One of my New Year's predictions was that the economy would go into recession within the next 18 months. My daily perusal of the WSJ is convincing me that the economy is in worse shape than I thought.
The liquidity crises has moved beyond the mortgage business, beyond the banking business and across national borders. The dollar has continued to plummet as gold continues to skyrocket.
Businesses and individuals with good credit are finding it hard to borrow. Plus banks and other lending institutions are getting nervous and starting to call in even performing loans, forcing more sell-offs and weakening the capital markets even further. I cringe each morning when I open the paper, wondering what domino has fallen next.
A key issue is that there isn't a lot the federal government can do. Politicians, especially democrats, will scream to "do something", but as in most government interventions, the law of unintended consequences means that they will just do more damage. In this case the market and people have to take their lumps and find a place of equilibrium. Government interference will more than likely extend the pain.