and business development consulting firm that provides communications-driven strategies to increase market share, enhance productivity and build distinctive brand awareness. Snyder can be reached at msnyder@themekgroup.com.
Click here for Snyder’s full biography.

Previous Columns in 2007:
2008 Indiana Venture Idol Competition to Attract High-Growth Entrepreneurs (9/4/2008)
Ivy Tech Community College Transforming Modern Work Force in Indiana (8/28/2008)
Indiana University Ramping Up For Global Economic Development Impact (8/21/2008)
Indiana Gov. Daniels: Serious Work Force, Education Reform on Deck (8/14/2008)
Chicago’s ad:tech in 2008: The Big Brand Idea Strikes Back For Advertising (8/7/2008)
Hoosier Life Sciences Sees Progress, Challenges as Experts Tout Success (7/31/2008)
Indiana Sets Historical Precedent With Standard & Poor’s Credit Rating (7/24/2008)
CNBC: Indiana ‘Most Improved State For Business’; Plus Balanced Budget (7/17/2008)
Midwest Experts Outline Subatomic Potential For Worldwide Nanotech Growth (7/10/2008)
Raytheon’s High-Tech Communications Network Bolsters Indiana Operations (6/19/2008)
BRAC Outcome Promises New Technology Growth Across Midwest, Indiana (6/12/2008)
Marcadia Biotech’s Success Underscores Indiana Life Sciences Potential (5/29/2008)
Indiana’s Best, Brightest on Display to VCs at 2008 Mira Awards (5/20/2008)
Purdue University: On the Brink of Midwest Technology ‘Supernova’? (5/15/2008)
Indiana Ready to Flex Subatomic Muscles With Nanotech Advances (5/8/2008)
Looming Energy Crisis: Where’s the Technology Policy DNA Headed? (5/1/2008)
Voicemail Inventor Scott Jones Sells Gracenote For $260 Million (4/24/2008)
Indiana Quietly Makes Gains in Foreign Direct Investment (4/17/2008)
Smithville Battles Digital Divide in Indiana With $90 Million Investment (4/10/2008)
CyberStates 2008: Indiana Tech Growth Still Pushing Ahead (4/3/2008)
Indiana’s Second-Largest City Moves to Seize $1 Billion Defense Growth Pie (3/27/2008)
World-Class ‘Big Red’ Supercomputer Opens Up For Indiana Development (3/20/2008)
Marcadia Biotech Scores Big Pharma Deal With Merck (3/13/2008)
FedEx CEO Fred Smith: Indiana ‘In Position’ For Global Growth (3/6/2008)
$2 Billion Indiana Military Center Taps World-Class University Firepower (2/28/2008)
TechPoint MIRA Awards Prepare to Showcase Indiana Tech Best (2/21/2008)
Purdue University Intensifies Global Life Sciences Innovation Position (2/14/2008)
AIT Management Team Takes Growth to ‘Higher Standard’ (2/7/2008)
Purdue University: Space Junk Accidents Producing Celestial Road Rage (1/31/2008)
Hoosier High-Tech Agriculture: The World Depends on It (1/24/2008)
Indiana Pumps Up Broadband Economy With $16 Million From FCC (1/17/2008)
Sen. Richard Lugar: ‘Energy, Ideas’ New Drivers to Avert Current Oil Crisis (1/10/2008)
Indiana’s Top 10 Best Technology Achievements, Worst Developmnets in 2007 (12/27/2007)
Vontoo, ExactTarget Bearing Holiday Gifts For Major Indiana Investor (12/20/2007)
Nathan Feltman: 2007 Indiana Growth Blazes on Record-Setting Pace (12/13/2007)
Indiana Rapidly Moving Toward Technology-Based Economy (12/6/2007)
Purdue’s New President: Growth Plans Reaching For the Stars (11/29/2007)
Entrepreneurs Swamp Indiana; Milestone Tech Summit on Deck (11/18/2007)
