You have heard that Fannie and Freddie, their gentle names notwithstanding, may cripple the financial system without a large infusion of taxpayer money. You have gleaned that jobs are disappearing, housing prices are plummeting, and paychecks are effectively shrinking as food and energy prices soar. You have noted the disturbing talk of crisis hovering over Wall Street. Something has clearly gone wrong with the economy. But how bad are things, really? And how bad might they get before better days return? Even to many economists who recently thought the gloom was overblown, the situation looks grim. The economy is in the midst of a very rough patch. The worst is probably still ahead. Job losses will probably accelerate through this year and into 2009, and the job market will probably stay weak even longer. Home prices will probably keep falling, shrinking household wealth and eroding spending power. “The open question is whether we’re in for a bad couple of years, or a bad decade,” said Kenneth S. Rogoff, a former chief economist at the International Monetary Fund, now a professor at Harvard. More
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