Despite massive interventions by governments around the world, things are still a long way from settled in the major industrialized economies. As an industry crashing in one sector can have significant flow on effects into other sectors, the collateral damage is often far worse and more wide spread than the original close down.
With auto manufacturers going cap in hand to government, and the general consensus being that things have a long way to go before we turn the corner, I’m trying to get my head around just how bad it’s going to get, and what the implications might be for the longer term.
Where are the limits to what we might expect over the next 12 months?
If you’d asked this six months ago, nobody would’ve predicted the end of the investment bank era, but it happened anyway. What’s going to happen in the next twelve months may be similarly astonishing.
As ultrafilter notes, it’s a rather unguessable question. Theoretically speaking the whole thing could turn about on a pin and bring us to new heights.
If you can sell everyone in the US and EU on a single unified plan to put industry back on track to kick ass for another century and to resolve the mortgage debts in a way that strikes everyone as being common-sense and simply a matter of waiting a year or two, then yeah, everything could rebound and get back to where it should be.
It’s largely an issue of salesmanship and having a gee-wow plan that also has some real numbers behind it. “Let’s bail them out and kick out some of the top people.” While not a bad answer in many cases, doesn’t really have the flair to sell anyone for something of this scale (in my mind.) While as ideas like putting US auto manufacturing on hiatus while things are updated to make cars for the new century sort of captures people’s imagination and makes them feel positive about the future.
Positivity about the future = A strong economy for most intents and purposes
Compare the takeover of companies–for instance Steve Job’s return to Apple–and you’ll see that getting the right guy in with the right plan can really do full 180s to an organization. But just as often they’ll come in and fail. There’s no knowing until the cards play themselves out.
unemployment goes up to about 10%. Stock markets fall about 50% from here. US property prices fall 25-50% with foreclosure rates going up. 10% of commercial real estate and shopping malls go bankrupt.
It’s going to be an ugly 2 more years in a best case scenario.
Knowing how much people in my life depend on their property appreciating over time, I’m having trouble coming to terms with the flow-on implications of say a 50% reduction in the value of their primary asset.
And surely the effect of share market losses on the superannuation funds supporting an ageing population has real implications for public policy, and thereby everyone else!