In January 2006, at the time when the market and official sector consensus was for another Goldilocks year of high U.S. and global growth, low inflation and rising asset prices, I made the following out-of-consensus and bearish 19 forecasts:  

- The US economy will slow down in 2006, especially in H2, towards a 2-2.5% growth rate

- The U.S. and global housing bubble will burst - or better fizzle-out - in 2006.

- The global economy will also slow down in 2006 towards a 3.0% growth rate from 4.3% in 2005.

- The US current account deficit will worsen in 2006 towards a $900b deficit and global current account imbalances will become larger.

- The US fiscal deficit will worsen in 2006 adding to the US twin deficits.

- Rising protectionist pressures in the US and Europe.

- China will allow its currency to appreciate by at least 10% and the rest of Asia, including Japan, will follow.

-The dollar will also weaken relative to other floating currencies but by less than relative to China/Asia.

- The BW2 regime will start unraveling driven  by less forex reserve accumulation in China/Asia and the movement of their currencies.

- US long term interest rate will head higher in 2006 driven by the BW2 unraveling and other global factors

- Oil prices will head again above $70 a barrel before falling once the US/global slowdown starts.

 - The Fed Funds rate will go above 5% and the Fed will not be able to react to a US/global slowdown by easing rates.

- The ECB and BOJ will start tightening monetary policy and the global easy liquidity conditions will start to reverse.

- Equity markets will do poorly, especially in the U.S.

- Geo-strategic and geo-political risks will remain high and they will affect asset markets.

- High risk that a major US corporation will enter bankruptcy.

- Rising political tensions deriving from globalization and the pressures that it puts on workers in the US and Europe.

- Rising spreads on a variety of risky assets and increases in asset prices volatility. 

- Increased probability of a systemic risk episode.

It may be a little early to declare victory but, in most dimensions, my bearish views on the US and global economy are starting to emerge as quite correct. The Three Bears scaring Goldilocks (that I have been referring to since the beginning of the year) - high oil prices, a flattening housing market, and rising inflation leading to higher policy rates than expected - are starting to kick in and leading to a sharp U.S. economic slowdown. Q2 growth may already be in the 2-2.5% range that I predicted in January and is likely to further decelerate in H2. As I predicted, oil would go above $70 a barrel because of geopolitics (Iran, Nigeria) and have a stagflationary impact.