Saturday, December 27, 2008

Looking back on 2009 

My new favorite historian, Niall Ferguson, has written a speculative "look back" at 2009. In the political analysis there is something in there to annoy everybody (except, perhaps, wholly unreconstructed fans of Barack Obama), but the economic forecast is as spot-on as any I have read. Note particularly Ferguson's claim, which I have read elsewhere, that notwithstanding European whining that the present crisis is the fault of the United States, their banks have even more bad loans than ours. The U.S. dollar will continue to be a safe haven, in Ferguson's vision, and the "Chimerica" linkage will strengthen rather than weaken. All interesting, even if scary, stuff.


By Anonymous meta-4, at Sun Dec 28, 08:05:00 AM:

And, watch gold very carefully. Could skyrocket here....  

By Blogger smitty1e, at Sun Dec 28, 08:49:00 AM:

Natural disaster and war did not show up here.
Hopefully, reality agrees.
Pray for peace.  

By Anonymous sirius_sir, at Sun Dec 28, 11:36:00 AM:

I will grant that in the short term (maybe extending to the end of 2009) the economy may benefit from the Fed's infusion of money, and why shouldn't it? But long term, I think the damage done to the capitalist system will tell.

Ferguson mentions obliquely "systemic" damage in one paragraph and in the next mentions "the worst economic crisis in 70 years" and yet we are to suppose that by the end of 2009 everything is better?

I think 2009 will be just the beginning of what's to come, only some small foretaste of which we are savouring now.  

By Anonymous Anonymous, at Sun Dec 28, 11:50:00 AM:

Japan's case is interesting. Having already weathered a long deflation, Japanese companies are cash flush and have little debt. The best of these companies also have premier manufacturing capabilities and brand names. Japan has a huge opportunity to boost itself economically.

The article is, to me, too optimistic since Ferguson largely ignores the possibility of American military withdrawal from many countries of the world, in the name of reducing defense expenditures, which will inevitably mean greater conflict across the world. We will see the return of many small wars going on across the globe simultaneously, only this time the weapons used could be far more destructive (read "WMD"). The world-wide political/military fallout of the Great Repression could be something we must withstand for many years, if not decades.  

By Anonymous Bird of Paradise, at Sun Dec 28, 03:43:00 PM:

Just wait for everything to go up TAXES,REGULATIONS,BURACRACY,ILLEGAL IMAGRATIONS and all sorts of rediculous plans by the demacreeps  

By Anonymous el gordo, at Sun Dec 28, 03:51:00 PM:

Can I summarize this fantasy in one sentence?

"Once Obama gets to run the entire economy himself everything will be fine even though we will drown in debt."

It is the end of the Republic but Ferguson feels fine.  

By Anonymous adam hartung, at Sun Dec 28, 08:45:00 PM:

Forecasting is not worth the bother, because it's based on the past. Just look at the forecast accuracy for 2008. What businesses need to do now is scenario planning based on the future. That will better prepare them for 2009 and beyond. Read more at http://www.ThePhoenixPrinciple.com  

By Blogger Kinuachdrach, at Sun Dec 28, 09:15:00 PM:

I am not sure about Nial Ferguson -- just a little bit too much of the BBC-selected rock star to be taken completely seriously.

The idea that The One will purge his Administration of Clintonites within 9 months is a little doubtful -- President Bush could not manage to get rid of the Clintonites he inherited, even after 8 years.

But Ferguson's big weakness is failing to recognize what Nassim Taleb in "The Black Swan" called "fat tails" on probability distributions -- low-probability events are not quite as low-probability as economists assume. Ferguson's world sounds just a little too similar to today's world, except for being lit by the light shining from The Big 0.

For example, will Venezuela or Mexico just keep stumbling on -- or could one or other implode, with severe consequences for the US? Is a suddenly-poor Russia going to keep sending gas to greedy European governments who are taking $100/Bbl in taxes on the Russian oil they buy for $35/Bbl?

Expect the unexpected!  

By Blogger chuckchuck, at Sun Dec 28, 09:24:00 PM:

I don't know about 2009 I'm still trying to get thru 2008.  

By Blogger North Dallas Thirty, at Sun Dec 28, 10:00:00 PM:

Japan's case is interesting. Having already weathered a long deflation, Japanese companies are cash flush and have little debt. The best of these companies also have premier manufacturing capabilities and brand names. Japan has a huge opportunity to boost itself economically.

Same with US tech companies, who (by and large) apparently have learned the lesson that everyone else forgot from the 2000 - 2001 recession -- hire slowly, figure out how to do more with less, and build up cash reserves rather than leveraging yourself to the hilt.

Meanwhile, Ferguson is right about Europe. The EU is a flashing red light for those who want to nationalize the US financial system, because, as it shows, all you end up doing is giving Barney Frank and Chris Dodd the ability to make bad loans themselves instead of encouraging proxies to do it. If Barack Obama and the Democrat Party get what they want, the government will be using Social Security money to buy up bad mortgages that they can't sell to anyone for any price when the bill comes due.  

By Anonymous epobirs, at Mon Dec 29, 05:08:00 AM:

Well, that turned into utter codswallop towards the end.  

By Anonymous wf, at Mon Dec 29, 05:27:00 AM:

It´s nice that Ferguson always has big plans for the US. Unfortunately, he is such a big government, national greatness, nation-building empire sycophant, it´s pathetic.

"It was not that Obama’s New New Deal – announced after the Labor Day purge of the Clintonites – produced an economic miracle. Nobody had expected it to do so."

No? Then why the heck did they aplaud it? Why isn´t it counted as a giant mistake?

"It was more that the federal takeover of the big banks and the conversion of all private mortgage debt into new 50-year Obamabonds signalled an impressive boldness on the part of the new president."

See? It doesn´t really cost a thing.

Please. Enough with this "FDR on steroids" nonsense.  

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