Second-Annual Entrepreneur Week Starts in Indiana on Nov. 5 (11/1/2007)
BioCrossroadsLINX to Bond Critical Indiana Biotech Assets (10/25/2007)
Burrill, BioCrossroads Conference: Indiana Life Sciences Expansion on Deck (10/19/2007)
Convergence Drives Runaway Success For Hoosier Biotech (10/11/2007)
‘Deals Are Getting Done, Market is Open’ in Indiana, CBRE Says (10/5/2007)
Nanotechnology ‘Backbone of Development’ Expands With Grant (9/27/2007)
Big Changes Under Way For $6 Billion Defense Industry in Indiana (9/13/2007)
Indiana is ‘Undisputed Juggernaut in Attracting Japanese Investment’ (9/7/2007)
High-End IT Professionals: Indiana’s Exploding Tech Industry Needs You (8/30/2007)
Indiana Biodiesel Plant a ‘Strategic Centerpiece’ For French Fuel Giant (8/23/2007)
China: Half a Billion in Indiana Exports and Growing Exponentially (8/16/2007)
Indiana University: New $2 Billion Partner For Economic Development (8/9/2007)
Message From ad:tech Chicago: Ignore Consumer Voice at Your Peril (8/2/2007)
Indiana Gov. Daniels: WestGate to Be ‘Flagship’ of Tech, Engineering (7/26/2007)
Taxpayer Revolt: A Constitutional Convention For Indiana? (7/19/2007)
$100 Million Formula One Rolls Out of Indianapolis, Won’t Return in 2008 (7/12/2007)
State of Indiana’s Defense Business: $4.6 Billion and Growing (7/5/2007)
Purdue Simulation of World Trade Center Impact Could Improve Design, Safety (6/21/2007)
Nobel Prize Winners, Scholars Primed For ‘Premier Conference’ in Indianapolis (6/14/2007)
2012: Repeat of 1859 Solar ‘Super Storm’ Catastrophe? (6/7/2007)
Indianapolis 500: 220 Miles Per Hour on 100 Percent Fuel-Grade Ethanol (5/31/2007)
‘Baby Steps’ For Marcadia Biotech in Indiana Grow Into ‘Giant Leaps’ (5/22/2007)
Indiana Legislature Scores Big With Innovative Patent Tax Credit (5/10/2007)
IEDC to Showcase Hoosier ‘Best, Brightest’ at BIO 2007 in Boston (5/3/2007)
‘Little 500’ Bike Race Sports 21st Century Indiana University RFID (4/26/2007)
Manufacturing Critical For Global Success, Indiana Expert Says (4/19/2007)
First-Ever Indiana Robotic Proton System Nukes Deep Tumors (4/12/2007)
Purdue’s Discovery Park a $350 Million ‘Driver For Change’ (4/5/2007)
Cellulosic Fuels, Ag Tech to Play Key Role in Indiana’s Future (3/30/2007)
With FCC Deadline Looming, Indiana Ponders Telemedicine (3/22/2007)
Realigned TechPoint Set to Energize Indiana IT Growth (3/15/2007)
Indiana General Assembly on Tech: Chaos or Collaboration? (3/9/2007)
Indiana DSI Initiative Sets New Vision of Innovative, Large-Scale Tech Transfer (3/1/2007)
No ‘Corn Dot-Com Bust’ For Indiana Ethanol, Says Ag Secretary Miller (2/15/2007)
Battelle Report: Indiana Biosciences Again Established as National Player (2/8/2007)
Indiana Defense Muscle Grows With West Gate Tech Park Expansion (2/1/2007)
Twenty in 10: President Bush Leaps Future of Hoosier Biofuels Forward (1/25/2007)
Outlook on Indiana-Based Biofuels, World Markets: ‘We’re Ready’ (1/18/2007)
ChaCha in Indiana Attracts Funding From Amazon, Compaq Founders (1/11/2007)
Purdue Ethanol Tech May Render Current Fuel Production ‘Obsolete’ (1/5/2007)
Click for 2006 column archive.
Click for 2005 column archive.

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