This weekend Kathleen Pender of the San Francisco Chronicle talked about how horrible 2008 has been for the economy and markets. So miserable, in fact, she wrote Sunday:

You have to go back many decades - to the early 1970s at least - to find a year that started as miserably for the economy and the markets as 2008.

Pender spoke to Jeremy Grantham, the money manager who oversees $152 billion as chairman of Grantham, Mayo, Van Otterloo & Co. She wrote:

This has been a “wickedly awful year,” says Jeremy Grantham, chairman of investment firm GMO. This is “worse and much broader” than previous downturns…

Grantham says the turmoil is not nearly over. “I’m very confident the global economy, and the U.S. economy, will be weaker than people expect, for longer than people expect,” he says.

The credit crisis is global and “the Fed and Congress have much less power than people think” to fix it. “Now that the system is in retreat, it’s hard to stop,” he adds.

For Grantham, who has advised such clients as U.S. Vice President Dick Cheney and former U.S. presidential candidate John Kerry, China is the key to global economic health. Pender wrote:

Grantham says the biggest risk is China slowing. “If they stumble into the teeth of slowing growth, nervous confidence and a credit crisis, that would be extremely bad news.”

Commodity prices would fall, which would hurt developing countries that export commodities. These countries have been fueling global growth, and if they slow, it will spill over into the developed world.

Source:

“Start of 2008 is the ugliest in decades”
Kathleen Pender
San Francisco Chronicle, June 29, 2008

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