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Allen predicts that unemployment will continue to rise and the economy will remain weak as consumers and businesses refrain from new spending until they are confident asset prices are no longer falling. "We need things to stabilize," says Allen. "The problem at the moment is that people don't know what their wealth is." Americans have no idea what their investment portfolios or real estate holdings are really worth and, as a result, are afraid to spend or make additional investments. "I think everybody is frozen with fear of losing their jobs and the rest of their wealth. There's huge uncertainty. Until that starts going away, until things stop getting worse, we'll keep going down."

Percival says the rate of consumption in recent years, fueled by easy credit and excess borrowing, was too much of a good thing for the U.S. economy. Ultimately, though, consumers will return to the malls, auto showrooms and the real estate market. "The consumer will be chastened for a while, but I can't see any dramatic change in the long run."

He notes that the emergence of bargain prices for stock in world-class companies is one positive note in the gloomy economic picture. "The prices you can buy these companies for are ludicrous. If you have some liquidity and a little bit of patience and a little bit of courage, there certainly are some wonderful buying opportunities out there."

According to Allen, the early weeks of 2009 will be marked by a wave of bad economic news as the incoming administration attempts to lay the political groundwork for a massive stimulus package. "They need to get everything out as soon as possible," he says. "It will be a very negative January and February and then hopefully things will start to stabilize. I think we have some painful months in front of us."

While the Obama administration will be pressed to take action to address the financial problems, adds Percival, it runs the risk of creating additional problems, primarily rising government debt and inflation. Meanwhile, he says, the global economy continues to remain vulnerable to oil price shocks. Finally, given the severity of the current economic crisis, politicians will find it next to impossible to stand up and take decisive action on the funding gaps in Medicare and Medicaid. "This will be put on the back burner, but the longer we wait to solve these problems, the bigger they are going to be," warns Percival.

Marston says the Obama administration's fiscal stimulus plan could result in an economic "spring thaw" that may only be temporary. "The fiscal stimulus is desperately needed to make sure things don't get worse. But I am pessimistic about the long-term impact of all of the spending. The pump priming may not really get things flowing. We need another source of demand -- consumers, exports, investment?"

Meanwhile, an auto industry bailout may only postpone for a time major restructuring that will erode the financial security of workers and retirees, particularly in Michigan, suggests Allen. "I don't think they can avoid it being like a Great Depression."

U.S interest rates are hitting historic lows and a flood of liquidity is coming into financial markets through Treasury bonds, he adds, noting that low interest rates did not do much to speed recovery in Japan in the 1990s and he does not expect them to help much in the United States now.

Europe: Hit Hard -- And Early