The Numbers Are Horrifying.(US economic conditions, and the economic hurdles that president-elect Barack Obama will face)

Obama's calm efforts have been negated by talk in Washington of regulatory clampdowns and violations of property rights.

On Tuesday, president-elect Barack Obama inherits an economic calamity, and the situation will get worse in the first few months of his presidency regardless of what he does. How quickly it improves thereafter is not just a matter of which policies he decides to pursue; importantly, it is also a function of how he pursues them. Investors need to pay close attention lest they experience yet another challenging and, in some cases, devastating year.

No one should doubt that we are still in the midst of a historic economic crisis. Having incurred massive losses, individuals and companies around the world are, not surprisingly, saving more--some by choice as they attempt to restore balance to their finances and others by necessity as their credit lines are cut by beleaguered lenders. As detailed elsewhere in this edition of NEWSWEEK, the world has entered an Age of Thrift. Less spending by individuals will mean even lower demand, and the production of goods and services will be cut, again.

The latest economic data vividly illustrate the self-fulfilling nature of this global phenomenon. The numbers are horrifying, and increasingly so. There's been a violent collapse in industrial production in Europe; the latest monthly data now show annual contractions of 17 percent in Spain, 13 percent in the U.K., 9 percent in France and Italy, and 6 percent in Germany. Emerging economies are now on the same course, with contractions of 9 percent in Russia and 4 percent in Brazil.

At the same time, the labor market is deteriorating dramatically in both Europe and America. The United States has now registered 12 consecutive months of job losses, including more than half a million in December, bringing the 2008 total to 2.6 million--a level not seen for more than 60 years.

The crisis continues to catch people by surprise, suggesting that too few people sufficiently understand its dynamics. The U.S. Commerce Department reports that December retail sales declined at more than twice the rate expected by most forecasters, and further extended the record for consecutive monthly declines, now six and counting.

President-elect Obama faces the prospect of more corporate defaults, pension losses and personal bankruptcies in the coming months. Fortunately, he has already shown that he has a good understanding of the need for an aggressive fiscal stimulus, and Congress seems to be onboard.