THE 5 MOST IMPORTANT GLOBAL POLITICAL TRENDS TO WATCH IN 2012

2012 is just around the corner and the macro trends are likely to dominate again. Nomura provides us with the 5 key trends to keep an eye on for the upcoming year (via Nomura):

1. Eurozone: The threat to the euro is greater now, in our view, than it has been at any time since the crisis started, with only the ECB now capable of averting
a catastrophe (Issue #1).
2. United States: Fiscal gridlock in election year now poses a real threat to US growth prospects (Issue #2).
3. MENA: Events remain consistent with our view that there will be a protracted period of political turmoil and uncertainty across the region, supportive of the oil price, despite growing concerns over global economic prospects (Issue #3).
4. China: We believe that China‟s leaders will do everything they can to ensure a smooth economic trajectory through to the completion of the handover of power from the 4th to the 5th generation leadership in March 2013 (Issue #4).
5. North Korea: Tensions appear still to be rising on the Korean peninsula (Issue #5).

Source: Nomura

Cullen Roche

Mr. Roche is the Founder of Orcam Financial Group, LLC. Orcam is a financial services firm offering research, private advisory, institutional consulting and educational services.

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Comments

  1. All but #4 feed into each other and will cascade into a SHTF moment IMO. That’s easy to predict, just when is a little tougher. Could happen very quickly in a “whoosh.”

  2. #2 isn’t a matter of “gridlock.” It’s a matter of how well austerity is resisted. So-called “fiscal responsibility,” i.e., austerity, is what will hinder US economic growth. Only the ratings agencies and mainstream media think “gridlock” is hurting economic growth. Why doesn’t Nomura listen to Koo?

    #5 is a fantasy. The pseudo-tension is simply kabuki for internal consumption in North Korea designed to help Kim’s incompetent son become the next glorious leader. Why is Nomura taking it seriously? It hurts their overall credibility. Instead, Nomura should offer Kim’s son a scholarship to study MMT abroad for a year.

    • Austerity is reality and isn’t going away. The global economy is energy constrained. The US can only grow if oil prices take a dive, and that can only happen if China and India take a dive. Thus, any relief from high oil prices will be temporary, and then will shoot right back again. And we haven’t yet hit real supply declines. So far, oil supply has essentially been constant since 2005. When the supergiant oilfields begin to fail, there will be an accelerating supply crunch that squeezes everyone. Prices of oil and food will soar while everything else deflates, and both nominal and real interest rates become increasingly negative.

      • There’s lots of evidence current oil prices aren’t justified by the fundamentals. Moreover, although it’s true that growth is energy constrained in a broad, abstract sense, is it practically constrained at the moment? Energy’s not free, but for growth to be practically constrained by input costs at the moment, we should see efforts to increase demand being eaten away by higher prices. That’s not the situation we see.

        I’m sympathetic to the view that energy is a big problem: the supply chain and politics of oil are crazy, and global warming might end up killing a lot of people. With that said, I don’t think we’re at any hard boundary. If anything this makes me support fiscal stimulus all the more, with a lot of resources dedicated to changing the way we access energy and how we use it.

      • Austerity is reality and isn’t going away. Andrew P

        Disagree. Occam’s Razor would eliminate anything other than the banking crisis as the problem.

        The lack of blood (either quantity or velocity) causes all kinds of symptoms and failures in the body yet the cause is the same. So it is with money and the economy.

        As for energy, I find it hard to believe that some strategic planners do not have a plan since solutions exist. Heck, the Germans synthesized 40% of their liquid fuel needs in WWII. Do you think the technology is not better now?

    • Interesting. I wonder if they would repo their PIIGS debt at par. That would be a nice twist … :-}
      (At the minimum, it is backed by that great bank balance sheet … oops … full of PIIGS “assets”.)

    • Thermonuclear war between Iran and Israel. The surprise would be if Iran launches first.

  3. Eurozone problem (the sovereign & banking financial one) will get ‘solved’, one way or an other, but even if it’s resolved in a less painful way, that won’t stop a deep recession.

    Problem is (#1 & #2) where and how does all this austerity stop, with all the hysteria about fiscal sustainability, this is pointing to an outright OCDE depression (with some of the European periphery on it already, just barelly masked by external demand), with private sector still deleveraging and a worsening income and employment situation, demand will continue dropping.

    We only need high oil prices added to the mix (#3) even under these conditions are we are screwed (also will hamper CB intervention power, which is already becoming powerless with ZIRP doing really nothing).

  4. Trade wars ? We already have barriers going up in the financial markets (witness Europe, where banks are deleveraging through cutting back loans in their foreign operations, while keeping their home regulators happy).

  5. So is everyone saying we can expect a major correction in GDP in most countries or specific countries and if so which countries?

  6. With the bull market in pessimism, the SP 500 ought to be at 850. What is keeping it elevated is a sense that there will be either a stick save such as EuroTARP or perhaps Italy and Spain are a lot more durable than is being speculated. Gridlock in the USA is occurring with real rates well below inflation and trillion dollar fiscal deficits. Not exactly a restrictive environment. MENA has been unstable since the 1940s and Korea since the 1950s. If the Eurozone flubs it, we could have a disaster. if a credible EuroTARP is developed, a melt up in equities will result. If true risk capital is available some bets are worth making in the next few weeks.

  7. You gota throw an X factor of natural Disaster in there somewhere as well. Tsunamis and Earthquakes seem to be a good bet every year.