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2012 Economic Predictions – a mid-year audit that augurs well

It’s time to assess how well I’ve done (or not done) during 2012 in making economic predictions. As these prognostications have been scattered over various posts, I’ll gather all of them here in one place and dig into them with straightforward honesty.

Predictions of the end of the world in 2012

I started the year by noting that Harold Camping predicted the end of the world three times for 2011, and we’re still here. Therefore, I began with a safe guess that the world will not end in 2012. While I like to start on fairly safe territory, I will note that I am bravely pitting myself against the collective knowledge of several million Mayans … or at least their spiritual leaders. The world may, however, feel like it’s about to end several times this year, as the economic clouds will continue to darken through the now-waning year.

The jury is still out regarding the end of the world in 2012, but it seems that even the Mayans were at odds with each other as a another Mayan calendar was discovered this year that did not have the end of the world as we know it in 2012. Being the older of two known calendars, it may be that it is wiser; or it may be that Mayans built upon previous knowledge so that the newer of their two calendars (the one we’ve heard about the longest) was an update — Calendar 2.0.

As noted at the beginning of 2012, the nice thing about predicting the world will not end in December 2012 is that, if I am wrong, none of my readers will be around to tell me about it. ;)

On all other matters of future projection, I took the ground that very few economists chose to walk upon. My own opinions in the first months of the year as to how the near future would play out were the polar opposite of what most economists, market analysts and talking heads were saying. I spoke of clouds while they danced in the one small patch of sunlight on the ground and claimed that everything was getting sunnier.

I’ve predicted all along that the clouds were gathering, and that the prevailing winds that would hit economy this year would be the euro crisis and the Iran nuclear crisis, which I refer to as the Iranium Reaction. Here we are a half a year later, and so it is:

Economic predictions of serious European bank failures and a crumbling Eurozone crisis

My first prediction of 2012 was that European bank failures would have a major impact on the global economy:

After the infamous U.S. stock market crash of 1929, it took two years for the damage in the U.S. to flood Europe to a level where European banks began to fail just as U.S. banks had. The repercussion of European bank failure proved even more damaging to the global economy than the first dip of the Great Depression in America because the whole global system had been weakened by the first dip…. Again, it looks as if bank problems will begin in a German-dominated central Europe, then spread to the U.K., which is outside the European Union’s eurozone, and finally to the U.S. A failed European econony will crash on U.S. shores later in the year in the form of diminished markets and further bank stresses.

At the time I said this, it looked as if the United State’s long economic winter was thawing. Factory production and employment were up. Economists were talking daily about the “recovery,” as if we were actually in one. I noted, however, that serious arctic winds were howling in the rest of the world, even as the U.S. was warming, and these winds would soon begin to cool the American economy back down.

I also noted,

With credit ratings being lowered heltar-skelter around the world weekly if not daily, some national economies are almost certain to crumble under their own torpid weight. The timing of these sovereign debt rollovers places the crisis toward the middle of the year.

Well, the middle of the year is here. Unlike Harold Camping, I will not allow myself to adjust my timing if it is off, but I think I’m relatively safe on this one. As I stopped short of declaring that a few countries would declare themselves bankrupt, but said, instead, they would crumble, I think we can all now see that crumbling happening. As mid-year approached, both Spain and Italy entered the orange zone of debt costs where a fraction of a percentage point will make the difference between a barely manageable debt and unsustainable debt. The weight of their debt is beginning to crush them into impossible positions.

Spain’s problems are due mostly to rampant bank failures, which is exactly the mechanism I believed would be the cause. I indicated in my earlier economic predictions that Spain, not Greece, would become the dominant threat:

The euro crisis will emerge on the horizon again but with problems that make the Greeks look like a minor tragedy…. [Europe’s] recession will certainly force heavier financial problems on nations like Spain that are already maxed out. Some nations are going to find their debt load impossible to finance as their interest rates go up while their need to borrow also rises sharply because of rising unemployment.

