All signs point to 2012 witnessing an acceleration of the negative economic and fiscal metrics that plagued advanced and major emerging economies in 2011. In particular, the eurozone debt crisis, which dramatically worsened in 2011, shows no sign of abating in 2012. A clear indication of this is that eurozone cheerleaders President Nicolas Sarkozy of France and Chancellor Angela Merkel of Germany, in New Year's messages, warned that things with respect to the eurozone crisis will be even more dire in 2012.
A sign of how bad things look in Europe is the latest PMI data on European manufacturing, which was continuing to contract towards the tail end of 2011. This all points to a recession. In fact, there is now a clear consensus among economists that the eurozone will enter a double-dip recession in 2012, if it in fact has not already done so. Clearly, nations such as Greece, Ireland and Portugal are currently in a recession so deep, it meets the definition of a full-blown economic depression.
And what about the United States? With 2012 a presidential election year in America, expect the Obama administration to spin economic data seven ways to Sunday in an effort to make things look more rosy. Thus, an unprecedented reduction in the total size of the American work force is twisted into a lowering of the unemployment rate. But such gimmicks will probably become totally inoperative, once the impact of the looming eurozone recession and banking crisis migrates to American shores.
In 2009, in my book , Global Economic Forecast 2010-2015: Recession Into Depression,(www.globaleconomiccrisis.com) I forecasted that the massive transfer of private debt into public debt by sovereigns as a synchronized response to the global financial and economic crisis unleashed in 2008 by the collapse of Lehman Brothers would fail to resolve the crisis, and would lay the seeds for an even more virulent global economic crisis by 2012.
With a global sovereign debt crisis now an established reality, and the eurozone teetering while America has had its previous AAA credit rating downgraded by at least one major ratings agency, neither a continuation of failed policies nor gimmickry by politicians and central banks will bring an end to the global economic crisis in 2012. Instead of a return to economic growth, the most optimistic forecast one could make is stagnation which, at a time of structural mega-deficits and ballooning national debts, is a guarantee of further long-term economic misery for a great many of the planet's inhabitants.
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