It seems that the rescue packages that have been implemented across the globe have started to have an impact upon bringing back a little stability to the financial markets. However, this is only the beginning of the problems for the real economy.

Economies throughout the developed world contracted in the third quarter of 2008 and this contraction is likely to continue and deepen as the imbalances in their economies unravel and the debt fuelled expansion is brought to a halt.

As a result many of these economies will be in recession by the end of the year and are likely to continue to shrink in 2009. Next year is going to be tough.

It is highly likely that unemployment in nearly all developed countries will rise sharply next year. For example it has been forecast that over one million more people in the UK could be unemployed by the end of 2009.

There are however some positives. Inflation looks like it has now peaked across the globe giving central banks the freedom to cut interest rates and stimulate the economy. Falling prices, particularly of fuel and food, will help to boost consumer confidence as real wage rates rise.

Finally it looks likely that Obama will win the US presidential election today. If this is the case, a new president the popular and political support should be able to act decisively and extensively to stimulate the economic recovery in the US.

For now I suggest getting ready for a very long 2009.