A good rule for a forward-thinking executive to observe is never go anywhere -- at least don't walk into any meeting -- without the latest projections or models for the U.S. economy for the year ahead.

How's the U.S. economy likely to perform in the year ahead? Well, here are the summaries of economist David H. Wang's models based on predetermined values for 20 proprietary variables.

Realignment: This forecast assumes a modest $200-400 billion fiscal stimulus, a $70-80 a barrel oil price, record / near-record home mortgage foreclosures, along with efforts to realign U.S. energy policy, and reductions in health care spending accompanying national health care legislation. In this model unemployment rises to 9.5% and the recovery does not begin until Q4 2010. (That's correct: Q4 2010.)

Elongated: This model assumes a modest $200-400 billion fiscal stimulus and a $60 a barrel average oil price, with another year of record / near-record home mortgage foreclosures. Unemployment rises to 9.0%, and the economic recovery does not begin until late Q2 / early Q3 2010.

Steady-state: This model assumes about $500 billion in fiscal stimulus and a $60 a barrel average oil price, among other factors, that limits the recession's depth slightly. Unemployment still rises to 8.0% from the current 6.5%, but the economic recovery begins in early 2010.

U.S. new home sales fell 5.3% to a seasonally adjusted, annualized pace of 433,000 in October -- the lowest annualized level since 1991, the U.S. Commerce Department announced Wednesday (pdf).

Economists surveyed by Bloomberg News had expected October new home sales to register a 450,000 annualized rate.

Further, new home sales are down 40.1% compared to a year ago. In 2007, 776,000 new homes were sold, compared to 1.05 million in 2006. And the median sales price for a new house decreased to $218,000 in October, a drop of 7% in the past 12 months.

Sales fell in two regions -- declining 18% in the West and 6% in the South. Sales rose 22.6% in the Northeast and 6% in the Midwest.

One bright spot: inventories declined 8% in October to 381,000 units, a roughly 11-month supply at the current sales pace. Inventories have now declined 25.7% in the past year, the largest decline since the federal government started tracking data in 1963.

October data is mixed

Economist Peter Dawson called the October new home sales stats a smorgasbord of data, some positive, some negative.

"We did see a substantial decline in inventories, so that's a positive. The problem is, the rate of new home sales is now so low, due to the recession and credit crunch, that it's still going to take a long time to work off inventories, which are still very high at 11 months," Dawson said.

The the most-pressing question after the National Association of Realtors announced a 3.1% October sales decline in existing homes: has the housing market bottomed?

Unfortunately, for home sellers and the nation, the answer is no, so says economist Peter Dawson.

Sales fell to 4.98 million units, on an annualized basis, the NAR said. Even more troubling, the median home price plunged 11.3% to $183,300 in October, from $206,700 in October 2007.

Economists surveyed by Bloomberg News had expected existing home sales to decline to a five-million-unit annualized rate in October.

Further, it was the largest year-over-year median home price drop since the NAR started keeping records in 1968. Meanwhile, inventories rose to a 10.2-month supply in October at current sales rates, up from a 10-month supply in September, the NAR said.

No mainstream economist or analysts thought the United States financial system and economy would ever face circumstances like these, but fundamentals and a negative spiral have worsened to such a degree that the nation may have to implement a temporary, home mortgage foreclosure for all mortgages, according to an economist.

Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE) have already announced a six-week halt to foreclosures and evictions through the holidays, lasting until January 9, to give the servicers time to implement their own program for at-risk mortgages, Bloomberg News reported. The government-sponsored enterprises own or guarantee $5.2 trillion of the $12 trillion U.S. home mortgage market.

National moratorium needed?

Economist Richard Felson told BloggingStocks a national moratorium on the remaining roughly $7 trillion in mortgages would give the incoming Obama Administration time to play-catch up, after the Bush Administration's underperformance on a universal, streamlined mortgage refinancing program. If implemented, the plan would end the rise in home foreclosures that's causing the securities defaults that are elongating the financial crisis.

When is a near double-digit decline in home prices viewed as a small victory? When you're the United States in late 2008 -- a nation grappling with its worst housing slump in decades amid signs of a deepening recession.

