There's nothing like starting a year with an economic mess to welcome you back from vacation. This makes my first column of the year, and in fact, the first column of my sixth year in this space, all the more challenging.

The Fed really threw a monkey wrench into things by loosening the money supply to make sure there was plenty of liquidity for the various subprime offenders on both sides of those transactions to sort things out. Fed policy may be directed to curing one problem, but since all aspects of the economy use money, not just the situation they are trying to fix, their actions can have an opposite effect in many other unintended and unforeseen ways. The Fed does this delicate balancing act and then chooses the most politically expedient and short-term act. At least that's what it seems like to me.

The dollar went down, and that has started an importing of inflation rather than goods and services. The fact that our exports are up with the weaker dollar offers little to balance the displacement of money that is losing value at a faster than typical rate. Get ready: the risks of a recurrence of late-1970s stagflation have risen greatly. The cures of tax policies that stimulate investment are politically implausible, especially in a presidential election year. It may be a rough, and unfortunately “interesting,� economic ride ahead. But recession is not in the cards, despite all these problems. It will certainly feel less bad than it did in 1979-1981, but more like 1990-1991. The year 2008 may feel like the end of 2000 and most of 2002 at its best.