What Could Go Right (and Wrong) for the Economy in 2012

If things go right, 2012 could signal the beginning of the end of a four-year economic slump

By DAVID FRANCIS

Recent improvements in the U.S. economy don't change the fact that 2011 was the latest in a series of tough economic years, dating all the way back to 2007. This year, Standard & Poor's downgraded U.S. debt for the first time ever. Unemployment is still nearly 9 percent, despite the economy adding jobs last month.Home prices throughout the country continue to fall or refuse to rise.

But the year's end has brought some encouraging news to light. The U.S. economy is growing slowly. Consumer confidence, which gauges the public's feelings about the economy and has been down for years, stabilized. According to Fannie Mae's Economics & Mortgage Market Group, Americans are now in a "wait and see" mode, hoping for the best in 2012.

Whether or not this hope is misplaced depends on a number of factors. If things go right, 2012 could signal the beginning of the end of a four-year economic slump. But if things go wrong, the modest recovery the United States is experiencing will be a brief respite from continued financial agony.

The following factors will determine the fate of 2012:

European financial crisis. Europe's financial problems are far from over. Greece, Italy, Portugal, and other European Union nations remain in danger of default. There is still a chance that the eurozone could break apart.

European leaders are meeting this week in Brussels to work out an agreement on government spending and fiscal discipline. According to Christine Thompson, chief investment officer of Fidelity Investments bond group, the outcome of this meeting will go a long way toward determining whether the euro zone can weather the storm. If it does survive, Thompson says she expects its debt problems to have repercussions throughout the world.

"We'll continue to have two steps forward, one step back. People [are] looking at the severity of the teeth of any policy statement that comes out and viewing it very skeptically," Thompson said Tuesday at the Thomson Reuters' Lipper Investment Series 2012 Outlook panel discussion. "What that means is markets will be volatile."

If the crisis is resolved, that volatility is likely limited. However, if the crisis lingers, or Europe takes a turn for the worse, repercussions will be felt on this side of the Atlantic. "While we're not forecasting recession, we expect the combination of slightly tighter fiscal policy and potential financial shock from the crisis to result in weaker growth in the near term," wrote Andrew Tilton, senior economist at Goldman Sachs, in his 2012 investment outlook.

Political uncertainty at home. In 2011, politicians did more to hurt the economy than to help it. Congress's failure to compromise on a debt deal led to the S&P downgrade of U.S. debt. This failure led to a second one, by the congressional "super committee" charged with finding trillions in savings. At the same time, Republicans and Democrats were unable to agree on a job stimulus package. Now, they're unable to agree on a payroll tax extension. If no agreement is made, some Americans who earn more than $50,000 will be paying higher taxes next year. Right now, the only thing each side can agree on is that the impasse is the other's fault.

"I know many Republicans have sworn an oath never to raise taxes as long as they live. How could it be that the only time there's a catch is when it comes to raising taxes on middle-class families?" asked President Barack Obama in a speech earlier this week. "How can you fight tooth-and-nail to protect high-end tax breaks for the wealthiest Americans, and yet barely lift a finger to prevent taxes going up for 160 million Americans who really need the help?"

Republicans answered this charge with an accusation that Democrats are the ones who refuse to compromise. After the super committee's failure, there is little hope for compromise on the tax issue.

Things aren't likely to improve in 2012, either. As the presidential election race moves forward, Obama and the GOP candidate will offer competing economic proposals and Congress will remain divided. Action on these plans won't take place until 2013.

Reasons for optimism. Despite the threat posed by the European crisis,and the political gridlock in Washington, there is reason for hope. According to Goldman Sach's Tilton, U.S. consumers are saving more and spending less, lightening the country's debt burdens. Tilton also said that the U.S. Federal Reserve could rise above partisanship in Washington and act to stimulate the economy.

Alec Letchfield, chief investment officer of wealth management at HSBC Global Asset Management, said that stock investments made in 2012 would pay off down the line. So 2012 might be a good time for Americans to invest some of the money they saved during the downturn.

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Reaction:

Reserve currencies and the banking systems that create them are the single greatest civil rights crimes on the planet.

Until governments reclaim their sovereign authority and power to issue national currencies there can be no equitable distribution of resources or economic justice. Privately owned banking cartels create money as bookkeeping entries lending it at interest to government who can never repay both the principal and the interest because nobody created the extra money for the interest payments. When national debts go unpaid, the banking system steps in, foreclosing on national assets and stripping the country at fire sale prices. The banks and bankers do not stave people, but they create the poverty that does.

