Saturday, 14 January 2012

2012: The year the global economy will make it to shore or break it with depression.!

With the end of 2011 we are standing at the gates of another year and the uncertainty and fear is rather ironically the same that we carried into 2011. The year with all its hectic and rough times did little to change the outlook and is now taking us back to the same challenges in 2012 with the debt crisis still the predominant concern! Fears of the escalating crisis in Europe has spread to engulf global markets and threatening the stability of major economies putting the risk at its highest with global growth and financial stability the possible victims. The year is ending with scattered confidence and doubt that Europe will get its house in order. The debt crisis is spreading and the eyes are on Italy and Spain the next big risk and too big to fail, with also all the EU under the watch and further downgrades that might escalate the crisis with the debut of 2012. Europe’s problems are not only in the euro area with the risk spreading to the United Kingdom that is threatened with a relapse into recession and the stability of emerging economies in the continent that might be scattered as well due to mounting market and economic pressures. The United States is also suffering the wave of pessimism and downside risks to growth from the uncertainty in Europe while it has its own debt problems to deal with as spending cuts come into effect in an election year that will prove to be as critical as the one that originally brought President Obama into the White House. Asian economies are suffering the global agony and China, the hope of nations, also is anguished from slowing demand and the effect of monetary tightening in the past period that pressured growth. Nations depending on exports and on stability in global growth are also affected and especially Australia and New Zealand which are closely sensitive to developments in both the Asian Pacific and Europe Japan is still suffering to exit from its devastating March earthquake and the hit to global stability only escalated the crisis with the yen surging higher and deflation a growing agony with also massive debt that will be brought to focus. What the next chapter will be is a matter of high uncertainty till now. Forecasts range from a mild recession to a risk of depression and all depending on how Europe will confront the crisis and whether the ECB, the IMF or a final breakup of the euro will be the logical solution. The economic debate is only part of the equation as 2012 will prove again to be the year of politics. Ever since the start of the financial crisis and now into the debt crisis, many governments have lost their grip and especially in Europe in 2011. We start a new Election Year in the United States, with unrest sweeping the region in the Middle East, tension expected with Iran, and recently unclear outlook for the Korean Peninsula which all is adding risk to stability especially with the effect this unrest has on commodities and especially oil prices. We will start 2012 with one advice to you dear trader, be wise and be calm as you are not the only one under this uncertainty. As pessimistic the outlook might seem the market will always try to hold onto the faith as the worst is something we surely know governments worldwide will try to contain, as the global economy as we know is what is at risk, and surely everything possible will be deployed to avert the meltdown and depression! What to expect from major economies, what to look for this year and where is the market trend taking us with the start of 2012 we give you the preview of what awaits us…

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