Several things we can bet will happen, the only question is the timing and sequences:
1. We will experience significant inflation from spending extra trillions of dollars on "infrastructure", without receiving trillions of dollars of new revenues. We will print more money to make it happen.
2. No matter how much money we "give" to the banks, they will not loan it out until the newly imposed "Mark to Market" accounting rule is revised. We will remain in a "credit crunch" until that happens. As long as we have this crunch, neither home or auto sales will improve.
3. Until the SEC disallows Short Sales of
oil, gas, banks, etc. by folks that do not own a position or shares of those commodities, our financial economy will remain vulnerable to our enemies (Soros, Russians) large enough to cause crashes.
4. With such low car sales, there will is a growing demand for new cars, which someone with courage, brains and who does not currently hold crappy mortgages/paper can satisfy with proper credit lines and "normal" credit terms. Expect one of the larger foreign car companies to find both the funds and restructuring to make this happen. My bet? Toyota will figure it out first.
5. Under no circumstances, except chapter 11, will the UAW negotiate significant wage/benefit reductions. Without that, the "big 3" cannot close the 1500-2500 cost gap to the "foreign 3". Therefore, only Ch11 will help. We will see this happen this year.
6. FORD, not in such a cash crunch, actually has a disadvantage in not being in such bad shape. Their Ch11 terms may not be available as soon, giving them a competitive disadvantage in the initial bargaining. Gov't may solve this problem, however, by finally "allowing them to arrange" an "orderly" bankruptcy, together. This used to be called "knocking heads together".
7. There will be a knock-down, drag-out political fight between the political parties and within the political parties about the entire auto wage/credit affair. Pelosi & the UAW will absolutely go to the wall against this reduction of wages/benefits to union workers. They absolutely control the Congress at the moment. (Rahm Emanuel's bringing more Conservative ex-military democrats into the party against incumbent RINO's, while a successful strategy on the surface of apparent party control of Congress, will become her own poison pill in this battle. Personally, Rahm is likely dead-meat on the Blago issues.) But, the country as a whole wants to see UAW wages/benefits drop in-line with "right to work" home states of the foreign-owned factories.
8. If the conservatives/Republicans wish to retake the Senate and perhaps the House, these will be the best issues upon which to turn things around in 2010:
Overspending waste (they cannot spend huge amounts this fast without error, big error)
Stagflation (a la Jimmy Carter, increased taxes and low growth mean disaster)
Dem party corruption as a policy, Chicago style
Failure to contain Russia, Venezuela, etc.
O'Bambi decision errors and subsequent dithering
Another attack
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... whereupon he gets down off his decrepit and wobbly soapbox, folds it up under his armpit, spits in the gutter and shuffles away... more later.