Although the financial markets are making a bit of a comeback this week, the economic news continues to "paint a bleak picture," as one news report put it. Today, November 26, four different government reports showed that consumers and businesses are retrenching and saving their money:

This bleak picture is not a complete surprise to everyone. Here at Elliott Wave International, we have been monitoring the growing signs of what the bear market is bringing to the fore.

Last week, in this column we gave the first third of Bob Prechter's 100-plus predictions for what would happen in the United States and around the world as social mood turned negative. Falling stock prices and bear markets reflect a negative social mood, which is what we are experiencing now. He published these predictions five years ago in his October 2003 Elliott Wave Theorist. (He also included this note: "None of the observations or forecasts listed below is designed to attack anyone’s patriotism, politics, religion or culture. The social mood is intense, and some people may find it difficult to assume the role of impassionate observer. Please realize that no offense is intended. It pays to know what is going on, whether you like or dislike any of the downtrend’s manifestations.")

So here is the second part of the list of forecasts for finance, the economy, politics and social trends that Bob made back in 2003. (Update: Part III is now online) Notice how eerily true to life they seem to be now.

(Bob Prechter's October 2003 Elliott Wave Theorist, excerpt):

Finance
- The dollar will lose its place as the world’s reserve currency. Either gold, a currency backed by gold (such as the Islamic dinar), or the Chinese yuan will take its place.
- The Federal Reserve System will be discredited and then abolished.
- “The rich” will be vilified, and their property will be increasingly taxed and seized.
- Regulatory and legislative reforms will limit, curtail or ban a number of structures facilitating speculation, such as options, futures, margin lending, hedge funds, mutual funds, IRAs and 401Ks.
- Fannie Mae and Freddie Mac will shut down.
- Financial news networks will change formats or go off the air.
- Despite attempted manipulation by OPEC or any other nations, the world price of oil will decline. (An exception may occur if production facilities are destroyed or shipping halted during wartime.)
- The “debt forgiveness” movement in the third world will eventually move to developed countries and see many of its goals realized.
- The price/earnings ratio for the S&P will hit single digits (probably falling below 6), while the annual dividend yield on the Dow and S&P will rise into double digits (probably rising above 17 percent).

The Economy
- Countries will adopt numerous trade restrictions, import taxes and other protectionist measures.
- Consumer confidence will fall to record low levels.
- The number of new skyscrapers will decline dramatically.

Politics
- Social Security in its current form will fail.
- The U.S. will threaten and possibly attack more countries. More countries will oppose U.S. interests.
- The Third World War, which began on 9/11/01, will escalate.
- The U.S. will increase restrictions on immigration.
- The U.S. will require internal travel papers.
- Both patriotism and anti-government sentiment will grow into powerful emotional forces.
- Openness and transparency will give way to secrecy. Spies and exclusive social organizations will have increased standing and power.
- The U.S. will accelerate its trend toward socialism. Opposition to that trend will be vigorous.

Other Social Trends
- The U.S. space program will be shut down.
- Conspiracy theories will become more plentiful, and more people will believe them.
- People will rate “the future” as increasingly less promising.
- Race relations will become strained and violent.
- The suicide rate will go up.
- Mob violence will break out more often than it did from 1982 to 2000.
- Mass demonstrations, expressing anger with some social situation, will occur.
- Hemlines will fall, and bright colors will go out of style.
- Music sales will slump, and popular music will become somber and/or angry.
- Hedonism will flourish. Pornography will become more bizarre. These trends will meet with social and political backlash, as mainstream behavior will simultaneously become more conservative.
- Popular self-help books will change focus from wealth and self-improvement to surviving hard times and beating adversaries.
- Cults and other escapist communities will be established.
- Food scares, probably including mad cow disease, will hit the U.S.
- Most restaurants will decline in popularity. “Family-style” traditional fare and home cooking will become popular.
- Interest in producing the plays of Shakespeare will wane.
- Anti-gay, racist and xenophobic entities will organize and openly pursue their agendas.