In terms of European nations crumbling, however, Greece is the first to disintegrate, though it does not pose as dire a threat as Spain. It could still easily be enough of a threat to do Europe in. It is already promising to reneg on the austerity terms it agreed to for its own salvation within the European Union. For the first time, many European leaders have begun to talk openly of a Greek exit from the Eurozone (and probably from the E.U.), which was taboo to talk about at an official level in 2011.

I noted in my first set of predictions,

Political tension between nations and between citizens and their governments is certain to increase in the coming year as a result of these great strains.

And that tension between Greece’s government and it citizens is exactly what is causing the Greek debt deal to fall apart now. Greeks revolted, voted their government out. A new government was unable to come together. Greeks voted back in a mixed government wherein the old backer of the Greek deal has had to promise Greek citizens that their party, too, will seek to renegotiate the terms of the Greek bailout. This has created such great conflict between Greece and other nations of the Eurozone that many of those nations sound much more willing to just let Greece walk away from E.U. membership at this point. So, the conflict within nations is beginning to turn into a conflict between nations.

Germany, as hinted at in my prediction, began to dominate Europe more and more in 2012 and has also found itself pitted against most of the nations in Europe without the strong ally for German austerity that it once had in France. The political conflict between Germany’s Chancellor Angela Merkel and the rest of Europe’s leaders became quite intense, and everyone began saying the latest summit was the most acrimonious of all.

As I start writing this audit of my economic predictions, the U.K.’s central bank has just announced more quantitative easing, while its CEO, Mervyn King, has said for the past couple of months that the U.K.’s problems are largely a spillover from the Eurozone. That fulfilled another prediction I made:

Europe will engage in more quantitative easing. (“More 2012 Economic Predictions“)

In March, I reported,

The euro crisis finally moved out of the headlines (almost) for a week. Don’t worry; it’ll be back soon enough … in spite of the sigh of relief by the European Central Bank chief, who said that we have now seen the worst of the euro zone crisis. Famous last words

Today, the European Central Bank also announced its most extraordinary moves to date on the basis that the euro crisis is getting worse. How is that I know more than European central bankers about where Europe’s economy is going? One likely possibility is that they are just talking game so you cannot trust anything they say as it is all marketing pep talk. The other is that they are blinded by what they want to believe. It has become my refrain in The Great Recession Blog that this is the cause of economic denial everywhere. People can’t handle the truth. They don’t even want to hear it.

While I said that

The stalled European economy will crash again on U.S. shores in the summer., Q.E. seems to be all the world’s politicians know, and once markets get a snort of this crack, they demand more the second the economic high wears off. (“Are My 2012 Economic Predictions for the Great Recession in Recess?“)

Summer has only just begun, so it’s a little premature to say what forces the European economy will actually exert on the U.S. economy this summer, but right now it looks like it is already exerting major stresses against the U.S. economy in that a lack of European customers for U.S. products is being stated as a big factor in recent U.S. manufacturing slowdowns, and European worries have begun to dominate the news again every day.

I also said,

A feeling of malaise [will develope] toward any hope of Europe getting out of its mess once larger nations start to fall. As Spain and probably Italy teeter, consumer confidence even in the U.S. will be hit worse than last year. Much more so, stock-market confidence.

Again, it’s too early to say if that will prove to be true, but it looks increasingly likely. My timing, however, may have been off:

I add to my previous predictions that this will be happening during the second major round of home foreclosures that will be passing through the U.S. economy in the next few months. This confluence of bad news will certainly undermine consumer confidence further than we saw last summer with more certainty of a second dip in the ongoing Great Recession.

That was said in April, so if it does not start to happen along with a significant rise in home foreclosures by the end of July, I think I’d be stretching the common definition of “the next few months.”

Predictions regarding the Iranium Reaction and its impact on the economy

I led off my predictions regarding Iran by noting

Iran promises to block the Persian Gulf if sanctions on it grow worse, and is threatening U.S. carriers that will very likely re-enter gulf waters to keep the gulf open.

