12/8/2011 8:34 PM ET|
The 3 big crises of 2012
To the eurozone mess -- which will spread -- add Russian unrest and a budget crunch in India. By midyear, we should know how it will all play out.
Ready for the next crises?
Yep. That's "crises." Plural. Because 2012 promises to be even more exciting than 2011.
First off, the euro debt crisis isn't going away. Sorry if you're bored with it. But it will take a new twist.
As Europe sinks into a self-induced recession created by all that tough talk about the need for austerity and budget cuts, we'll get treated to the spectacle of chickens coming home to roost as politicians have to explain to suffering voters why they need to tighten their belts even more to balance budgets thrown out of whack by no-growth economies.
But I do think that in 2012, we'll add exciting new crisis venues such as Russia and India.
And this could be -- don't get too excited -- just a run-up to 2013, when the United States and China could get into the act.
Ready? Let me play tour guide to the next stage of the fun.
Eurozone debt, the once and future crisis
Want to know why this crisis will launch a new season in 2012? Take a look at what's going on in Ireland.
If there's a eurozone debt crisis/budget austerity success story, Ireland's it. After a $90 billion bailout, the government's annual budget deficit is projected to fall to 10.1% of gross domestic product in 2011 (from 32% in 2010 -- yes, that was the annual government budget deficit that year). That would be slightly below the 10.3% target. And the economy could actually show 1% GDP growth for 2011. Quite an improvement from the 7% drop in GDP in 2009 and the 0.4% decline last year.
That "progress" comes at considerable pain -- tax increases and budget cuts of $34 billion, so far. That's equal to about 15% of Ireland's annual GDP, or $2.2 trillion if the Irish economy were the size of the U.S. economy. Unemployment has climbed to 14.5%, and it would be higher except that, as of the end of November, 40,000 people have left the country in search of jobs. (Ireland has a population of just 4.5 million; 40,000 people is about 0.9% of the population. That level of emigration is equivalent to 2.8 million people leaving the United States.)
Combining those budget measures with the pain of falling wages, the government figures the country's austerity plan is the internal equivalent of a16% currency devaluation (roughly as if the euro went from $1.36 in U.S. dollars to $1.16). No wonder Ireland's GDP growth this year is built on a 5.4% increase in exports in the first nine months of 2011.
And the progress isn't guaranteed to continue into 2012.
The slowdown in the European economy because of the eurozone debt crisis, and the increase in interest rates because of it, have resulted in lower-than-projected tax revenue --about 1.6% below projections in the first 11 months of 2011 -- and an increase of interest payments of about $1.4 billion over the first 11 months of 2010.
The situation looks worse in 2012. On Dec. 6, Michael Noonan, Ireland's finance minister, cut his forecast for 2012 GDP growth to 1.3% for 2012, from 1.6%. That was the second cut to growth projections in a month, and Noonan's forecast is still substantially above forecasts of 1% from economists at the Economic and Social Research Institute in Dublin. This week, Noonan put forward a program of an additional $4.5 billion in cuts and tax increases designed to keep Ireland on track to hit its target of a 2012 budget deficit of 8.6% of GDP. The package included tax increases such as a 2-percentage-point increase in the sales tax, to 23%.
The plan by the European Central Bank and the International Monetary Fund has been to support Irish borrowing using bonds issued by the European Financial Stability Facility until Ireland can start raising money in the financial markets again in 2013. By 2015, the Irish debt-to-GDP ratio is supposed to be down to the eurozone limit of 3%.
That's not going to happen if growth in the eurozone economies sinks below 1% in the next quarter or two and then heads for 0%. Which is where the next European debt crisis comes in.
If you don't include the payments Ireland has to make as a result of the government bailout of banks like Anglo-Irish that collapsed along with the Irish real-estate market, then the Irish budget deficit was 1.6 billion euros lower in the first 11 months of 2011 than in the similar period in 2010. But, if you include the cost of that rescue, then the deficit was 8 billion euros higher. The debt-service costs alone ran 1.1 billion euros higher than in 2010.
VIDEO ON MSN MONEY
Good Times! Get the popcorn and watch the show!
Seriously, things can't improve here in the U.S. until after November of 2012. And then only if the current idiot collection is thrown out. And, frighteningly, a large percent of the people here actually think the idiots that have presided over this disaster are somehow the solution and want to re-elect them. Does not look good................
I suspect that people want to blame everyone accept the real people who got us in this mess. We can blame Obama, obviously BUSH and the ones before him. One needs to understand that by DEREGULATION of any industry i.e banks, big oil, utilities and any other deregulated industry SPELLS OUT TROUBLE for all of us.
The world banks are run by individuals not government! Wake up here people!! When wall street and the SEC received their ticket to the DEREGULATION game look at what has happened here. No more middle class, the poor get more poor (if that is possible) and control stays with the banks and the people who have the money.
Look folks, you and I are threatened each day by the TAX MAN, Police, our government etc. The one with the most money has the power and we will be in the hunger lines. If you do not get in step with the majority that stand against the banks and the government, you will soon be taken over by them. Hey, look at CORIZINO he goes in front of congess and says (I DON'T KNOW what happened to the money) $1.2 billion dollars gone and OUR FRIEND CORIZINO who once was a Senator, Governor and was a MF manager lies to the government and they do NOTHING!!! Give it a break!! This is pure and simple thieves protecting another thief.. We have to protect ourselves now and get these whales in jails and take their money as they do us. That's my view from the 1%
Since we are so good at bailing out failed institutions, we should promote the concept that the American Worker is simply Too Big to Fail. We offer a 1-time massive restructuring of all US consumer balance sheets (mortgage, credit cards, the works) and our big institutions/investors take a big 1 time hit (Dow drops 40%).