U.S. median home prices fell 9% in Q3 compared to a year earlier, to $200,500, the National Association of Realtors announced Tuesday. Prices fell in 120 U.S. metro areas, rose in 28 and were flat in four.

California registers major declines

The largest decline in home prices occurred in California: the Riverside-San Bernadino area recorded a 39.4% decline, to $227,200; the Sacramento area, a 36.8% decline to $212.000; and the San Diego area, a 36% plunge to $377,300.

At the other end of the spectrum, prices rose 12.5% in Elmira, N.Y, and 8.7% in Decatur, Illinois.

Economist Peter Dawson said today's NAR statistics represents more, sobering data from the housing sector, but in the broader context the report is not as bad as the quarterly data implies.

"We're down 9%, but it's less than what most feared, so that's a positive development, sort of," Dawson said. "We've experienced so many jolting, double-digit price declines in home prices and other negative stats from the sector that anything less than the truly abysmal looks modest, and that's the case with the Q3 NAR data."

The U.S. Treasury and FDIC are said to be close to agreement on a plan that would have the U.S. government guarantee mortgages of millions of distressed homeowners.

The plan, which could place as many as three million homeowners in affordable mortgages, would require lenders to restructure mortgages based on the borrower's ability to repay. In exchange, banks / lenders would receive a federal guarantee that the loan would be repaid; program guarantees are estimated at $500 billion.

Program goal: Address toxic asset source

Economist David H. Wang told BloggingStocks Thursday a Treasury / FDIC or comparable plan is needed because to-date too few lenders have refinanced terms for preventable foreclosures, creating a steady stream of foreclosures into the financial system pipeline.

"They'll be little improvement in the toxic asset situation until we address the source of toxic assets, which is foreclosures," Wang said. "It's an economic imperative that we do this."

The decline in U.S. home values continues. Home prices in 20 top U.S. cities declined at the fastest pace ever, on a year-over-year basis, as foreclosures increased and banks sought to unload homes by selling at cut-rate prices.

Home prices in a 20-city sample plunged 16.6% in August, on a year-over-year basis in, according to the S&P / Case-Shiller U.S. National Home Price survey (pdf). The index has fallen every month since January 2007. Further, prices in a 10-city survey plummeted a record 17.7% in August on a year-over-year basis.

Economists surveyed by Bloomberg News had expected home prices in the 20-city Case-Shiller index to decline 15.9-17.1% in August on a year-over-year basis.

Large price declines in western U.S.

The areas with the largest annual percentage declines were: Phoenix, -30-7%, Las Vegas, -30.6%, Miami, 28.1%, San Francisco, -27.3%, Los Angeles, -26.7%, San Diego, -25.8%.

Not one Top 20 metro area experienced a year-over-year increase in home values as of August and only two cities saw an increase in home prices in the month of August: Cleveland, 1.1% and Boston, 0.2%. Prices in Denver were flat in August.

Just call it a case of a need to strengthen a hospital patient with IVs to make him strong enough for a much-needed operation. The Treasury and FDIC need to do more to stem the tide of home foreclosures -- foreclosures that are a major source of the currently afflicting credit markets -- so says an economist.

"Stress and fear, although at lower levels, remain a pervasive feature of credit markets, with above-normal, short-term interest rates, and bank-to-bank suspicion," economist Richard Felson said Monday. "This stressed condition in credit markets is just going to linger until we shut off a major portion of the source of toxic assets -- home foreclosures."

Felson said the U.S. Federal Reserve and U.S. Treasury, in conjunction with their companion major central banks and governments abroad, have done "a decent job" addressing two, key dimensions of the financial crisis: maintaining market liquidity and lowering interest rates to assist the recovery.

Progress in two other areas -- buying toxic assets and ending the pattern of home foreclosures -- has been less impressive, he said.

Washington Post Business Columnist Steven Pearlstein does not 'hold it all in,' as they say, regarding who he thinks is most to blame for the financial crisis.

Pearlstein cites the ineptitude of Wall Street and the nation's financial regulators. The crisis would have occurred whether Lehman Brothers was saved or not, because bad debt had overwhelmed the global financial system. A government intervention was inevitable, essential, and an act of leadership, in Pearlstein's view.

