Lot’s wife looked back at a scene of devastation and was turned into a pillar of salt. Salt–as in the salty tears we shed last week as we looked back on 2008, a year of deepening economic recession, and the worst for share prices since 1931. Worse: most forecasters are expecting an even bleaker 2009. The unemployment rate is expected to climb into double digits, output to drop by between five and ten percent, repossessions of homes to soar, protectionism to stalk the international economy, more firms to file for bankruptcy as they find themselves unable to refinance the $1 trillion in loans that Reuters Loan Pricing Corporation estimates are coming due in the next three years–fill in your own predicted horror to round out the list. “Most major economies will remain in recession or at least in relative stagnation through most of 2009,” says John Greenwood, chief economist at Invesco.
Greenwood is only one of the many economic forecasters who are gloomy–and he is far from the gloomiest, since he sees the possibility of a modest recovery in 2010. These forecasters are admirable men and women who study their models of past behavior for a clue to the future in an attempt to meet the demands of clients and readers seeking help in peering through the fog of economic crisis. I fear I am not a member of that fraternity, but a mere guesser of what might be in store for us in 2009, a year in which government policies–some new, some of unprecedented magnitude–will drive events. As the estimable Robert Samuelson writes in the Washington Post, “The great lesson of the past year is how little we understand and can control the economy.” The equally estimable Matthew D’Ancona puts it this way in Britain’s Sunday Telegraph, “The Sibylline Books remain closed. The crystal ball yields no secrets….Almost nothing is certain about the next twelve months.”