America is a vast playing field of economic opportunity. Those who win biggest on that field should pay the most rent, in the form of income taxes. The rich, who use more of the field and it's facilities (courts, government, advantageous laws passed, tax dodges, etc.) should pay more taxes than the poor and middle class, who derive much less out of the services provided by government. (The poor and middle class can't afford to buy themselves a congressman). Of the 47% who do not pay taxes, it's true that some are lazy bums, but many are elderly and poor and many do not make enough money to be required to pay taxes. Sorry, but until the rich are taxed for their fair share, the United States economy is not going to get much better and the deficit will continue to climb.

Only when government issue national currencies in the interest of their citizens, will the people of the world prosper.

Nearly Half of Americans Are Poor or Low-Income

WASHINGTON — Squeezed by rising living costs, a record number of Americans — nearly 1 in 2 — have fallen into poverty or are scraping by on earnings that classify them as low income.

The latest census data depict a middle class that's shrinking as unemployment stays high and the government's safety net frays. The new numbers follow years of stagnating wages for the middle class that have hurt millions of workers and families.

"Safety net programs such as food stamps and tax credits kept poverty from rising even higher in 2010, but for many low-income families with work-related and medical expenses, they are considered too 'rich' to qualify," said Sheldon Danziger, a University of Michigan public policy professor who specializes in poverty.

"The reality is that prospects for the poor and the near poor are dismal," he said. "If Congress and the states make further cuts, we can expect the number of poor and low-income families to rise for the next several years."

Congressional Republicans and Democrats are sparring over legislation that would renew a Social Security payroll tax cut, part of a year-end political showdown over economic priorities that could also trim unemployment benefits, freeze federal pay and reduce entitlement spending.

Robert Rector, a senior research fellow at the conservative Heritage Foundation, questioned whether some people classified as poor or low-income actually suffer material hardship. He said that while safety-net programs have helped many Americans, they have gone too far, citing poor people who live in decent-size homes, drive cars and own wide-screen TVs.

"There's no doubt the recession has thrown a lot of people out of work and incomes have fallen," Rector said. "As we come out of recession, it will be important that these programs promote self-sufficiency rather than dependence and encourage people to look for work."

Mayors in 29 cities say more than 1 in 4 people needing emergency food assistance did not receive it. Many middle-class Americans are dropping below the low-income threshold — roughly $45,000 for a family of four — because of pay cuts, a forced reduction of work hours or a spouse losing a job. Housing and child-care costs are consuming up to half of a family's income.

States in the South and West had the highest shares of low-income families, including Arizona, New Mexico and South Carolina, which have scaled back or eliminated aid programs for the needy. By raw numbers, such families were most numerous in California and Texas, each with more than 1 million.

The struggling Americans include Zenobia Bechtol, 18, in Austin, Texas, who earns minimum wage as a part-time pizza delivery driver. Bechtol and her 7-month-old baby were recently evicted from their bedbug-infested apartment after her boyfriend, an electrician, lost his job in the sluggish economy.

After an 18-month job search, Bechtol's boyfriend now works as a waiter and the family of three is temporarily living with her mother.

"We're paying my mom $200 a month for rent, and after diapers and formula and gas for work, we barely have enough money to spend," said Bechtol, a high school graduate who wants to go to college. "If it weren't for food stamps and other government money for families who need help, we wouldn't have been able to survive."

About 97.3 million Americans fall into a low-income category, commonly defined as those earning between 100 and 199 percent of the poverty level, based on a new supplemental measure by the Census Bureau that is designed to provide a fuller picture of poverty. Together with the 49.1 million who fall below the poverty line and are counted as poor, they number 146.4 million, or 48 percent of the U.S. population. That's up by 4 million from 2009, the earliest numbers for the newly developed poverty measure.

The new measure of poverty takes into account medical, commuting and other living costs. Doing that helped push the number of people below 200 percent of the poverty level up from 104 million, or 1 in 3 Americans, that was officially reported in September.

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REACTION:

The only thing that people can do now is plan for the worst and hope for the best. If the programs that help get cut and the individual who saves on some taxes has $1000 more at the end of the year, that won't do the individual much good if they loose their job. People can see that chance really is more powerful than will when it comes to poverty in some cases.

