Feeling Bearish

David Wessel of the Wall Street Journal is feeling bearish this morning:

Every so often, economic forces and financial markets collide in ways that make for a tumultuous year — the stock market crash in 1987, the Asian financial crisis and bond-market paralysis in 1998, the bursting stock bubble in 2000.

Suddenly, this year has all the ingredients of a Big One.

The dollar is sinking. Global stock markets are volatile. Bond-market interest rates are climbing. Oil prices are up. Gold is at a quarter-century high. Housing prices are softening. Protectionist pressures are intensifying. General Motors Corp. is a candidate for bankruptcy court. Iran may be on the verge of going nuclear. A nasty, partisan congressional election looms. And a new Federal Reserve chairman’s inflation-fighting resolve is being tested.

Alan Greenspan certainly picked a good time to retire.

Wessel neglected to mention the fuel that the US’s enormous current account balance adds to this unignited fire, but even so, he seems to have reasons enough for concern. It’s not clear what the spark will be, or even whether there will be a spark at all. There may not be. But I think that Wessel is right to suggest that there is enough dry wood and kindling piled together to give 2006 the potential to generate more than a comfortable amount of heat and flames.