2011 was pretty hard to take at times. I think the main reason is that by this time in recent recessions, one expects things to start bouncing back up again. There were a few signs of that early on, but then the sheer size of the problems were too great. This was demonstrated extremely by the Japanese Tsunami, as well as tornado's in America. Struggles on debt in the US and Europe never ended through the year. And yet, the Arab spring may, with my optimistic hat on, be one of the longer lasting impacts of the year, as millions chose for themselves a new way forward.
Politically, our western leaders seem unequal to the task. On both sides of the Atlantic, we have not seen a leader emerge to help us understand what's going on and paint the picture of how we are going to get out of it. The burden of all this medical and retirement expense ahead of us is not being addressed, and it looks like more pain ahead as politicians want the other side to be the bad guys. This is a serious lack of leadership.
Both in Europe and US, I think we're confronted by a question around the very democratic process. In Europe, we have Greece and Italy only able to start confronting their issues by having technocrats installed by Brussels. I'm all for bright people, but this just stresses the gap between the medicine needed, and the band-aids being applied. Europe's governments will be increasingly answering for policies they do not control, and voters will feel they cannot impact the technocrats who seem to really run the show. I see further tough discussions ahead for the EU itself as a gradually unifying project - not good for a crisis. There are signs that people will be willing to accept the type of change needed. Support in France is growing for working in return for benefits. It has to in a country where public spending on social programmes is at 28%, same as Swedish levels, v 25% in DE/IT and 20% UK. These countries need to rally behind a democratic leader from the bottom up who is willing to lead the way. Otherwise, there is the danger of the authoritarian leader with the attraction of quick fixes.
Unfortunately, in general, international co-operation does not seem to be achieving as many wins as it needs to to keep popular an internationalist viewpoint. It was great to see some foreign policy success in Libya, but NATO was majority US funded and equipped. Cameron and Sarkozy were able to enter as victors, but very much relied on US, and cannot do more in Iran or Syria to actually influence the Middle East. It is very disappointing to see UN Climate talks achieve nothing.
In the US, the political stale mate has been embarrassing to witness. It truly is beyond the average person to understand what these guys in Washington think they are doing, spending time legislating that 'pizza is a vegetable' but not able to have honest and under-inflated discussions on trillions of debt. While under the surface, the cuts have been starting to dig in. State budget shortfalls will bring a raft of cuts to public schools. Jobs overall in US now slightly up, but government is already the big loser - whether this is right or wrong it is a change with pain attached. Policies seem issue driven rather than more objectively market led, a good example being Georgia's immigration bill which actually seems to have ended up hitting farmers. At the other extreme, the more aggressive tax stance of the US government is impacting many international companies desire to deal with the US. There are increasing alternatives for them in the world. It was interesting to see the rise of the 'Occupy' movement, but the lack of specific opinion from the protests is weak in the face of the lack of pragmatic compromise from the tea par tiers, mixing religious, social and fiscal right wings. This presidential race season has also been underwhelming in terms of candidates who actually look able to lead this country to a new phase.
If one takes the more objective view of the investor, then there is a shaking of the foundations of belief and faith in the market system because of these actions. Easily forecasted 'risk-free' state investments no longer exist. Yet they yield far too little because there remains far too much. Inflation has increased little so far, but it feels like this is going to be the big change in the year ahead. Cash must be worth less as governments make it mean less. The debt problem has been internalised and collectivised across the US and Europe by their central banks. I imagine we may soon see a real de-coupling of financial returns of the BRICs from the west.
To end on a more positive note, as I dig deeper, I see that actually many economic and social indicators are improved, which gives me some more positive belief for a sunnier side ahead, once the world, and especially the west, works out how to fit into the changing world order. But I am waiting for the leaders who can get us out of it fitter and politically healthier than we came in, to start accelerating the progress made. The rest of world is perhaps already embarking on that political shift. The Arab spring in north Africa will have a long term effect. I would not bet on significant warming up in North Korea or Russia soon, but then recent events could be the also a beginning of change. In this context, Chinese stability and economic growth are important for the world, as its ongoing evolvement to international citizen for the economy, environment and peace.
