It is not yet a researched blame to say that present plight of world economy is caused by the lies, deceit and greed of Wall Street, the mortgage companies, the SEC, the Administration, MBAs, Political & financial leadership and so on. But it’s true that recession and expansion of economy happens cyclically with text book precision time and again. All that the financial leaders could do and should do is to smoothen the ripples to a level bearable by all the strata of society.

However this economic Meltdown or the impending depression in world economy is unprecedented. The unfortunate part is that right from list of Nobel laureates of Economics to Federal banks of various leading economies still do not have a clue about how to come out of this contagion. When G-8 summit could not come up with any solution to this crisis, then US president George Bush called for G-20 summit at white house. So this is the level of confusion.

One of the worst example of this confusion and which takes the cake is the US 700 billion dollars proposal to buy the debt of US banks. It was none other than the Treasury Secretary of USA Mr. Henry Paulson along with Federal Reserve Chairman Ben Bernanke who after wide consultations submitted the economic bailout of 2008 plan allocating over 700 billion dollars to purchase bad debt incurred by financial Institutions. The bill gets passed by cabinet and the congress after long debate and then is sort of abandoned as it is realized that buying the debt was not the appropriate solution to the situation.

Under such circumstances who will dare to predict any thing about this recession and its consequences, above all every one has one irritating question “when is it all going to end” and we can go on to lead our normal lives?

Who is to take this question? The so called experts of Economics dare not put their signature on any predictions and take the risk of academic ridicule later. Anyway their education and training has only prepared them for analyzing the past and digging the history. They are right now busy in blurting out analysis of how signs of this depression were evident in 2006 and 2007, as usual engagement with history. Ask them to write about what caused the great depression of 1929 and you will find them in their element, pages after pages can be filled. For them to write about this present crisis of 2009, you will have to wait till this crisis is over and they getting a little wiser as the episode matures & is turned into history first.

But there is one person speaking right now, he is because that’s what he is good at. Barak H. Obama, the new President of USA, who was sworn-in, on 20 January, to inherit this Economic mess. He has been speaking at various forums including State of the Nation address to the American Congress. What he has been saying is a bit of obvious switch over to ideals of good economics like green technology stuff, bit of nudging the wrong doers or the free loaders and a bit of confidence building. It is his duty so no one can fault him on that.

However the facts have a funny way of precipitating the ultimate truth with total disregard to Kings, Presidents, Prime ministers and the ordinary citizens alike. So what are some of those Facts?

Money by itself starting producing even more money:

The instruments of risk diversification among the banks were used to create spiral of transactions between transnational banks as a results banks made more money simply by playing among them selves than by actual lending to some real productive project of some real company asking for it. Wall street began rewarding the foolhardy, steering capital to the least productive uses and shying away from responsibility of their blunders. Above all they were so used to serving their self interest & greed that they paid themselves tens of millions of dollars as bonuses even from the bail out funds of Government, which infuriated Obama.

Rating Agencies Failed in their responsibilities:

The ever willingness of rating agencies such as S&P, Moody's etc to certify top ratings to new innovations in securities like collateralized debt obligations made in-roads for numerous dumb deals churned out of blatant greed & connivance that otherwise would never have seen the light of day.

Banks are like blood vessels to Economy:

The banking industry is to ensure efficient flow of credit to thrust sector appropriately. Like our body any blockage or damage must be treated with urgency as it could be fatal. This is what happened when banks like Lehman Brothers were allowed to go. It proved a death nail to the credit confidence within the banking system world over, which to this day remains affected.

US Governments contribution to Depression:

One of the moves by US Government that can be perhaps singled out for this financial crisis is their legislation in the year 2000 to ban regulators from having any say into over-the-counter derivatives like credit default swaps. Not that the regulators would have spotted out and warned against the dangers in time, however banning them from even looking at such instruments, sent a pretty clear signal that anything-goes. Thus anything and everything packaged as debt swap went round and round from one banks books to others, to the extent banks do not have an idea what other is holding and are fearful of the same.

Ignoring Einstein:

Well something can not come out of nothing. Conversion can take place from one state to other according to energy equation given by Einstein. But we the people were so happy to get some thing from nothing by taking large debts that were beyond our means to repay. The credit card frenzy was unsurpassed. Where in the past history we had seen people rushing to bank periodically to borrow against every rise in their real state, to pay for holidays or invest on stock exchange. Today there are people who have borrowed couple of hundred thousand dollars and invested in stocks that are hardly worth few thousand dollars. This was ignited by our desire for home ownership which was fueled by gushing credit from China and Japan.

Well enough! When is all this ending?

If we take President Obama on his words and on letter & spirit of the proposals he has made (we have nothing else to work on), it will take at least 4 -5 years to make those proposals any viable reality on the ground, that is generating more jobs and more profits. The patents to wind energy and solar power technology now lie with Europe and Japan. By the Time America innovates and patents cutting age science and makes them productive and gains economy of scale, well 4-5 years will look a short time. Thus we can not see much hope this year or the next and hence must prepare ourselves and our families for a long haul.

The burden of past mistakes is so large that it can not be wished away by oratory of a president or couple of stimulus plan as the very soul of investor’s and consumer’s confidence has suffered a major blow, that can not be simply charmed by motivational songs by G-8 or G-20.

However as Mr Obama says if we do not do any thing then the gloom may last very long, as Japan is already witnessing after having lost a decade. Thus we need to be positive all the time and do every thing to keep our confidence and moral high, even if it means to hear out Mr Obama more often. During the recession of 1958 members of the Chamber of Commerce in USA used to stage a mock execution of "Old Man Gloom" as show in the picture below (courtesy Time Magazine)

Here are some of the prediction according to my gut feeling and with the quantum of damage done to world economic system and confidence. They must be taken with pinch of salt, as I myself do not want to be proven right on these.

• Millions more jobs may be lost around the globe, before light is seen at the end of the tunnel.
• The stock market will probably continue to drop, or remain flat, and things won't start to show signs of recovery to 2008 levels may be until 2014-15. the Exceptions could be some of the new ventures in green technology sectors like solar & wind power, hybrid cars etc. and old companies in medical or repair/maintenance domains.