Tuesday, December 30, 2008


We are near the end of the year, so I thought I'd do a few predictions for the New Year. This is a little scary, since this will all be in print for the whole world to see and I'll never hear the end of it if I'm wrong. But hey, that's cool... Its part of the fun of it, and that's what blogs are all about. American economy
  • all four quarters of '09 wind up being recessionary
  • GDP for '08 will eventually (after all revisions are in) show a contraction of >5%
  • GDP for '09 will contract 10-15% (depending on the numbers for '08)
  • Overall contraction: 20-25%; annualized GDP at low point: $10 trillion (see Vox's column for the logic)
  • DOW will bottom at ~4500 in Q3 or Q4; bottom will be fairly flat
  • Gold will reach $2000/oz by Q4 of 2010
  • Inflation will begin by Q4 of 2009; by 2010, it will be in double digits
  • Housing will not bottom in 2009, either. Median home price by the end of the year: $140K or less
  • >12% unemployment before its all over
Global economy
  • China faces a huge crash; current projections for 2009 are ~7% growth, I'm saying 10% contraction. At least.
OK, I'm done for now. Maybe I'll add some more, later. You might say these predictions are pretty dismal. That's true, and they are mostly based on the Great Depression. The case could be made that today's situation isn't quite that bad. It is true that the bailouts are the wrong idea, but this is actually far less damaging than the price control system that was put in place back in the '30's. That is probably what did that generation in. So far, we haven't made that mistake. Yes, we're trying to "prop up" the price of housing with easy credit (again! will we ever learn!), but that's not quite as bad as an actual price control. And so long as there is no attempt to fix wages, unemployment shouldn't get that bad. It was 25% at times during the Great Depression. But if Congress starts squawking about raising the minimum wage - watch out! It could get very, very ugly. Of course, our inflation is much, much worse. So, it's a tossup.

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