Welcome to 2013. Where are we headed?
1) Stagnation in the US economy and in the Eurozone. Western Europe will remain in recession territory in 2013. There is no reason for much improvement. The picture in the US will deteriorate. Improving housing and growth in the energy sector will not be enough to keep the American economic engine going. Unfriendly government policy in the US -- higher taxes, increased regulation, implementation of Obamacare, demonizing rhetoric from the Obama White House -- mean the economy is most likely to slip back into recession territory.
2) Markets -- stock markets, ending in the negative (but not disastrous), and terrible bond markets (disastrous) should be the pattern for 2013. Improving housing markets and home prices during most of 2013. Pattern should be similar to the economic trajectory of the US in the 1970s and for pretty much the same reasons.
3) Continued economic growth in the Asian periphery that surrounds China. The only blight on an overall good record will be Japan, which is afflicted by the same set of diseases that plague the US and Western Europe. Asian economic growth will be hurt by stagnation in the West, but should still be the strongest economic area in the world.
On the political front, the Democrats will strengthen their hold on government and on economic policy. The Republicans no longer have a platform to run on and will increasingly retreat to narrow social issues, having totally abandoned the low tax, free market agenda. More debt, more government, more regulation, weaker economy -- that is the pattern for 2013 and for the next five or six years.
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