The Year of Rational Pessimism
The year 2012 could prove to be historically significant – the year in which the eurozone, the culmination of 50 years of European integration, falls apart, and the rating agencies’ downgrade of US sovereign debt turns out to have been justified. If investors suffered from irrational exuberance in the 1990’s, rational pessimism is likely to prevail in the coming year.
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NEW YORK – Someone recently quipped that the best thing about 2011 was that it was likely better than 2012. By the same token, while there has been much concern about America’s political gridlock, something worse for America, and for the world, could have happened: the Republicans could have prevailed in their program of austerity-cum-redistribution to the wealthy. Automatic cuts won’t happen until 2013, which means that the economy in 2012 will be spared, ever so slightly.