Well, it's 2009 and time for annual predictions. This post, however, will review my 2008 predictions.
If I had reviewed my oil price predictions in May of 2008, things would have looked great: I predicted that prices would solidly breack $100. After that, I failed to predict a "spike" (as it turned out, to roughly $147/barrel), or the subsequent crash in prices. This second failure was largely the result of my biggest failure in my 2008 predictions: I argued that we wouldn't have an economic crash, and that we wouldn't even enter a recession. I don't think it's possible to mince words here: I was wrong.
Ultimately, my confidence in the economy was due to my belief that we wouldn't see enough oil production decline in 2008 to really pull the rug out from under our economic fundamentals. And, at least to the extent that didn't happen, I was right. Where I was wrong was in my optimism that we'd be able to deal with the credit and financial troubles we were facing. I still stick to my underlying belief that our credit crisis--as a short term bubble caused by overly optimistic lending--is fundamentally fixable. By insisting on continuing to try to prolong the bubble, we eventually pushed it past a point of no return to where it popped. The far more intractible problem facing our economy--dependence on depleting fossil fuels and (the related) problem of being a growth-dependent economy confined to a finite planet--remain to cause havoc in the future, but they aren't the underlying cause of our current troubles. So now we're in a recession, and we're paying the price for living high on a bubble for the past few years. C'est la vie. What troubles me about this is that 1) we'll recover and ramp up consumption just in time for this to collide with a decline in energy production that will gather steam in the next few years, and 2) we'll be so fixed on solving our short-term problems over the next few years that we'll squander our best (last?) opportunity to proactively address the truly fundamental problems that we face. More on that, of course, next week when I make my predictions for 2009.
Were there any highlights, things that I got right in 2008? While it was a pretty dismal year for my predictions, I did get two things right. First, I predicted that it would be a slow year for Iran and Iraq, and that turned out to be the case. Second (and, admittedly, so vague that it shouldn't really get scored), I predicted that we'd continue to fail to take the tough steps necessary to deal with our most fundamental threats, and that we'd continue to push off a real accounting to later years and generations. I wish I could have reported that I was wrong there, too, but unfortunately I can't... Maybe I'll write a post about Hotelling's law and our ability to solve our problems within our existing political system. At least that's one prediction that I feel confident in being right about, even if my proof won't (hopefully) arrive in 2009.