This was not a prediction, but a mere note of the kind of saber rattling that was already happening. We saw more of that last week as a measure was put before Iran’s parliament to force the government to take exactly that action. As I noted then, Iran is always rattling its swords, so such threats don’t mean much in themselves. Likewise, Iran’s threat that it is now time to wipe both Israel and the U.S. off the map is real in intent, but their ability to carry it out, so long as they are kept from having nuclear weapons, is severely limited.

What Iran can do, however, is cause harm to the global economy:

An uptick in the Iranium reaction would shoot up the cost of oil either by choking supply or using more of it in war or simply triggering speculation.

Having predicted that Iran would cause the price of oil to rise, we saw the first small heartbeat of that kind in the past week as the Iranian oil embargo that is part of Western sanctions against Iran kicked in, and the price of oil immediately rose a couple of notches. Nothing serious so far, but a clear indicator that speculators are at their triggers, ready to start pricing oil up in proportion to how much things heat up with Iran.

It doesn’t take much to make that kind of prediction. It is more a statement of how the oil economy focuses on the Middle East. The following, however, reached a little further out on the limb:

Here is the catch that many are not seeing: I firmly believe sanctions have no hope of dissuading Iran from its nuclear weapon’s program. Ahmadinejad has said numerous times all over the world that Israel must be and will be destroyed. Unless Ahmadinejad falls from power, he and the United States and Israel are on a head-on course. I say that because it is clear to me that Iran’s president is not driven by political realities in his country but by radical religious ideology that, in his mind and in the minds of many others in Iran, trumps all other concerns. Several of his speeches have made it clear that he believes he is called to prepare the way for the Mahdi — the twelfth imam who will come in apocalyptic times.

It probably did not escape the notice of too many people that Iran’s war games last week and this were called “Great Prophet 7.” Clearly, Iran’s nuclear program and its defense of that program has an underlying religious zeal driving it. One cannot imagine the United States picking such a religious term to create support for its war games. In the very least, President Ahmadinejad is using religious zeal to build national support for his hawkish actions.

One thing to keep in mind with Iran is that they cannot start a war and claim it is the jihad that will bring the Mahdi. Muslim belief is that jihad or holy war must be defensive in order to be holy. Iran can, however, assert certain rights that many other nations have asserted (such as its demand in nuclear negotiations that the U.S. openly affirm Iran’s equal right to enrich uranium), knowing that acting on such rights will provoke other nations to take action against them. Having provoked an offensive reaction by other nations by invoking their own right to what the U.S. has been doing for decades, they will, then, be able to declare that their war with the U.S. and Israel is defensive. It is holy jihad that all Muslims must rally to support. (Of course, all Muslims will not rally to support it.)

In terms of the timing of this nearly certain conflict, I only said,

I doubt Israel will wait until January 2013, unless a November change in U.S. leadership leads them to believe the U.S. will act shortly after a new president is installed. Even that may be too long to wait in Israel’s eyes as a new president is unlikely to launch straight into war. The Obama administration seems more likely to continue pressing Israel toward diplomatic efforts … perhaps until it is too late for Israel.

As the news and opinion articles posted on the right sidebar of The Great Recession Blog have shown throughout the last two weeks, many are now speculating that the timing could even be before the next presidential election. Obama is clearly stacking up troops in the region in case conflict is necessary and, probably, to reassure Israel that he is ready to take bold actions if talks with Iran fail. Talks have, so far, failed completely, as I said they would. Obama is also being driven along faster by Candidate Romney’s attempts to make the president sound weak in his support of Israel. That’s bound to incline Obama to show a little spine, not that he is actually spineless as Romney tries to portray.

Having more war machinery throughout the Gulf increases the likelihood of war even by accident.

