4. What will happen next...

The money post. I like to tell my team that we are all paid to predict the future in our own function. Anyone can analyze the past.. Look down the rabbit hole and tell me how deep it runs... thats what we are all paid the moolah for.

1. The western economies will roil in the oscillations
2. China will swoop harder and faster into Africa and capture key resources without anyone realizing
3. India will sit and watch.. and fight about Nano plants and the rights of farmers...
4. Russia will suffer as the West does...
5. The middle-east will capture and control several key resources in the West
6. Iran will grow stronger
7. Japan will suffer a housing market collapse, but the banks will not be hit as badly, since I believe that they were more conservative than the US banks...

Will the US get into a recession?
Yes. Atleast for a year or so. If the interest rate lowering happens at the right time, then things will improve. Else there is a long decade ahead of us.

As the US economy goes, so does the Indian economy. I predict that if 10 years ago a 1% drop in the US led to a 20% drop in India, now the drop will be around 10%. But drop it will. Indian businesses cannot sustain themselves on local demand. If they find a way, which they should, that will be great for us.

Situation in Europe and Japan?
I believe that in addition to the poor asset management practices by the IBs, the double whammy came from falling asset prices.

I think the banks in the Eurozone had similar bad asset management practices. So Trichet and co., will have to buy the junk the banks own, but I don't see a housing bubble like in the US. The clear exceptions being Spain and the UK. Spain already went down in 2007. UK will go down in 2009.

So the government will have to step in but the effect should be much more short term. Banks are affected. Home-owners and consumer should not be affected to a great extent.

Japan, I believe has the reverse situation. Assets were managed very conservatively with very low exposure to bad assets. But from what I hear the housing market was in a bubble and the real estate prices are bound to fall.

So the government will probably not have to step in, but the home-owners will suffer. There will be a mini-US-like situation, but the banks will be capitalized enough to manage the resulting defaults.