Sunday, December 26, 2010

2010 wasn't quite as good as 2009 for this blog's annual end-of-year predictions, but it wasn't too bad, either. Here's a wrap-up of the results, followed by a new batch of prognostications, sure to demonstrate the principle of "regression to the mean"...

  • The US economy will grow only modestly in 2010, and unemployment will remain high. Consequently, the stock market will end the year down slightly. The Fed will continue its highly expansionary (short-term) interest rate policy, but the combination of easy money and profligate government spending will spur fear of possible inflation risks down the road, forcing up longer-term rates and thus impeding economic growth. On the other hand, the US dollar will recover somewhat, and gold and other commodities will fall in tandem, as Europe and Japan continue to suffer from an even worse case of America's economic malaise. This will help dampen short-term inflation. Real Estate will, after a brief pause, continue its decline.

Right on the big picture, but off on most of the details. The economy was indeed nearly stagnant through 2010--so much so, in fact, that fears of a double-dip kept even long-term interest rates low, impeded the dollar's recovery, and sustained the gold bubble. The low long-term bond yield also sparked a stock market rally in the fall that carried the indices back above their January levels. (On the other hand, I called the real estate market pretty accurately.)

  • The Iranian regime will not fall in 2010. In fact, it will begin a massive crackdown not only on oppostion leaders and groups, but also (as previously predicted) on insufficiently hardline elements among the government and clerical elite itself. As the repression gradually succeeds in quelling mass protests, Western attention to internal events there will subside.
Pretty much on target, although the ayatollahs in particular appear to have generally been cowed rather than targeted. (The arrest of Rafsanjani's grandson, for instance, seems to have kept him in line.) Indeed, if it hadn't been for Stuxnet, the country might have fallen off the news radar almost entirely.

Pretty much spot-on, I'd say. I've added supporting links above from 2010 news reports.

  • The Israeli government will fairly soon make a deal with Hamas to free hundreds of Hamas terrorists in exchange for the return of captured Israeli soldier Gilad Schalit. The deal will powerfully energize terrorist groups in the West Bank, who will respond with a surge of terrorist violence and disturbingly effective subversion of the new American-trained Palestinian Authority security forces. However, Israel will step in firmly to fill the gap left by the suddenly floundering locals, and will harshly suppress the violence. This show of resolve by the Israeli government will dampen the usual global hysterics--American and European official condemnations being predicated largely on Israel's past meekness in the face of international bombast--and American and European relations with Israel will actually strengthen in the aftermath.
Okay, this one was way off-base. The Netanyahu government appears to have had considerably more negotiating spine than I anticipated--thereby avoiding the need for military spine...
  • The Obama administration will hobble through 2010 weakened and flailing. Health care legislation, if it passes at all, will be watered down still further from the already-perfunctory Senate version, after the bill's big losers (Medicare beneficiaries, "Cadillac plan" customers, and most doctors) band together and start exerting serious political pressure. The administration will turn its attention to the economy, but sluggish growth and stubbornly high unemployment will nevertheless persist throughout the year (see above). The president's foreign policy will appear similarly feckless, with the already-unpopular Afghan campaign dragging on inconclusively, the "engage America's enemies" strategy garnering nothing but contempt from the likes of Iran, and the Middle East conflict (unsurprisingly) continuing to resist resolution despite the administration's best efforts. The administration will also make major personnel changes to his inner circle at some point during the year, replacing one or more key advisors with establishment figures intended to add gravitas and centrist appeal. Needless to say, the shuffle will accomplish little.
A couple of minor details were off (the Senate version of the health care bill did pass after all, and there was no major staff shuffle at the White House), but overall, I think I captured the spirit of the Obama administration's year quite well.
  • Exploiting the economy's weakness and the administration's poor approval ratings, the Republicans will launch a grand policy platform akin to the "Contract with America" that led to huge GOP electoral gains in 1994. Like the previous one, the new program will consist of broad, vague, impractical proposals that poll well but stand no chance of being implemented. Armed with this putative platform and buoyed by populist conservative outrage and disappointment-bred apathy among the liberal base, the Republicans will make large gains in both houses of Congress. They will, however, fail to take control of either one.
Again, I slipped on a detail--the GOP did, in fact, win control of the House of Representatives. Otherwise, the above paragraph stands up pretty well--including the bit about the "Contract with America" knockoff.
  • There will be a cultural backlash against recession-driven frugal-mindedness, and stories about straitened times for the once-profligate will give way to 30s-style otherworldly depictions of ostentatious wealth and glamor.

Does this count?

And now for this year's predictions:

  • The US economy will continue to recover in 2011, and unemployment will drop, although not sharply. Inflation will remain tame, and short-term interest rates will therefore be kept very low, although long-term interest rates will rise substantially. Real estate will decline slightly again. The dollar will strengthen, oil and other commodity prices will be stable, and gold will drop.

  • At least one US state or large municipality, and at least one European country, will experience a Greek/Irish-style debt crisis, which it will manage to muddle through, Greek/Irish-style, with a combination of austerity measures and external bailout funds.

  • The Afghan "surge" campaign will show signs of progress, but strong domestic opposition to it in the US will force an overall de-escalation of operations and/or a shortened time limit on deployment. The gradual American withdrawal from Iraq will continue, and internal instability there will again increase, although only modestly.

  • Middle East peace negotiations will remain frozen. The Palestinian Authority will enact some kind of official declaration of independence or sovereignty, which will be nominally recognized by a bunch of countries around the world, but otherwise change nothing. Similarly, the UN tribunal will indict some Hezbollah officials for the murder of former prime minister Rafiq Hariri. The move will be ignored in Lebanon, where Hezbollah's iron grip will continue unaffected. Both Hamas and Hezbollah will exercise relative restraint towards Israel, however, due to strengthened Israeli deterrence and Iranian government's preoccupation with consolidating its hold on power and shoring up its imploding internal economy.

  • The Obama administration and Congressional Republicans will alternate between conciliation and confrontation over the year, co-operating on certain popular measures--possibly including deficit reduction and tax reform--while feuding bitterly over partisan ones, such as health care and the environment. GOP-run House hearings and proposed (but doomed) legislation will compete with symbolic executive and regulatory actions for partisan advantage through theatrics. Obama's approval ratings will improve to the low-50-percent range. On the Republican side, the 2012 presidential nomination race will by the end of the year produce neither a clear frontrunner nor a credible threat to Obama's re-election.

  • Phenomena such as the Voca People and Mike Thompkins will lead a surge of popular interest in a cappella music.

If you disagree--or think you can do better--feel free to add a comment with your own predictions, and I'll review them along with mine next January...

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