(snip)"Here are in a summary the main questions addressed in my long analysis of the 2008 outlook and a short version of my answers of them:
Crucial questions about the U.S. and the global economy in 2008
Will the U.S. experience a soft landing or a hard landing (recession)?
Will the current financial markets crisis (liquidity and credit crunch) get worse or better?
Will the US Fed ease, how much and will this easing prevent a recession?
Will the rest of the world decouple from the U.S. slowdown/hard landing or recouple?
Should we worry about global inflation or deflation?
What is the risk of stagflation (negative growth and rising inflation)?
What are the implications of the outlook for the various asset markets and asset prices?
Summary of the answers to these questions:
The US will experience a hard landing (recession) that will be severe and protracted rather than mild
The liquidity and credit crunch will get worse and the risk of a systemic financial crisis is rising
The Fed easing will be too little too late and it will not prevent a recession
The rest of the world will not decouple; it will rather recouple with the US hard landing leading to a global economic slowdown
Existing inflationary pressures (from oil, energy, commodities) will fizzle out once you have a US recession and a global economic slowdown.
True stagflation requires an exogenous politically driven negative supply side shock to oil prices (such as war with Iran).
Risky assets (equities, credit spreads, housing, commodities, emerging market assets, the US dollar) will get hurt. Cash is king in 2008."(snip)
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