Politically, our western leaders seem unequal to the task. On both sides of the Atlantic, we have not seen a leader emerge to help us understand what's going on and paint the picture of how we are going to get out of it. The burden of all this medical and retirement expense ahead of us is not being addressed, and it looks like more pain ahead as politicians want the other side to be the bad guys. This is a serious lack of leadership.
Both in Europe and US, I think we're confronted by a question around the very democratic process. In Europe, we have Greece and Italy only able to start confronting their issues by having technocrats installed by Brussels. I'm all for bright people, but this just stresses the gap between the medicine needed, and the band-aids being applied. Europe's governments will be increasingly answering for policies they do not control, and voters will feel they cannot impact the technocrats who seem to really run the show. I see further tough discussions ahead for the EU itself as a gradually unifying project - not good for a crisis. There are signs that people will be willing to accept the type of change needed. Support in France is growing for working in return for benefits. It has to in a country where public spending on social programmes is at 28%, same as Swedish levels, v 25% in DE/IT and 20% UK. These countries need to rally behind a democratic leader from the bottom up who is willing to lead the way. Otherwise, there is the danger of the authoritarian leader with the attraction of quick fixes.
Unfortunately, in general, international co-operation does not seem to be achieving as many wins as it needs to to keep popular an internationalist viewpoint. It was great to see some foreign policy success in Libya, but NATO was majority US funded and equipped. Cameron and Sarkozy were able to enter as victors, but very much relied on US, and cannot do more in Iran or Syria to actually influence the Middle East. It is very disappointing to see UN Climate talks achieve nothing.
In the US, the political stale mate has been embarrassing to witness. It truly is beyond the average person to understand what these guys in Washington think they are doing, spending time legislating that 'pizza is a vegetable' but not able to have honest and under-inflated discussions on trillions of debt. While under the surface, the cuts have been starting to dig in. State budget shortfalls will bring a raft of cuts to public schools. Jobs overall in US now slightly up, but government is already the big loser - whether this is right or wrong it is a change with pain attached. Policies seem issue driven rather than more objectively market led, a good example being Georgia's immigration bill which actually seems to have ended up hitting farmers. At the other extreme, the more aggressive tax stance of the US government is impacting many international companies desire to deal with the US. There are increasing alternatives for them in the world. It was interesting to see the rise of the 'Occupy' movement, but the lack of specific opinion from the protests is weak in the face of the lack of pragmatic compromise from the tea par tiers, mixing religious, social and fiscal right wings. This presidential race season has also been underwhelming in terms of candidates who actually look able to lead this country to a new phase.
If one takes the more objective view of the investor, then there is a shaking of the foundations of belief and faith in the market system because of these actions. Easily forecasted 'risk-free' state investments no longer exist. Yet they yield far too little because there remains far too much. Inflation has increased little so far, but it feels like this is going to be the big change in the year ahead. Cash must be worth less as governments make it mean less. The debt problem has been internalised and collectivised across the US and Europe by their central banks. I imagine we may soon see a real de-coupling of financial returns of the BRICs from the west.
To end on a more positive note, as I dig deeper, I see that actually many economic and social indicators are improved, which gives me some more positive belief for a sunnier side ahead, once the world, and especially the west, works out how to fit into the changing world order. But I am waiting for the leaders who can get us out of it fitter and politically healthier than we came in, to start accelerating the progress made. The rest of world is perhaps already embarking on that political shift. The Arab spring in north Africa will have a long term effect. I would not bet on significant warming up in North Korea or Russia soon, but then recent events could be the also a beginning of change. In this context, Chinese stability and economic growth are important for the world, as its ongoing evolvement to international citizen for the economy, environment and peace.
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