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Posts Tagged ‘eurozone’

Could the economy get even worse?

2011 will be remembered as the year of disaster capitalism. Almost $6.3 trillion was wiped from the global markets. While the Dow went through major upheavals almost daily, the net gain/loss for the year was absolutely flat. After all the drama, 2012 is looked to as the telltale year of global health for decades to come.

The Eurozone woes which began in earnest at the end of November are as yet unresolved, despite reassurances of European leaders and wishful thinking on the part of American analysts. In truth, European and US banks are broke. There is no new money to be found, and the engine of the global economy is running on fumes of mounting debt. At some point the whole thing has got to crash and many analysts see it all breaking loose in 2012.

Sovereign debt was a term that came into the public conscience in 2011, and in 2012 we may see the peripheral Eurozone countries so overwhelmed by their indebtedness that they will be literally owned by the financial institutions which have helped them simply tread water. Ironically, when countries such as Greece, Italy, Ireland and Spain are forced out of the EU, they will again fall back on the drachma or the lira, the currencies which will reinstate their sovereignty at the cost of their economies and their living conditions being laid to ruin.

China will become more a focus in 2012, possibly through a trade war with the US. The China economy is predicated necessarily of an 8-10% annual growth rate, and the country has fallen to 5%. It’s a bad situation and the only solution may be to lower tariffs to such an extent that they are giving away their own and made-for US products, hoping that the bulk of trade will make up for lost revenue. It’s a risky strategy in the current global downturn, and if there is no global turnaround, China might be forced to invest even more heavily in their military strength as the best and only economic driver. Already the prodigious growth spurt in new weaponry is causing a stir, and the China military industrial complex is being compared to the US circa 1945-60.

Taken as a whole, the health of the global economy is greatly dependent now on a demonstrable upturn beginning in 2012. Every country, including the US, is in jeopardy if the situation remains static or falls farther during the coming year. The potential for military upheaval in the Middle East and in Asia has the world is on edge.

Brazil is now one of the healthiest and most stable economies in the world. It is quite possible that South America, which is traditionally viewed as the largest aggregate of third world economies, may in fact be looked to more as driving the global recovery during the new year.

Ironically, it is the Mayan calendar which forecast disaster by the end of 2012. Let’s hope they got it all wrong.