So 2008 has begun with a lot of foreboding economically, particularly with Oil now going through the $100 a barrel figure. This is adding to the ongoing Credit Crunch to produce a pretty risky situation. This has led to a lot of downward movements in the stock markets, but I'm now getting more optimistic than when I started writing this post at the start of January.
The reasons that I've got some cautious optimism is due to the impact on commodity prices of the slowing US economy and the fact that this will help rebalance things. For the UK the declining exchange rate will help to make the economy less dependent on capital inflows from other economies and hopefully boost exports. The housing bubble starting to deflate will be good as long as it doesn't actually pop. I think the first couple of quarters will be painful, but because of low rates of unemployment the pain will not last too long.