For close to three years, the primary focus of European leaders has been to solve the region’s banking and sovereign debt crisis, which have caused a serious weakening of the economy and created massive unemployment in some countries. The same leaders however faces a larger problem in 2013: how to manage the social unrest across the continent as a direct consequence to the [mis]handling of the economic crisis.
Last week’s US budget deal and better-than-expected jobs data helped lift the S&P500 to a five-year high. But expectations for the New Year are subdued: the clock is ticking on a resolution for the $16.4 trillion American debt ceiling as temporary measures installed will only provide funding until about mid-February. Over the weekend, IMF managing director Christine Lagarde warned that failure to find a solution to the US debt-ceiling debate and matters in Europe could trigger a “major world economic crisis”.
Monday, January 7
Despite maintaining aggressive stimulus measures that have been credited with aiding economic recovery, minutes from December’s Federal Reserve meeting show that officials are increasing split over when to halt the central bank’s controversial bond buying policy.
How politics and economics interact nationally and globally is one of the important questions for 2013 and beyond. There are three scenarios: good economics and effective politics provide the basis for a growing and more cooperative global economy; bad economics interact with dysfunctional politics to ruin the day; or the world muddles through, increasingly unstable, as a tug of war between economics and politics plays out, with no clear result or direction.
The last minute U.S. budget deal may have spared millions of Americans the burden of higher taxes amid a weak economic climate, but if American politicians can come so close to falling off a fiscal cliff, they are unlikely to “reach a deal to help their country climb out of an abyss,” said China’s Xinhua, a state-owned news agency.
In an English commentary, Xinhua acknowledged the United States’ dominance as the world’s largest economy, but cautioned that the country “simply cannot live on borrowed prosperity forever.”
It wrote:
According to an IMF study released late last year, there is now strong evidence that China has been over-investing significantly over the last decade – leading to sustained economic growth rates at the expense of a suppressed consumption base. But even as China embarks on a new era of economic rebalancing, any attempt to reduce its reliance on investment-led growth may cause severe economic repercussion, while doing nothing may also lead to further financial fragility.
The United States’ long-running fiscal cliff crisis was finally resolved when the House voted on Tuesday to approve a Senate bill aimed at averting huge tax hikes and budget cuts that would have pushed the world’s largest economy into recession.
Despite booming oil production in North America on the back of the shale revolution, many industry forecasts still expect oil prices to remain above $100 a barrel in 2013 – the third consecutive year that oil prices have gone above the triple digit mark.
Japan’s population shrank by an estimated 212,000 people in 2012, claimed the nation’s Health Ministry on Monday, as concerns continue to mount the nation’s rapidly aging population and low birth rates.
According to the ministry, as cited by the Japan Times, a record low of 1,033,000 babies were born in Japan last year, compared to 1,245,000 deaths in the country, which resulted in a net drop of 212,000 in the nation’s population of around 126 million people.
The Organisation of Petroleum Exporting Countries, or OPEC, is expected to reap a record of more than $1 trillion in net oil revenues in 2012 as the annual average price of Brent crude closed at an all time high, rising 3.5 percent for the year.
Brent crude, the international oil benchmark, rose on Monday closing the year 2012 up for the fourth consecutive year.
