The top ten credit crunch questions for 2009

The end of the year is approaching, and 2009 will soon be upon us. Here are my top ten credit crunch questions that should be answered within the next 12 months.

1. Deflation or inflation?

Despite the fact that the UK CPI recorded a 4.1 percent increase over the last 12 months, the MPC are more worried about falling prices. Determined to fire up inflation, the MPC are about to reduce the bank rate to something close to zero. On the other hand, negative real interest rates and a tidal wave of liquidity should normally guarantee double digit inflation.

2. Do UK banks need more capital?

Charlie Bean, the deputy chairman of the Bank of England, thought so this week when he talked to the financial times.

3. Have we seen the worst of the banking crisis?

Will there be more banking failures? Or has the credit crunch been transformed into a fiscal rather than a financial sector problem?

4. Commercial property – how exposed are the UK banks?

It is the unmentionable crash - empty shops and offices are now sprouting up like a bad case of the measles. Somebody must have financed those new offices and shopping centres. Was it the hapless UK high street banks?

5. Sterling – how low can it go?

The pound is edging towards parity with the euro? Can it go lower?

6. The UK housing market - where is the bottom?

Average prices are already down 19 percent from the peak, could we see another double digit decline next year?

7. Unemployment – will it hit three million by December 2009?

This week’s unemployment data was a shocker – 137,000 jobs lost in just one month. few more months of that kind of shake out and 3 million definitely looks likely.

8. Oil - $25 or $80?

Will the OPEC production cuts push oil prices back upwards? Or will the world economic slowdown deal a crushing blow to Putin, Chavez and their oil-rich fellow travelers?

9. Will Brown and Darling get away with an 8.5 percent of GDP fiscal deficit?

Actually, I know the answer to that question.

10. Will any be going to jail?

Trillions and gazillions of pounds of wealth disappear, but will anyone be held to account?