Her Campus UChicago On the World in 2012: Economy

2011 has finally gone, leaving us to wonder what 2012 has in store for the world. Will the economy get better? What do the runways have in store for this year? And, of course, will the world actually end?
 
While we can’t see the future (would be cool, though), we at Her Campus UChicago definitely have our own predictions for what the world will look like in 2012. From politics to the movies, we highlight SOME of 2012’s possible events while leaving the rest to your imagination. A lot happens in a year so we weren’t able to cover everything, but hopefully our predictions remain more or less accurate. Each day we’ll cover one spectrum, starting with politics, then the economy, media, fashion, science, and finally, movies, highlighting what we believe will be the best thing about 2012, something that could go either way, and the worst.
 
But one thing we are sure of? The world isn’t going to end.
 
Happy New Year, and good reading.

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THE ECONOMY
 
The best thing about this year: NOTHING
 
Sorry.

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Could go either way: EUROPE
 
Europe may be able to save itself from complete collapse, but don’t expect much in terms of recovery. The worldwide economic downturn has encouraged countries to put their own survival at the forefront, tearing away at further European integration. Nationalism is on the rise, politically hindering efforts to create a collective agreement for Europe’s benefit.
 
Greece and Italy will spend 2012 by remaining the epicenter of Europe’s woes. With Germany’s opposition to any direct bailout and the European Central Bank’s refusal to indiscriminately buy government bonds, the region looks like it could be in for a further tumble. This will only be compounded by France’s impending credit downgrade, a move by Standard & Poor that will surely cause panic among the European states.
 

Fortunately for Europe, as of December 22^nd, the ECB seems to have undergone a wakeup call. On that day the ECB pumped approximately US$648 billion into its coffers for loans to national banks, demonstrating that while the ECB looks down upon directly reducing government debt, it would much rather avoid the euro system’s complete collapse. Along with the new supply of money, the ECB also announced that the injection was the first of many initiatives to bail out banks, prompting the New York Times to label it as a “potential turning point” for Europe.
 
But the word “potential” is key here as Europe’s politicians must also play their part. Though the ECB’s new monetary supply may reduce the chances of a much-feared run on banks in Greece, France and Germany must learn to work with the region’s debtor countries to reform Europe’s economic infrastructure. A new emphasis must be placed upon creating regional institutions with criteria suitable for a common market and upon preventing, rather than alleviating, another crisis.

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NOT looking forward to: SELF-INDUCED STAGNATION
 
Europe aside, 2012 will be a year of political gridlock and fear-induced austerity that may plunge the world’s developing economies back into a recession. With a projected GDP growth of just 1.3% for the U.S. and 2.2% for Japan, 2012 will see the continuation of what some economists are now calling “The Great Stagnation” while emerging economies like China and India maintain their growth.
 
While global austerity in 2012 will not match the protectionism of the Great Depression, countries will put national interests above international ones. This mindset is already ingrained in Europe, where Germany and other northern European creditor countries are doing everything to avoid giving direct aid to states like Greece and Italy. As a result, debtor countries will find it nearly impossible to dig themselves out of debt and budgets will be ever tighter.
 

But never mind political deadlock between countries as national governments are divided within themselves. 2012 will be no better for the President’s economic policies, as Republicans in Congress will refuse to pass many, if not most, of his stimulus plans. Though the recent passing of a spending bill prevented the shutdown of numerous government agencies and proved that consensus can be reached, cooperation like this will be rare.
 
The European Central Bank and the Federal Reserve will do their best to cut interest rates and provide loans to banks, but ultimately the world economy will look no better in 2012. A double-dip recession would come as no surprise, and given present political circumstances it could even be inevitable.