A Gloomy New Year’s Forecast

By IRWIN M. STELZER:

Now that you have read the results of the various economic forecasting models that have served so many so badly in recent years—they are predicting the U.S. economy will grow in 2012 at an annual rate of between 1.5 percent and 2 percent—let me offer an alternative way of looking at things. It is called ‘pick your if.’

If you believe that the recent decision of the European Central Bank to make unlimited cash available to eurozone banks for the next three years, and that the meeting next week of German chancellor Angela Merkel and French president Nicholas Sarkozy will solve the problems created by excessive debt of some eurozone countries, you will heave a sigh of relief. You will then not have to worry whether the inevitable Greek default will be the first step towards a Lehman Brothers moment, with liquidity drying up, bank credit shrinking, and a deep recession settling over Europe, hurting American banks and exporters.

If you believe that the recent jagged but downward trend in claims for unemployment insurance foretells a drop in the unemployment rate that will be reported on Friday, and if you give weight to recent cheery numbers such as the uptick in regional indices of economic activity, you will stop worrying about the possibility of a renewed collapse in the jobs market.

If you read the recent upsurge in consumer confidence and spending to be suggesting that the demand side of the economy is ready to contribute to a more rapid recovery, you will murmur a word of thanks to the sainted John Maynard Keynes, and face 2012 with equanimity.

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