Obama intends, of course, to put as much pressure on Iran before the next round of talks much more than he intends to show that he’s tough. The lead negotiator has said that it is unclear whether or not more talks are justified. Still, there is one more round of talks planned, which everyone acknowledges may be the last if there is no breakthrough. So, Obama knows the window for talks is rapidly closing. He would naturally hope that turning up the pressure on Iran may help. This, too, all fits my predictions on Iran:

Iran may give incremental teases to make it appear talks are going somewhere at the moment of crisis, but all this stalling ultimately has to come to an end that will be a strike on Iran’s nuclear facilities and perhaps all of its military apparatus in order to reduce its ability to retaliate, as Iran is not going to give up its secret nuclear program. You’ll see the pope carrying a scimitar and wearing a crescent moon before you see that happen. (“Are My 2012 Economic Predictions for the Great Recession in Recess?“)

My basis for that prediction was given in an article this year about Iran’s religious political ideology. In that article I also stated that neither Iran’s parliament nor the Ayatollah had any desire to stand against Iranian President Mahmoud Ahmadinejad’s nuclear ambitions. That certainly has proven to be the case now that Iran’s parliament is voting on measures to block oil in Persian Gulf, rather than voting on measures to force Ahmadinejad to capitulate with the West.

I maintain that we cannot understand the situation we are now marching straight into or the risks we are allowing if we do not understand Islamic Fundamentalism and its prophecies, especially if we just assume Western ways of thinking apply in this situation. These prophecies are the forces that drive Ayatollah Khamenei, who was a key mover in the Islamic Fundamentalist revolution in Iran, and Mahmoud Ahmadinejad

I still hold to that view, too. I said Iran would enter talks in order to buy time for its nuclear enrichment program, and it did. I said the talks would fail, and so far they have failed to find any room for compromise.

As a quasi prediction, I stated in the article just mentioned,

The Iran nuclear crisis is becoming the single greatest force that will be acting on the global economy in the months ahead. In the very least, Iran will do what it can to make sure the West suffers any pain that it [Iran] has to endure because of Western sanctions.

I think we are now marching into those dark days.

Predictions about the Federal Reserve’s economic activities

These were fairly short. In my first article, I noted that

The Fed’s tools — whichever are used — will work less effectively, not better, now that they are old and worn.

That much has certainly proven true by the words of the Fed chairman, himself, but I think everyone knew that much, as we’d already seen it in past Fed actions. Ben Bernanke admitted as much when he said to congress that there is little else the Fed can do to help the economy at this point so that it is up to the politicians now. Indeed, everyone said the Fed’s latest actions were clearly the least the Fed could do as if it has given up on economy fixing, right as we hang on the lip of a second recession in this depression we call The Great Recession.

The Fed’s inaction appears to have been by design, as the Fed wants to encourage politicians to stop leaning on it and to do more themselves, and as the Fed knows that whatever it does will have little effect and that such little effect, when proven out publicly, could cause more fear throughout the markets of the world by revealing that the Fed as a recourse has come to its end.

That does not mean that the Fed will not try more quantitative easing at the end of the day as it feels more and more pressure to try and do something; but if it does (and I think it will), it will find that Q.E. almost completely effete. As I noted earlier, the stock market has become addicted to quantitative easing. The Fed has created a bubble that it finds itself pressed to keep supporting:

Stocks entered a temporary dead zone. Don’t worry about that either. They’re likely to go back up soon, as the Fed will do whatever it needs to in order to pump the market back up … such as promising Quantitative Easing III … if necessary.

Just a week ago, I noted how the stock markets of the world now go up when economic indicators look bad because speculators believe the bad economic news means that central banks will engage in more quantitative easing. If that isn’t solid evidence that the stock market is riding on an enormous speculative bubble funded by the fiat money of central banks, I don’t know what is.

The above statements (in black) were meant as likelihoods, not as predictions, but one predictive statement I made about the Fed and the impact of its actions was,

The political leaders of this world — U.S. and European both — will continue to run the presses at full velocity because the cost of admitting they are money-printing and that they are on a bad course is too high politically. They will stay with their present plan, hoping they are buying enough time for an exit to emerge. All of this means the second dip not only happens, but that the next “dip” is to dips what Grand Canyon is to ditches.

Thus, while two rounds of quantitative easing have not turned the economy around, it has created an addicted market that pressures the Fed to continue feeding it or get blamed for the crash when it stops its artificial life support. How soon this will play out, I didn’t say and still don’t; but the Fed continues to hold out the carrot of more Q.E. if necessary while showing reluctance because it knows that game is over once the third round of Q.E. accomplishes nothing but a blip of a few days. No one wants to see “game over” with victory still so far away.

