We’ve entered 2012, the year of the Dragon, with some unwanted baggage from 2011 – the European mess, threat of high oil prices, after effects of the Arab spring (…summer, fall & winter), volatile markets (although current VIX would disagree), and Yahoo’s future (for those in Canada – RIM’s future).
Where we go from here is dependent on the outcomes of tough decisions, efficient policies and collective actions. We continue to flirt with the idea of War in Iran, the lack of bipartisanship in the US and the fact that the land of Socrates just doesn’t get it!
Regardless of these outcomes, some things are certain over the next few years….
- Decreased Spending: reduction in debt levels accumulated as a result of first, private and then, public sector excesses; in the initial years of a recession post a bubble, debt passes hands from the private to the public sector with the intent that
- Default: if you can’t re-finance your debt, you have no way out. Further, those unable to manage their debt in this historically low-interest rate environment shall falter as rates start to climb
- Devaluation: if you’re not in the camp of decreased spending or default, you have the option to devalue, i.e., grow yourself out of debt via the printing press. By reducing the value of money, you can reduce debt-to-GDP
spooked out? Hopefully not…ask the Japanese, they’ll justify that, while arduous, they got through it. These economic realities combined with the upcoming political climate seem like dark clouds looming over the horizon – unsure of what they have in store for us. The last time around (circa 2008), emerging markets (China!) lifted the World economy from the financial slump. However, recent concerns of a credit bubble are surfacing in China. Will the legendary Dragon come to China’s rescue ?