As one of the most significant years in recent history comes to a close, filled with the sublime (election of Obama) and the profane (the Madoff scandal) I think that we have seen that nothing should be taken for granted.  Real estate agents, mortgage brokers, banker and financiers talked themselves into believing that the real estate boom would never end and that you could make risk go away by chopping it up.   Energy experts almost convinced us that there was a reason oil should cost $150 a barrel. 



The fact is that the only things that we should take for granted is that the basics we have always known haven't changed.  First, if something looks too good to be true, such as nonstop rises in house values and the Madoff returns, IT IS too good to be true.  You can't cheat an honest man. 



Second, the fundamentals of the market work - if the demand did not exist to support oil at $150 a barrel did not exist, then it wouldn't stay there for long, and it didn't.  Has everyone forgotten the basics, including the fact that overshooting occurs while the market finds its level.  Why are Wall Street analysts especially good at predicting the past, and drawing straight lines in whatever direction the trend is headed, until it heads in the opposite direction.



I think that we are going to get out of this present economic crisis faster than any of the experts predict for exactly this reason.  You can't pump extreme amounts of liquidity into the system without some reaction.  People are going to start to feel more comfortable and less beleagured when they have all those extra dollars that they were spending on filling up their tank and on food inflated by the energy crunch.  Their house values may be lower, but once they level off and people understand their real net worth they also may fell more comfortable.



And what about all those retiring Boomers?  Either they are going to retire and put this huge burden on the system or they are not.  If they do, won't this make room for unemployed younger people and immigrants further down the food chain?  If they don't retire because they need the money, well, then there won't be  a greater burden on Social Security and pension systems and at least the public funded portion of those expenditures can be spent on pumping up the economy.



More later, but 2009 will be better than we think and we will be out of this by 2010.