For that reason, I also predicted

I believe in the face of so much trouble Ben Bernanke will strain and manage to pass another round of quantitative easing this summer, but it won’t pass easily this time, as he will find more resistance in the FOMC. It will pass like a wooden block through the bowels of credit only because the alternative looks so much grimmer and because of intense election-year pressure for a short-term laxative. No one will be impressed for long with all the extra cash that comes out of it. In fact, QE3′s failure to accomplish much of anything will increase consumer malaise. While the first rounds of Q.E. brought months of stock-market inflation, this last round may be lucky to bring days of relief.

The accuracy of that remains to be seen.

Economic predictions related to the U.S. housing market

To know what the housing market is going to do, the fundamentals are best shown in this week’s news: ”Wreckage of the Foreclosure Crisis Far from Over.” That story tells you about the log jam that is just up-river from us. And THAT single fact [of the logjam of foreclosed houses], not the stock market this week (or last), is going to affect what comes down river next week and the weeks after that. (From my “Economic News Article Archive for the Week of 03/25/2012.”)

I have indicated along the way this year that foreclosures would depress housing prices more. That log jam has been slow to make its way downstream, and it is now natural to wonder if it will ever get here. The housing market has seesawed back and forth all year. Every gain seems to be retracted by some other loss in the next week or even the same week. Currently, the housing market looks a little better than it did when I wrote the above because banks are doing everything they can to avoid creating a flood of foreclosures. Such a flood of their own creation would force them into an endless spiral of writing down their balance sheets even more because of the suppressing effect that foreclosures have on housing prices.

Housing has also been buoyed a little by record low mortgage rates that have come about from the Fed’s Operation Twist, yet only a little. Considering that this is a time in which prospective buyers can lock in the lowest interest rates they will see in their lifetime, sales are astonishingly flat. I have also noted that there is a time-bomb in these low interest rates because, even with record low fixed rates, banks are still being allowed to entice buyers with adjustable rate mortgages that offer even lower rates.

Those, however, are not something that is going to cause harm in 2012, as they typically have five-year fuses. But, it’s important to note, that we are doing all the same things all over again to try to drive the economy up with housing purchases. We’ve learned nothing. Or, at least, our politicians have learned nothing. Hopefully one of the reasons these policies are failing to stimulate the housing market is that Americans have learned more than their leaders.

The housing market is also dependent on the job market. Low interest rates don’t matter if you have no job to pay any mortgage at all, and the job market has clearly gone back down.

So, I’d say the jury is still out on the housing market. I did, however, speak in terms of weeks, and it is playing out more in terms of months. On the other hand, I rightly noted that banks would do all they could to delay and minimize the release of their foreclosure backlog:

Banks will do all they can to soften the blow of these foreclosures because it is finally becoming clear to them that solutions other than foreclosure are in their best interest when there are far more houses in foreclosure than there are potential buyers.

So, I think I got the dynamics of how opposing forces would play out about right. And that is why we see a seesawing housing market. It is the result of opposing forces or trends trying to find equilibrium.

Economic predictions of a deteriorating job market

I started off with both a hit and miss on this one. In my first post of predictions, I said,

The small employment gains crowed about so much in November and December of the year just past are likely to unravel as holiday-season employees are laid off now that the holidays are over.

Those job gains very clearly fell apart in the second quarter of the year, but it did not happen as immediately after the holidays as I thought it would, though I did state it as a likelihood, not with the force of a certain prediction. Things continued to look positive for a few months. Many believe that was due to unseasonally warm weather throughout much of the U.S., which stimulated economic activity after the holidays. So, my timing was a little off.

Economic predictions that are as good as gold for 2012

Here is one prediction of mine where my faith is wavering a little, but still not much:

I will say … that things look good for gold. I think it will be a rough ride for gold [to test the $2,000 barrier again], but there is no reason for gold on average to go lower than it is now and many forces on the horizon to push it up. I think it is bottoming out right now.

