My New Years Eve bubble-induced hangover did not help me forget the many worries I have for 2008. High oil prices (record $100 today), talk of recession, a return of populist politics, housing market crash, a weak dollar, a credit crunch, social unrest in Pakistan (Middle East region in general), and other issues have me walking on egg shells.
However, with the exception of social unrest and recession, the most important concern I have for 2008 is inflation. "A change in inflation expectations [could] send the Federal Reserve into a severe monetary policy tightening campaign that would take the U.S. economy into a recessionary path," wrote Wells Fargo Senior Economist Eugenio Aleman.
That comment came on the heels of Mr. Aleman's analysis that the ongoing credit crunch should bring U.S. economic growth back within a trajectory of a mature economcy - not an emerging market's rate of growth. Also, the negative savings rate and current account deficit would not weigh on the economy like in the past.