The worker is too big to fail and corporations that outsource labor need to make up for that in lost income, social security and medicare taxes for every single foreign worker using American prevailing wages as the basis point.. Bring our jobs home!
Then we start building it back the right way. Consumer loans only to consumers who can pay for them. No more ridiculously leveraged deals by Wall Street/Big Banks. End the Social Security/Medicare Ponzi scheme and limit benefits to what those programs take in. If Americans want better retirement/healthcare then put it too a vote (voters - not Congress) and let democracy speak.
2 Years after we start - Dow UP 80%...
Time for change...what a joke, I voted for it, and boy did I get it....
My father used to tell me growing up, "there is as much justice as you can buy", this countries leaders are bought and paid for, and this idiot "O'bankrumptus" who can never be found during a crisis is one of them...
We need change from the top down....
This is what happens when the majority of the world economy falls into the hands of just a few institutions. Without growing, sustainable middle classes, no economic model works. And over the past 40 years, there has been a massive redistribution of wealth to a few people/institutions.
Worse, the mass media has made government far more politicised then it used to be, making democracies, frankly, incapable of solving problems for fear of upsetting their voters. Word of advise, if your politician EVER mutters the phrase "I think this is a bad idea, but I have to vote for it", vote them out, as they are incapable of doing their job.
Out of curiosity, does anyone know where all this money went to? I mean, SOMEONE has to be riding a surplus somewhere, with all the money that governments owe, right?
Here's a thought..
Many have been struggling in these economic times. We are learning to live within our means. The article mentioned that perhaps corporations will turn tail and come back to the USA as no one out there can afford their "stuff". I wonder if we can take solice in knowing that these corporations will get their come up pence:):) At least "we the people" will have learned and adjusted to the economic times. I am taking a bit of wicked glee in knowing that they will get theirs in the end and I may just be around to see it:):) Just a cup half full kind of thinking.
I am very thankful that I have a job (school teacher), I have a roof over my head (pay the mortgage each month), and I have enough to eat. My mom was my hero. She was happy being a farm wife. She worked very hard and she got by on less than a $1000 a month since my dad died. She was happy and thankful for what she had. She always was optimistic and told me that "tough times don't last but tough people do!" She was very frugal but splurged on occasion; she paid cash for a new car 11 years ago. She passed away last month at 81 years of age. Rest in peace mom. You have taught me well!
The moral to this story: Be happy with what I have and to suck it up when you have to! Our Depression Era parents are laughing at us from heaven. Don't look to Washington for help! Suck it up and get out there in your community and make it happen! We, Americans, are getting very soft!!!
The saddest part is Congress couldn't even come up with $120 Billion/year in savings; I can do 10x that easily, and remove the entire deficit.
According to the CBO, tax deductions have a net total cost appraoching 1.2 Trillion, or the size of the entire US deficit. Simple solution: Remove all deductions from the tax code, while reducing all rates between 2-5%. This will raise about $800 Billion in tax revenue.
At the same time, reduce defense spending by about 20$ (~$160 Billion) [As someone who works defense, take my word, we can afford it]. We're now up to $960 Billion in savings.
Next, when the US economy recovers, the ~$600 Billion in lost income tax revenue [due to people not making any income, or not enough to pay taxes] will be added on, giving us a grand total approaching $1.56 Trillion in savings, or about $300 Billion of actual surplus.
Point being, if you are willing to remove tax deductions and cut a little defense spending, the budget problem is rediculously easy to solve.
the current draconian atmosphere in congress is dragging us down an ugly path and has for quite some time. consider regan's tax cuts (trickle down policy) and defense spending gone wild -2 trillion, bush sr.'s gulf war and tax cuts -1.5 trillion, clinton's spending increases -1.4 trillion, little bush's afgan war/iraq war, tax cuts, stimulus spending -6.1 trillion and obama's stimulus spending, revenue losses from economic downturn and extending little bush's tax cuts for the rich -2.4 trillion. there's 13.4 trillion of our 15 trillion debt.
we need a working congress and a working president who'll cut entitlements and increase taxes b-4 it's to late. vote out these sitting congressional zombies who care only about getting reelected especially anyone who signed a pledge to grover norquest the hostage taker. as far as our next president...? obama looks like our only choice at this time. i don't see a republican running now who can make the compromise we need to fix this financial fiasco we are in.
luck to us all
Copyright © 2014 Microsoft. All rights reserved.
Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.
[BRIEFING.COM] The stock market ended the holiday-shortened week on a mixed note as the Dow Jones Industrial Average shed 0.1%, while the S&P 500 added 0.1% with seven sectors posting gains.
Equity indices faced an uphill climb from the opening bell after disappointing quarterly results from Google (GOOG 536.10, -20.44) and IBM (IBM 190.04, -6.36) weighed on the early sentiment. Google reported earnings $0.15 below the Capital IQ consensus estimate on revenue of $15.42 ... More
More Market News
|There’s a problem getting this information right now. Please try again later.|