I think that fairly sums up what gold has done so far. It appears to have bottomed out and to have started a lurching climb back up because there are peculiar countervailing forces pulling against its ascent. My prediction only said that things look good for gold, and things do still look good for it. It didn’t go much lower than where it was when I made that statement and has returned back above where it was when I made the statement. So, it turned out to be roughly near what appears to be a bottom. It is only the testing $2,000 this year that I am not as sure of as I was because gold has been surprising everyone by not acting the way gold typically does.

Gold’s peculiar activity right now is due largely to the economic bubble the Federal Reserve is creating in the stock market with all of its unusual economic tampering. When there is bad economic news, the stock market now sometimes defies the gravity of the situation and goes up solely because speculators think the bad news will assure more quantitative easing by the Fed — the candy they now long for.

More quantitative easing is good for gold, too, because it means more likely inflation down the road. If the value of the dollar drops, it takes more of dollars to buy gold. As a result of the Fed’s exceptional manipulation of the economy, gold now sometimes goes up when the stock market goes up and down when it goes down, shattering the longstanding inverse relationship between gold and stocks. Hundreds of billions of dollars of artificial intervention by the Fed are creating abnormalities in markets, which makes it harder to predict what gold will do.

Overall, though, things do look better for gold, as it price has begun to rise again.

Other economic predictions for 2012

While gold has not advanced quite like I thought it would, I did accurately predict the major countervaling force that would be working against the rise of gold:

U.S. interest rates will probably not go up much this year because the U.S. will still be the safer haven of choice for many … but only because Europe looks worse and worse as time goes by.

The U.S. will not see its interest rates rise on the national debt in any significant way this year, even when its credit rating gets downgraded by one or two of the big-three credit-rating agencies.

For right now, the U.S. is outshining even gold as a safe haven, but this is a temporary illusion. Once things stabilize in Europe, U.S. debt will no longer garner the cheapest interest rates in the world. An interest rate change on the national debt is the biggest time bomb on the horizon. I cannot say when it will change (though I have said it will not be this year), but when it does, it will create a devastating drain vortex on the U.S. economy.

The only hope for the U.S. to survive the guaranteed increase in interest rates on a debt that is now growing at a rate of over a trillion dollars a year is if it can finance all of its existing debt on long-term bonds while those bonds are at a low interest rate.

In predicting that the U.S. would continue to have good interest rates this year, I also said it will see another downgrade of its credit rating. I have been right on the interest rates so far, and I didn’t anticipate the credit-rating downgrade would happen any sooner than it did last year, so there is nothing wrong with that prediction either. The downgrade simply remains to be seen.

Another thing I predicted for 2012 was the popping of several European housing bubbles:

Some of these European nations barely burped when the Great Recession hit and the U.S. went into housing anaphylaxis. In all cases their acceleration of housing markets has hugely outpaced wages. Clearly that is not sustainable. Most of these nations intentionally fueled this rise with the lowest interest rates in history, learning absolutely nothing from the U.S. debacle. Europe thought it would power right through the Great Recession. If last year proved this to be unlikely when housing prices in some areas began to recede, 2012 with its pan-European recession will be Europe’s 2008.

With the exception of Spain, we have not yet seen a disastrous popping of the numerous European housing bubbles, but I don’t see any activity that is clearing those bubbles out of the way; so I stay with that prediction. As the European recession that is now underway drags on, the housing bubbles will eventually give way to its weight. We can see from Spain, where the problems are entirely due to recessionary unemployment and the bursting of the Spanish housing bubble, what effect that will have on all of Europe. It is highly doubtful that Europe can even withstand Spain’s ongoing wind-down of housing.

So, if you think European banks have trouble now because of U.S. investments and because of Greece, Portugal and Ireland, how much more so when European housing bubbles all begin to pop now that unemployment is rapidly rising?

I mentioned many other bubbles that are due to pop, but I did not say they would happen in 2012. They represent a lot of additional bad economic news for the years ahead, lest we think we’re nearing any conclusion, but not necessarily for 2012.

