The outlook for the US economy isn’t pretty.

As we reported earlier this morning, economists surveyed by Bloomberg estimate US growth will slow to 0.5 percent from October to December.

The US economy is not yet officially a recession. But most commentators are treating it as such, including Lord William Rees-Mogg, former editor of The Times and regular contributor to The Daily Reckoning UK. Lord Rees-Mogg says there won’t be a recovery until the first half of 2009…

The downturn in the global economy is now 11 months old, if one takes the subprime crisis of August 2007 as the starting point. It has spread like the forest fires in California, establishing itself in one area after another, putting out tongues of fire that extend the area of the fires, always a step ahead of the firefighters.

The housing and mortgage crisis is far from having burnt itself out. The oil price crisis also started in August 2007, when the oil price was only $70 per barrel, half what it now is. The price of other commodities, particularly foodstuffs, has moved with the price of oil. Equity markets behaved as though they were immune from the recession. That pretense lasted until last October.

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Since that time, the U.S. stock market has fallen by 20%. Only the art market seems to be exempt, with billionaires buying conceptual art at speculative prices. This may reflect the sheer weight of billionaire money, or it may follow the precedent of the art market being the lagging indicator among all asset classes.

Everyone would like to know how long — and, implicitly, how deep — the 2007 recession is going to be. There are always commentators who think that the end of recession is about six months away. In 2007, there were those who expected a recovery in the second half of 2008; that expectation has now shifted back into 2009, with the recovery starting in the second half of next year and persisting through 2010. Hardly anybody now expects even the first signs of a recovery to appear before the November presidential election in the United States, the fist big political date. If the American voters follow precedent, they will elect a Democrat as president; since the classic case of Herbert Hoover in 1932, economic depression has usually led to the incumbent party being turned out.

Source: Still Burning