Our economy, for too long, has flirted with the ragged edge of prudence and as a result has finally fallen into a death spiral unlike any most of us have ever lived through. Now that we’re in this freefall, it’s time to appraise the potential depth and duration of this crisis.

We can learn much from the work of Carmen M. Reinhart of University of Maryland and Kenneth S. Rogoff of Harvard University; co-authors of a study entitled, “This Time Is Different: A Panoramic View of Eight Centuries of Financial Crises.” Their comprehensive report explored the impact of banking crises across more than 60 countries. What can we expect? Housing prices can decline another 10 to 30%, the S&P 500 index drop to as low as 200 or skid to as low as 470. Unemployment can rise another 4 to 20%. Real per capita GDP can decline another 8 to 27%! That is staggering to consider, but that’s not all!

Not surprisingly, we can expect the public debt to explode, increasing another 46 to 145%. When Rahm Emanuel, and later Hillary Clinton, spoke of never letting a good crisis “go to waste,” many people were shocked. Are you? This data suggests that politicians hold religiously to this philosophy. Around the world, they strap their citizens with the bondage of governmental debt at the height of every crisis.

Having seen how far the bottom could fall, the next point we’ll focus on is, how long? The Reinhart-Rogoff study suggested that the average crisis endured for just under 3.5 years and the longest was five years. IF this crisis is average, we might expect it to bottom out in the first quarter of 2011. So I guess it’s not yet prudent to listen to the pump monkey’s on CNBC shouting, “PEACE, PEACE, ALL IS WELL!”

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