Conversely, Wall Street's top executives have shown little leadership, if any, he said. Their silence and invisibility throughout the crisis "attests to their moral and political bankruptcy," Pearlstein said, a perfect match for the financial bankruptcy they caused for investors, creditors, and customers.

Further, Pearlstein is particularly angered by Wall Street's top executives unwillingness to commit to a plan to enable borrowers to refinance mortgages into government guaranteed mortgages set at 85% of current market value of the property, and at the executives' utter lack of comment before the cameras, particularly regarding credit lines to businesses.

Political & Economic Analysis: Columnist Pearlstein clearly lays the blame for the financial crisis at the feet of Wall Street's top officials. Still, the mortgage process -- and the failure of a substantial portion of the subprime/Alt-A mortgage market -- involved many players: bank executives/lenders, mortgage brokers, appraisers, securitization specialists, ratings agencies, and borrowers.

Washington Post business columnist Steven Pearlstein does not mince words: too many people just don't get it.

Moreover, yours truly is not one to alarm, and typically views 'sweeping and dramatic statements' with a journalist's skepticism and a scholar's critical review.

But when the best economists you talk to, and business executives, and others in financial and investment circles, start reaching the same conclusion, from decidedly different vantage points, the dramatic statement begins to take on more weight, becoming more compelling.

'The reality of the facts on the ground'

Further, as Pearlstein incisively points out, there are reasons why a considerable portion of the American people are not 'getting it' regarding how serious the current situation is. Politicians are more concerned about ideology, partisan posturing, and teaching people a lesson -- if you can believe that they could be so irresponsible (my astonishment added, not Pearlstein's). Financiers have been very slow to admit to greed, arrogance, and incompetence. And foreign government leaders still view the financial crisis as 'an American problem.'

But none of the above changes what Pearlstein, and what my closest economist colleagues (David H. Wang, Richard Felson, Peter Dawson, M. Chandler, and Glen Langan) all argue is "the reality of the facts on the ground," to borrow a phrase from Israel's former Prime Minister and Defense Minister Ariel Sharon. Namely, that a massive, global deleveraging is taking place, and that absent a systemic rescue/intervention by the U.S. Government, in conjunction with interventions by other governments around the world, the world risks the bursting of a credit bubble that threatens to bring down the global financial system.

Few economists / analysts would deny that the financial crisis is so complex, with numerous casual factors, that there's more than enough blame to go around: no one party can or should be seen as 'the culprit.' Moreover, what's paramount now is to identify what works, i.e. what helps solve the crisis, and implement it.

The U.S. Congress' bailout / rescue bill (pdf) is one tool: it will help. If it goes reasonably according to plan, the U.S. Treasury, and the companion agencies the rescue creates, will slowly remove distressed / bad assets from the financial system and in the process would both stabilize the credit markets, and equally important, restore confidence in the financial system.

Another tool: mortgage help in the form of refinanced mortgages for homeowners having trouble paying their mortgage / nearing default.

Economist David H. Wang said Congressional Democrats were unsuccessful in their effort to get U.S. bankruptcy laws amended so that judges could adjust the terms of mortgages -- Congressional Republicans were adamantly opposed to it -- but the bailout / rescue package does authorize the U.S. Government to further assist homeowners who face mortgage defaults.

The U.S. Government's decision Friday to put in place a sweeping program to buy distressed/bad debt to stabilize the financial markets will likely represent the biggest intervention of the federal government into the private sector since The Great Depression of the 1930s. But not everyone is convinced the action is destined to add hundreds of billions to the taxpayer's bill.

U.S. Rep. Barney Frank, D-Massachusetts, is chairman of one committee that will review the U.S. Treasury's/U.S. Federal Reserve's plan, the House Financial Services Committee. He believes the plan will cost taxpayers "ultimately not a great deal. The Treasury will buy selectively," Bloomberg News reported Friday.

Frank added that the bad debt will cost "maybe double-figure billions over a few years. The government will sell the assets back," he said, Bloomberg News reported.

Frank's forecast realistic or optimistic?

