In no clever order.

House prices may rise in 2009.  I am feeling smug on this one: a later post will reveal why*.

A bunch of economists explain the Crunch to the Queen, who rather sweetly wondered why things can't be predicted. The world of economics is not like a kingdom, ma'am.  It is a chaotic system, dynamically responding to its own views of itself. If you meet an economist who will promise that some combination of improved theory, academic incentives or moral character can ensure that such events never happen again, have him beheaded - you are still allowed to.  

Here is the letter.

John Kay is sceptical about democracy.  On California:

"The state’s budget crisis goes back to the passage of Proposition 13 in 1978. Asked whether they wanted lower property taxes, or not, voters quite reasonably decided they did. Voters also want to use more electricity but do not want more power stations. They want to reduce carbon emissions but also want to drive their cars. If you ask people simple questions that can be answered yes or no, you will get honest answers. But there is not the slightest reason why these answers should add up to a coherent policy programme".  

He would like this timeless HL Mencken quote.

A letter-writer claims that "never again" is a myth.  He is wrong: we will spend the next decade or so fearing and expecting a repeat of 2007-9, then something else will happen.  I know - for the first 5 years of my life in the City I had punters endlessly expecting the crash of 1987 to happen again, and losing their shirts. 

Personally, I agree with Paul Ormerod: animal spirits will not stay down for long.  This is not like the 1970s - there is money to be made.  Tim Bond of Barclays agrees: "Time to stop worrying and learn to love the recovery". He points out:

"The 9.5 per cent US unemployment rate is also viewed as an obstacle to recovery. This objection ignores the many contrary examples of high unemployment rates and subsequent recoveries, not least in the US. Thus in 1982, US unemployment hit 10.8 per cent, yet GDP soared at an average annual pace of 7.7 per cent over the next six quarters."

But inflation was much higher back then, which made many policy routes possible that are not so easy now - including a natural erosion of the value of debts.  And reading Jonathan Guthrie's excellent account of his business centre closing warns me against extrapolating too glibly from the seemingly prosperous South. 

This article depressed me.  Paying African ministers for out of office meetings has meant they are never in the office doing their jobs. 

Munchau believes central banks might have less choice about inflation than people think.  

If you love economics you'll enjoy this article by grumpy monetarist Scott Sumner on how Supply and Demand confuse people so much. I am still entirely unconvinced by his idea that nominal GDP targetting and monetarist solutions would have prevented the collapse of the economy last Autumn from taking place. Real GDP growth surely needs real people to produce real economic demand, and if they are all simultaneously freaked out, what precisely could the Fed have done? In other words, surely we needed the government to supply some demand?  But he hates fiscal solutions.  However, SS is way way brighter than me in this field, so when I read stuff like this I want to find out more:

"Monetary policy was roughly as tight last year as in 1981, when Volcker raised rates 20% in order to break the back of inflation.  Both monetary policies were tight enough to drive NGDP growth rates down very sharply.  If the business community and the public and journalists and economists had been aware of what was going on, there would have been riots in the streets."

I sort of see his point that the price of money does not on its own indicate monetary tightness or laxity.  But the zero-bound for interest rates makes me think that without real economic demand there is nothing more money could have done.  Turning people's expectations of economy around on a dime after an event like Lehmans, through monetary actions alone, provides a rather optimistic basis for discarding fiscal measures.  I am probably missing something.  

Simon Johnson wonders if China emerging first from the slump means the unavoidable need for capital controls. 

*No, it is not because I boneheadedly think that by owning a house I benefit when they go up in price.  Thank you Willem Buiter