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From the Editor

To 2010 -- and Beyond

This month we're peering not only at 2010 but also at a new decade. And I'm impressed with our track record.

When I was writing Kiplinger's economic outlook during the recession of the early 1980s, one of my colleagues asked if I was going to predict that we were heading into a depression. No, I said, because as bleak as things looked, I didn't think it would happen. In fact, the headline on our outlook story read, "Why the Rest of the '80s Look Better."

And that's how it turned out. Inflation was halved, oil prices collapsed, and we began the longest period of peacetime growth in U.S. history. In 1990, our lead story asked, "What can you say about a seven-year-old economic expansion that refuses to die?"

This month we're peering not only at 2010 but also at a new decade. And I'm impressed with our track record.

ON THE MONEY
Looking back, I discovered that there's nothing new about the idea of a "new normal." In 1980, we noted that "yesterday's rules don't necessarily apply to your finances now." And some predictions were uncannily prescient. For instance, we observed that the supply of water, as much as oil, could play a key role in economic growth. Associate editor Tom Anderson reports that will be an even bigger challenge in the years ahead.

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We warned that the cheap loans that made homes such an attractive inflation hedge in the 1970s were no longer available, so homeowners shouldn't count on making a killing. "It's best to buy a house because you want to live in it, not because you want to live off the profits when you sell," we advised. We were a couple of decades ahead of our time, but you know the rest of the story.

As the century was about to turn in 1999, Knight Kiplinger wrote about the "world boom ahead," fueled by the "dispersal of technology and a vast new middle class in developing nations that will be both tough competitors and avid customers" -- trends that some forecasters are just discovering today.

In 2000, we predicted that red-hot tech and Internet stocks would cool off. And we floated the almost unthinkable idea of 0% inflation by the end of the decade and a 3% yield on long-term Treasury bonds. Those bonds were recently yielding -- drumroll, please -- 3.5%.

OPPORTUNITIES AHEAD
So what do we see when we look to 2010 and beyond? Personally, I believe now, as I did back in the '80s, in the resilience of the U.S. economy. But that doesn't mean we can't muck things up. Two decades ago we worried that federal budget deficits would be a drag on the economy: "It would be healthier if Washington could find a way to consume a smaller share of available resources."

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At the time, deficits were about 3% of gross domestic product. Today, even conservative forecasts predict that the government's share will be almost double that amount by 2020.

That makes me pessimistic about inflation. Sure, there's nary a whiff of it now. But Congress and the feds have unleashed a torrent of spending, and depending on Ben Bernanke alone to keep inflation under control is like depending on the Dutch boy's digit in the dike. I'd put a portion of my money in Treasury inflation-protected securities or some other inflation hedge. And when the other shoe drops, in the form of higher taxes, you'll be happy we gave you the lowdown on Roth IRA conversions.

One theme that has remained constant over all these years is our commitment to the promise we made in 1980: "There will be opportunities to thrive in the new decade if you know where to look." Come what may, you can count on that.