Is U.S. Rep. Frank's cost estimate realistic or very optimistic? Economist David H. Wang told BloggingStocks Friday that depends on several factors.

"On the one hand, if we have a two-year period of economic stagnation, the government could end up with hundreds of billions of dollars of extremely-low-grade bonds, bonds that they may only be able to recoup the equivalent of 20 cents or 10 cents on the dollar," Wang said. "Some bonds would be written-off, others reconfigured and perhaps grouped with other investments, with the housing that backs them perhaps converted to other uses."

"On the other hand, if the government intervention broadens the conforming loan category of both Fannie Mae and Freddie Mac, as the legislation is expected to do, this will enable more 'somewhat-risky' mortgage bonds to be purchased, providing even more liquidity," Wang said. "And if the FHA [Federal Housing Administration] also receives more money to refinance mortgages at a lower rate, this will help check the high level of foreclosures."

"Under the latter scenario, net government outlays would be considerably less," Wang said. "Essentially, the issue is this: can the government maintain financial market liquidity, ease risky bonds out of the system, and reduce foreclosures with this plan? Not a simple task, but it is possible, over years."

The head of the Senate Banking Committee has indicated that the U.S. Federal Reserve has the authority to create a new 'debt fund' to buy, warehouse and dispose of distressed / bad debt resulting from the subprime mortgage crisis.

"The Fed has the authority to move in this area," U.S. Sen. Chris Dodd, D-Connecticut and chairman of the committee, told Bloomberg News.

Many economists and analysts argue that a step integral to stemming the cycle of foreclosure / housing price decline / bad bonds / stock run / collateral call / bankruptcy is for a special agency to buy up and strategically restructure, then sell, distressed / bad assets. Economist Peter Dawson is one of those economists who favors the tool.

"Ideally, you'd like to have a private-sector consortium of banks or other financial institutions to coordinate the effort, but right now there aren't exactly a lot of banks stepping up to the plate to take a swing," Dawson told BloggingStocks Thursday. "There's a considerable amount of fear in the market, frankly, and banks are hoarding cash. If this remains the case then we'll need a public sector effort to put this new institution in place."

U.S. housing starts fell again in August, indicating that the worst housing slump in a generation will continue to weigh on the U.S. economy.

Starts of new homes declined 6.2% in August to a seasonally-adjusted annual rate of 895,000, the U.S. Commerce Department announced Wednesday. It was the lowest new home start rate in 17 years (pdf).

Economists surveyed by Bloomberg News had expected housing starts to total a 950,000 annualized rate in August.

Meanwhile, starts of single-family homes fell 1.9% to a 630,000 annualized rate.

Economist Glen Langan said the housing market remains "a terrible market if you're trying to sell a home, and still a risky market if you're thinking of buying a home."

"Conditions vary by region, but in general the U.S. housing market remains in a deep slump. Unless you absolutely have to or you find your 'dream house,' it makes sense to a wait a few months to see if the market stabilizes, mortgage availability factors being equal," Langan said. "In most regions of the U.S. home prices and sales are falling and that's why we're seeing a declining rate of new home starts by home builders."

Confidence in the global economy fell in September, as concern mounted about the health of the U.S. economy and global financial system following the bankruptcy of Lehman Brothers and the near bankruptcy of AIG, which prompted a U.S. Federal Reserve intervention, a new survey indicated.

The Bloomberg Professional Global Confidence Index fell to 11.3 in September from 14.1 in August among U.S. respondents. The Western European index fell to 12.6 from 12.9. Readings below 50 indicate negative sentiment.

Economist Richard Felson, who did not participate in the Bloomberg survey of 3,000 Bloomberg Terminal users, told BloggingStocks Wednesday too many financial concerns and bankruptcies are occurring over a short period for business professionals to be positive.

"Countrywide, Bear Stearns, Indymac, Freddie, Fannie, Lehman, Merrill, and now AIG. Wow, that's an awful lot for any economic system to absorb in five years, let alone one year," Felson said. "Executives and other business professionals are justifiably concerned about credit access for business operations and about declining demand due to rising unemployment. The major U.S. economic metrics are not moving in a positive direction right now and the nation needs to correct that."