1.02.2009

My Economic Predictions for 2009

What do I know? I've got a fine education and a little world experience; I try to stay reasonably informed, but I'm no economics expert. Today's post is based on observations of trends and developments with a smidge of analysis. Mostly I'm just curious to see how far off I'll be as the year unfolds, so I record my impressions here as a baseline to compare against in the coming months. Sort of like a personal experiment. So here goes.

Things will truck along in the present gloom for the next few months. New information about how historically BAD the economy has been will be announced. President Obama will succeed in collaborating with Congress to pass his stimulus package, with a few nasty compromises, but the general thrust of the plan will remain: re-invest in public and social infrastructure - roads, utilities, schools, hospitals, local police and small businesses.

In April, thin glimmers of hope will appear in the leading economic indicators. Very thin. Nothing is changing yet, the layoffs continue, instability in the middle east is ugly, drawing in countries that usually sit out the conflicts on the sidelines, but at home there are a few bits of data suggesting that there could be light at the end of the tunnel.

The summer will be a hard, long haul. Things will get even uglier in Pakistan and Afghanistan, and India will again be drawn into the conflict. The entire subcontinent will come under the threat of catastrophe with a combination of natural disasters and political instability, resulting in an appalling humanitarian crisis. The international community - including China - will render significant aid. Obama will order an air attack against a known terrorist base in the region. Oil prices will hit a new cyclical high, beating back down the small recovery that was otherwise taking root. It will feel like one step forward, two steps back. As usual, ordinary Americans will respond by putting our heads down, rolling up our sleeves, and working our asses off, creating higher levels of productivity than ever before. Violent crime in both major cities and the mid-range metropolitan areas will continue to rise through the summer as gangs extend their activities and control into new markets, feeding off of the unemployed who join their ranks and making use of technology in ways that leave law enforcement - underfunded and undermanned - struggling to keep up. In the wake of the crime, communities will organize to fight back. Stronger communities will pay off in greater social dividends later beyond reducing crime rates.

Around October, as temperatures cool, gas prices will have retreated enough to relieve the pressure against productivity gains. News will start to surface of data from the summer months showing improved fundamentals; the economy is undeniably turning around. Next year's winter holiday retail sales will be slightly better than this year's - but only slightly. Americans are still feeling the pinch, and after the violence of the summer months the desire to celebrate is hard to muster. It will have been a tough year. Around Christmas there will be another significant military aggression that the rest of the world would have been much better without, and again, the global community will be slow to respond. By this time next year, it would be overstating it to describe Americans as "cautiously optimistic;" the year will have been too ugly for optimism. But there will be a general sense that the worst of this down cycle is behind us. We will have a foundation in place to build on, and will look forward to spending 2010 working our asses off even more to make sure that foundation sticks.