NOW THAT most people agree the US is experiencing a recession (or at the very least a slow down) the following questions remain: how bad will it be and how long will it last? Ben Bernanke and many on the Street predict short and shallow. Popular media and other economists, such as

Nouriel Roubini

, believe we teeter on the brink on the next great depression. The data seems to lean to the Bernanke camp, but at this stage it’s impossible to know. Economists are trained to be Monday Morning Quarterbacks, not fortune tellers. Talk to me several years into and I will be full of insights about the implications of the “sub-prime crisis” and the “credit crunch” that followed it.









Our fate will be determined by many unpredictable factors, primarily expectations. The expectations of consumers deciding how much to spend and those of investors deciding how much to lend will be a crucial. The more uncertainty that persists in the market, the more cautious people will be. It seems we have an incentive to declare this recession short and shallow and get to spending and lending. Perhaps, though I wonder if this strategy is feasible in the long run. The US can not go on forever with a negative saving rate. If its debt becomes too large eventually foreigners will become skittish about investing here. They will have unfavourable expectations. Calling this recession short and sweet could make sense for today’s policy makers, but may not be a dynamically consistent strategy.









But saying we are on the verge of the next great depression seems to do more harm. Why would so many smart people put their reputations on the line and potentially drag out a recession longer than it needs be? The current climate has many troubling aspects. Policy makers and investors need to cognizant of what brought us here if we want to avoid past mistakes. Not learning the lessons from the current, or any, recession does everyone a disservice and could lead to a serious contraction.









Also, I wonder if you are more accountable for your view when you predict good times rather than bad. If you predict gloom and doom for the next ten years, but good times follow, people will be pleasantly surprised. In business you often want to set expectations low and then deliver.









Paul Krugman has been predicting a recession for years; he was bound to be right eventually. Predicting a wealth boom that never happens, or occurs later than expected, will lead to disappointment.









As I mentioned earlier, I can not predict the future, but I am going to be bold and put my name (or would if it were not for

the Economist

anonymity) on a prediction: in the future we will see positive and vigorous economic growth. Then, further into the future, the US will experience another recession. I can not say when, how long, or predict the magnitude of either of these events, but they will happen.