2009 – An Outlook

posted by Nima

December 31, 2008 · Posted in General Economics

Consumer Spending will collapse throughout the entire year as consumer credit continues its contraction

Commercial real estate and consumer credit will be the next sub-prime crisis and companies from those industries will get in line for massive bailouts

The stock markets will drop to new lows, the S&P 500 will test new lows around 600 and bottom out some time between the end of 2009 and mid 2010

Home prices will continue to decline constantly

Government spending will soar beyond levels that Americans wouldn’t have dared to dream of in their worst nightmares

A new massive government public works program will spark an initial euphoria that will soon be disappointed by progressively worsening unemployment data

All measures taken by the government to stabilize consumer credit, home prices, domestic auto sales, employment and other things will turn out to be miserable failures and aggravate and prolong the crisis

New municipal bankruptcies will add to the ongoing credit contraction

Banks will remain unwilling to lend so long as credit keeps contracting

The savings rate will keep rising

Gold and silver will rise continuously but not excessively

Big unknown: What will foreign central banks, in particular in Japan and China do? Will they keep lending money to the US by buying their bonds. Recent events indicate that foreigners are slowly beginning to cut the US off. China has embarked upon a huge domestic stimulus package over $600 billion and Japan is injecting $110 billion for bad loans. This means that less money will be available to lend to the US. Kuwait just pulled out of a deal to buy a stake in Dow Chemical. So long as foreigners keep loaning money, the US will not yet plunge into a complete depression.

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