Random thoughts:<quoted text>What fundamentals are you referring to you're looking at for 2010 & 2012?
"Official" unemployment to peak near 11% in 2010, and then remain around that level through 2011... dropping very slowly thereafter, but remaining high from a historical perspective for quite a while. I think Democrats really need to get it at least below 8% or so by 2010 from a political standpoint in order to even be semi-tolerable for voters.
Resultant low consumer demand means continued overcapacity/oversupply in almost everything. Without production, you don't get growth. So low growth - GDP maybe fluctuating between 1%- 2% through that period, and partially due to "misleading" statistical and other measures that aren't indicative or supportive of true, sustainable growth (e.g., government spending).
Many more bank failures - in the hundreds, through that period, as CRE and personal loans continue to go bad, and mortgage loans also continue to sour. Banks are unwilling to lend when they're worried about simply surviving.
Housing stabilizing from now through 2011, but remaining stagnant for quite a while. Huge inventory overhang fed by continued defaults/foreclosures, banks reluctant to extend credit. Many foreclosed homes are being kept off the market by the banks. As they are gradually released, they'll continue to be a drag on prices.
CRE next major shoe to drop. No consumer demand will translate into more stores and businesses going under. At the same time, personal loan defaults will rise as unemployment remains high.
Stocks are richly valued, with expectations for a "V"-shaped recovery already priced in. They can go somewhat higher short-term, but I believe the eventual reality of long-term, reduced earnings will weigh on the market. I expect a double-dip "W" recovery at best, but more likely, a long, drawn-out "L' with small ups and downs on the tail, similar to Japan's lost decades. When we do have bouts of price inflation, it will be in specific commodities, like oil, and driven more by supply constraints than demand.
Continued low interest rates for the next few years. Despite all of that printed money and resultant inflation fears - you can't force people to spend, and you can't force bank to lend. No velocity means no (overall) inflation (depending on how you choose to define it, of course). I think disinflation/borderline deflation for quite a while. No tragic deflationary spiral, but no Zimbabwe hyperinflation either.
Boomers had driven much of consumer spending. Now it's time to save, retrench - but not spend. They've lost much of their paper wealth, and now the "negative wealth" aspect comes into play.
Higher taxes are inevitable. This will also be a drag on the economy.
Overall, social mood has shifted to frugality. A (forced, in part) return to simple, cheap, close-knit family and community values, recreation. On a macro level, this will be manifested by growing protectionism amongst nations.
Significant wildcards will be situations like Iran, a more serious swine flu pandemic, China internal instability, etc. I especially expect Iran to come to some kind of head within that timeframe, if not sooner. Who knows what that'll bring. Higher oil prices for sure. Nothing good to look forward to that I can see, other than perhaps the end result of a defanged Iran. But even that will bring other adverse repercussions.
I also fear that the proposed healthcare reform and cap-and-trade could have unintended, adverse effects on the economy, although they'd probably take a while to manifest - probably outside of the 2012 timeframe, depending on what and when.
What's your outlook, and what do you think Obama & Co. should do to get us out of this situation?
OK, gotta go, for real.