- The recession will last until 2010Q3. Nominal GDP growth will become positive in 2009Q4, but by NEBR scoring the downturn will last a lot longer.
- Unemployment will hit 10% in 2009Q3. The job market will be brutal in 2009, and robust job growth won't start until 2011. And 10% is the U3 number; U6 will reach 16%.
- Oil will fall to $25-30.. After bottoming in that range crude will rise substantially as the dollar weakens in the second half of the year. Against the euro and other currencies the change won't be as great. But the price in any currency will be low enough to seriously damage the petro-states.
- The dollar will lose strength. The dollar will stay flat for the first half of the year as money continues to flee emerging markets, then fall to 80¥ and 0.55€ as people start realizing that the Fed is printing. The greenback could go to 0.45£, or to 0.80£ depending on how bad things get in "The City".
- A country will leave the Euro. I've been predicting Italy will leave for some time now; this may be the year I'm finally right. The dark horses for the dubious distinction are Spain, Greece, and Ireland
- China will blow a gasket. The current leadership seems unprepared for the current crisis, and has spent too much money propping up state industries instead of investing in desperately needed basic infrastructure inland. The pain will be widespread even if the renminbi is devalued. There is a good chance the devaluation will be excessive and prompt a reaction from the US.
- The mercantilists will crash. Both Japan and Germany failed to address structural problems while times were good, depending instead on a positive balance of trade to paper over the problems. The decline of trade in general, and with the US specifically, will cause these problems to re-assert themselves. Other significant European exporters - Norway, Finland, Sweden, Netherlands, Switzerland, and Austria - will suffer as European importing countries - Spain, United Kingdom, Italy, Greece, Portugal, most of Eastern Europe - find their public and private budgets severely pinched. However, the pain won't be as great as that of the big exporters because of better fundamentals. The smaller East Asian exporters - Thailand, Indonesia, Malaysia, Singapore, Hong Kong, Taiwan, and Korea - will suffer as is usual during a US downturn.
That's all for now.
Update: This list goes to 11.
- GM and Chrysler will both file for bankruptcy. GM will seek Chapter 11 protection in March, and will re-emerge in a few quarters. Chrysler will file at the same time, and then be dumped on the UAW and various creditors by Cerberus. However, the company will be too far gone to save, and liquidation will start in early 2010.
- The banking system will evade nationalization. Between Obama's deep-seated cautiousness and the wall-to-wall appointment of economic insiders, the banking system will not be subjected to the "Swedish model". The Fed will continue to be the primary source of relief, and its balance sheet will expand by another $2T.
- Retail and commercial real estate will get crushed. CRE is wildly over-built and over-leveraged after years of cheap credit. Personal consumption will fall almost 8% from 2007 levels, and thus many store chains will file for CH7, leading to massive loan defaults by property holding companies.
- Housing will decline for the entire year. Aggregate prices will continue to fall until 2010Q2, though as usual local markets will vary widely. Homebuilders will finally go bankrupt due to continuing declines of spec starts after unexpectedly clinging to life in 2008. Sales volumes of existing housing will decline through 2009Q2 then flatten for the rest of the year.
Well, that's what I've got at the macro level. Predicting the markets is not one of my talents, so I'll forgo the embarrassment on that front.