China, too, has a housing bubble that could pop, but China has chosen to do something about it. One of the economic predictions I made for 2012 was that …

China will have a softer landing than the rest of the world’s major nations.

While many people have been fearing a hard Chinese landing, I’ve repeated had to point out that China intended to bring its economy down as a way of getting its escalating housing prices back in check. That said, “no hard landing for China” does not mean the settling of the Chinese economy will not make things worse for everyone else. It’s one more factor pulling down the U.S. now. Chinese manufacturing buys a lot of raw material from the U.S. and everywhere else it can. Even a smooth slowdown means other nations are not likely to see any growth in those resource export industries, such as logging and mining.

One of the things I noted shortly after the beginning of the year was how many people who had predicted a tough 2012 were fleeing from their predictions as quickly as things began to warm up economically during the months of winter:

Hoards of investors, news reporters and economists this past week caved to … temptation and started immediately to revise all their opinions about 2012 being a tough economic year for the US. They’re fickle. I maintain they are premature in their euphoric reversals of their own flimsy predictions — predictions so flimsy even those who made them do not have faith in them. In spite of the turnaround in economic news reporting last week [for the positive], and inspite of how economists all over the world are reversing their former outlooks, I stayed the course. (Those economists have been wrong at every major turn of this crisis so far anyway and missed predicting the entire Great Recession.)

I don’t change my predictions to go with the wind. An economic depression has many ups and downs along its rough bottom. I base my own predictions on economic fundamentals, not on the indicators of the moment. Remember: “Focus on the Fundamentals.”

I see that the fundamentals have deteriorated, not gotten better. Nations are far deeper in debt with little improvement to show for the vast debt they’ve added to the balance sheets. Many nations are fully back in recession, which effects all other nations that market to them. Conflict within nations and between nations is growing. Iran’s position is based on prophetic religious beliefs, so we are almost destined for conflict with them, as their leaders believe they will bring on the prophesied end of the world (actually, the end of the present age) if they fight a defensive jihad and, particularly, if they destroy Israel. They are “hell-bent” on destroying Israel.

So, I’m not blown and tossed on every wave as economic indicators rise and fall. I look for how the deep terrain at the bottom has changed or not changed.

We are now at the beginning of a period I described:

The early economic spring of 2012 is going to grind into the dog days of summer for the U.S…. Expect a long, dry and dusty summer economically.

and …

The heat of summer will look like the heat of hell for Europe. Money will flee Europe over the course of this year, including European money. (“More 2012 Economic Predictions

While that is a prediction for the immediate months ahead, things have certainly stacked up perfectly for that scenario to now unfold. For the past several months, money has been fleeing Europe, as it turned to the U.S. as a safer haven, so that much has already come true. I have full confidence that the rest will, too.

The follow-on to that prediction was that

Spain will consume the last of Europe’s ability to save the euro…. Spain will land hard, and the euro zone will reach the end of its euro-rope

It’s too early yet to know if that is true also, but, again, all evidence is leaning harder that way.

And that brings me to the last of my economic predictions for the final part of 2012, which is really a prediction for 2013:

2012 has the markings of an economic apocalypse that will create a new world for us to live in by 2013. With so many massive cracks in the landscape, my last prediction in this post is a little shy of an economic apocalypse in 2012: Some combination of the above predictions will give way in a landslide by year end to make the beginning of 2013 look a lot worse than the beginning of 2012….  This is the year when all hope for reviving the old economy begins to crack and fall away. The next president of the United States, be he the same one we already have or another, walks onto a stage much different than we’ve seen in a very long time. (from “More 2012 Economic Predictions“)

(If you liked this article, please use the email button to pass it along to as many friends as you think might be interested. If you want to see other articles as they’re posted, please click the RSS feed link in the left sidebar to subscribe. Finally, I’d love to read your comments below.)

An earlier article that offers additional insights into how my economic predictions were stacking up can be read in the Economic News Articles in the Great Recession — Archive for the week of 04/01/2012. You can also read how I stuck to my economic predictions even when all things seemed to be pointing against them in this article: “Are My Economic Prediction for the Great Recession in Recess?

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