Another, related, aspect of this will be the return of the entrepreneur. If it is true that necessity is the mother of invention, then wide-ranging necessity will lay the groundwork in 2009 for sparking a re-invention of self-employment and entrepreneurial activity. Because access to credit will remain tight, this activity will take time to develop. But if there is a silver lining to the coming despair it will be the return of entrepreneurial problem solving.


4. Don't Touch Me!
"Whoa! Hey! Don't touch me!"

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Video: Q&A With Robert Prechter

- Brak, "Don't Touch Me"

It is important to keep in mind that structural shifts in social mood take place as long-term, non-linear processes. They do not occur as singular events. One of the peculiar myths in the narrative of the era of the Great Depression is that the stock market crashed, businesses closed, people went hungry, stood in soup lines, picketed, rioted and then things got better.

If one spends time looking through historical records of that era - newspapers and magazines such as Time and The New Yorker -  it becomes clearer that while economic times were difficult, life continued. People went to school. They followed sporting events. In short, they went about their lives.

Nevertheless, for 2009 we should expect increasing bursts of social strife and ugly human behavior culminating in increasing waves of violence and crime.

Strangely, pundits and commentators will attribute this to worsening economic conditions. For example, news articles may report that banks are being robbed with greater frequency and attribute causality to declining economic conditions.

The reality, however, is that declining social mood is what causes declining economic conditions as people collectively feel more risk averse, fearful and negative. That mood also translates into actions that are themselves more negative; criminal acts, anti-social behavior and increasing personal conflict... nevertheless...

"Three words you have spoken,
don't make me a fool.
As a gesture, a token
please play by the rules."
Brian Jonestown Massacre, "Nevertheless"


5. Markets: Gold Declines, Dollar Rises, Interest Rates Hover at Unimaginable Lows

I recently covered in the article, "Bear Markets Ain't Over 'Til They're Over," the reasons why I believe probabilities favor dramatic new stock market lows in 2009, but what about the other asset classes, gold, currencies and bonds?

It is no secret that in a deflationary debt unwind all asset classes suffer absolute declines. In a relative sense some asset classes may fare better than others, but the problem remains that you can't spend negative relative outperformance.

As for commodities and precious metals, look for 2009 to begin optimistically with commodities retracing some of their disastrous declines this year. Gold is also in the late stages of another attempt at cracking the $1,000 level. Unfortunately, the purpose of deflationary debt unwinds is to crush the spirits (and speculative juices) of all who attempt to participate in financial markets. The point of recognition for this deflationary debt unwind will culminate in another wave of intense selling pressure as the last speculators standing give up.

There has been no shortage of top callers in the bond market of late. From a technical standpoint bonds certainly begin the year with the rubber band stretched painfully to the upside. But do not underestimate the power of deflationary forces to keep a floor under bond prices as interest rates hover at lows that, as recently as a year ago, seemed unimaginable.

So there you have it. Only 366 days until 2010. That's the good news. When all is said and done, perhaps the best thing that will be said of 2009 is that it only lasted a year.