The very wealthy and politicians probably already know this which is good, but unless they take strides to actually maintain or grow their middle class, then in the end they too will suffer as the empire goes down.

People in power need to think ahead, they need to stop thinking just about themselves and the present times and start thinking about the future, their children's and grandchildren's future, for there has always been a remedy on every problems. 

The people should also change their lifestyle and perspectives, they take too much advantage on such privileges where they end up with their downfall. For example, they only have a limited salary that could sustain their daily needs yet they keep on buying the things that they want which is not a NEED and makes them satisfied and end up on what? Common sense is not common nowadays. Especially with americans? no doubt. They overused the credits. <sigh> So to us Filipinos, we must also take note of this situation, We are a ship connected to our big mothership. If they fall, i can't imagine what could also possibly happen to us.

Mindanao Power Crisis: Vicious Cycle

MANILA, Philippines - The wrangles over cost impacts, exacerbated by political grandstanding, have been bedeviling the power supply crisis being experienced by Mindanao consumers.

Sure, something went amiss that's why the recurrent brownouts are happening. But stakeholders must realize that continuing the blame-game will not solve the problem.

Once and for all, this should be the time to include public conscience in the debates and discussions in determining the real cause of the Mindanao problem; as well as in exploring the short-term, mid- and long-term solutions.

It does not matter much really if the brownouts are just one to three hours as defensively stated by Malacañang; or if these are stretching up to eight hours as claimed by other quarters. The fact remains that Mindanao consumers are gnashing their teeth out of frustration on these incidents of power outages. Worse, the region's economic gains are also in danger of being wiped out if the more permanent solutions are not put in place.

Opinions as to what triggered the grid's power dilemma have been varied: some quarters said the Department of Energy (DOE) failed to plan on how to avert the crisis; while others opined that the defiance of the electric cooperatives to enter into supply contracts left their consumers groping in the dark with the protracted power interruptions.

The rest pinned the blame on the government (or the National Economic Development Authority) on its delayed action on the approval of the rehab of Unit VI of the Agus plant; and that the Power Sector Assets and Liabilities Management Corporation (PSALM) slept on its job on the mandated privatization of the power barges - that if based on the instructions of Energy Secretary Rene D. Almendras, this could have been done as early as last year so the government can call on its transfer when additional capacity is needed by Mindanao this summer.

Groups with more 'savage imaginations' went as far as inferring a "conspiracy theory" between the government (the DOE in particular) and the power investors - that they supposedly invented the 'crisis scenario' in the grid to justify their proposed power projects. If this is true, these investors will just be throwing away their billions because a "makeshift crisis" cannot be kept for long. Who will buy their generated electricity then if there is really no shortage in supply?

Read more: http://ph.news.yahoo.com/mindanao-power-crisis-vicious-cycle-075713159.html

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Reflection:

The serious and lingering problems/issues regarding lack of power generation is fixable. Many countries are facing the same issues but are taking actions today to solve the impending problems. Failing to do a "PLANNED" remedy or permanent solution is not an excuse, this has been a déjà vu, same situation happened last 2010 where the problem occured again this year! It seems like they haven't learned a lesson. Yes, endless blames won't help, but the government is still not faultless.

This slow processing economic issues are keep on occuring again and again and again and again, should we put the government on the blame? i guess its yes! in tagalog term i should say "BULOK NA SISTEMA", now they are pressured in finding a remedy, they act when the problem is already there, im just wondering where are they busy at. "It does not matter much really if the brownouts are just one to three hours as defensively stated by Malacañang", what on earth are they saying? every minute that could have been spent would affect the productivity of industrial companies which could decline the economic gain. The region's economic gain is at risk, this problem must be solved before things could get worse.

There are people who have been telling about some conspiracies where they said that the government are just inventing this "power crisis". I hope there is no inside job happening here between the investors and the government. Well, it has been a tradition in the government in implementing their self-interests. Philippines will never prosper with this kind of people. Electricity has been a major commodity nowadays, living in a modern, fast phasing, progressive age. The government must hit the bulls eye in looking for power alternatives. There is no time in beating around the bush. Mindanao must also learn to pay the true cost of power and judiciously weigh the solutions apt to ensure its energy security, because if not, the vicious cycle of brownouts in the grid will never see its end. IF THERE'S A WILL, THERE'S A WAY. ENOUGH WITH THE BLABBERING. DO A COURSE OF ACTION!