David Karsbol, Saxo Bank's chief economist
David Karsbol, Saxo Bank's chief economist - 
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Scott Jagow: At the beginning of this year, did you think any of the following would happen? Oil would drop $100 a barrel -- it wasn't even close to $100, period! Or interest rates would drop to zero? Or Wall Street as we knew it would collapse? It's still hard to believe the fallout of 2008.

The Danish bank Saxo just came out with its outrageous claims for 2009. And they don't seem so outrageous anymore. We're joined by Saxo's chief economist David Karsbol in Copenhagen. David, let's start with the prediction that the S & P 500 will fall 40 percent to 500 points in 2009. Why do you think that might happen?

David Karsbol: Well, we believe that the earnings will drop massively from here. The unemployment is increasing rapidly, a lot of companies are beginning to fail. They simply have too much debt, the debt is simply too big of a problem. I mean now, everybody has to focus on servicing their debt, paying it off. And that means that there will be basically no consumption going on.

Jagow: And consumption also has to do with oil prices. OPEC just announced a production cut pretty significant. But you're still saying that oil's going to go down to $25 a barrel?

Karsbol: Yes. First of all, we believe that demand is slowing even faster than supply. And I think a lot of that has to do with the fact that the OPEC cannot maintain the discipline, because Venezuela and Iran face like that with a very big oil revenue as percent of total government revenue, they have a problem. They will need to produce more, otherwise we will see a lot of civil unrest in these countries.

Jagow: And one of the predictions that surprised me a bit was what you said about China, that its growth will go to zero percent? It's, what, 8 percent, 10 percent now?

Karsbol: Yeah. I don't think the Chinese authorities will, at any point will come out and say GDP growth was zero percent. They will make up figures, there's no doubt about that. But at least we will probably see indicators telling us that growth was, is back to zero percent. The whole miracle of the Chinese economy was really based on the U.S. consumers going into debt buying cheap stuff from China. And they don't have any Plan B.

Jagow: So David, do you have any good prediction for next year?

Karsbol: Unfortunately, we were also relatively right last year, we were really bearish on the economy. But I think that on the positive, I think it cannot get much worse than what we're seeing here. In 2009 will be some kind of turning point. Not that we're tremendously bullish after that. If we actually see 500 in the S&P 500, I think that will be a good buying opportunity. Not that we think that we'll see 1,000 a year afterwards, but I think stock markets will only gradually begin to recover after that.

Jagow: David Karsbol, Saxo bank chief economist. Thanks for joining us.

Karsbol: Sure.