With the warm glow of the holidays quickly receding into memory, it’s time to remember that there’s a big scary world out there waiting for us in 2012. While we’re not going to witness the Mayan apocalypse touted by nut jobs and supposedly educational cable television shows, there’s enough potential for disaster in this upcoming year to make anyone reach for a stiff drink or a tub of Ben and Jerry’s.
In no particular order here are four things to worry about in 2012
1) The Euro
The Bottom Line: 2011 was a rough year for the Euro, but 2012 is likely to be even tougher. Obviously a sick European economy doesn’t bode well for the world economy.
There was a lot of news about the Euro in 2011, but it’s more than likely that we haven’t reached the peak of this crisis yet. In 2011 we saw Greece take center stage as the European Union failed to contain fears that Greece was just the first domino to fall in a multi-country debt crisis. Indeed, by the end of the year, fears had moved on from tiny Greece onto much larger Spain and Italy, which both saw governments toppled as austerity took a bite. In 2012, things look even worse. People fear that Italy and Spain might not have what it takes to finance their debts, and are looking increasingly suspiciously at French debt. At the same time, European banks which hold a lot of this debt, are also increasingly worried about their own ability to stay solvent. The bottom line is this: we could finish 2012 with a drastically different Euro and and Europe in something akin to a depression. A depression for Europe is certainly trouble for the rest of the world. While this scenario sounds alarmist, it’s been increasingly brought up by notable economists like Simon Johnson of MIT and Tyler Cowen, who runs Marginal Revolution, among others.
2) North Korea
The Bottom Line: With an unsteady young leader in charge of the world’s scariest nuclear arsenal, we may be in for some turbulence on the Korean peninsula.
North Korea perenially makes lists of things to worry about, and with good reason. The secretive totalitarian nation is not only run by a family of wierdos who have managed to brainwash their starving populace, but also has a huge conventional army and nuclear weapons just a few hundred miles away from some of Asia’s most important population and economic centers. 2012, though, is different.
With the death of Kim Jong-Il in December after nearly twenty years of iron fisted rule, the world looked on as his rotund and politically inexperienced son, Kim Jong-Un, ascended to power at the tender age of 27(ish) in a series of televised events. While many hope that this will open up an opportunity for reform in the country, others fear that it will set off a bout of political instability and the collapse of the country. In the event of total collapse, it is feared that the United States could inadvertently be drawn into military conflict with China as the former rushes in to secure nuclear weapons and the latter rushes in to stop a torrent of refugees. Sure, everything looks calm now in North Korea, but no one really knows what is going on under the veil of secrecy that shrouds the country.
The Bottom Line: With the strictest sanctions ever imposed on Iran squeezing the country’s oil industry futher, it’s not surprising that people worry about a looming confrontation with the West. While outright military confrontation is unlikely, even the threat of a major disruption in the oil supply could send oil prices soaring, sending the world economy and its nascent recovery back into recession.
It looks like it’s going to be another hot year in Iran. With 2012 barely a week old, we’re already seeing a crisis brewing. The United States and Europe have recently decided on some of the toughest sanctions yet on Iran, targeting, in particular, their oil industry, a major source of national income. In addition the West is increasingly putting pressure on Asian importers of oil like Japan and Korea to reduce their reliance on Iranian oil. In short, Iran has a lot to lose from these sanctions, and they’re obviously not too happy about them. In fact, they’ve threatened to block the Strait of Hormuz, a vital artery for the export of Middle Eastern oil. While most experts don’t think that Iran would actually go through with their threat and risk a potential military confrontation with the West, world governments are already hatching plans to release emergency oil reserves just in case the flow of oil is disrupted in the coming months. Even without a major confrontation, the simple threat of instability in the Middle East could send oil prices soaring, resulting in fledgling economic recoveries all across the globe coming to a screeching halt.
4) Creeping Authoritarianism in Europe
The Bottom Line: The European periphery is increasingly turning towards more extreme goverments. Hungary in particular could be a flash point in the coming year as the ruling Fidesz party increasingly erodes democratic principles.
Thought that we left European authoritarianism behind in the 20th century? With persistent economic malaise in Europe, some countries on the European periphery are increasingly turning towards far right governments for help. While far right governments have been making gains throughout central and eastern Europe, perhaps the country most in danger right now is Hungary. With Victor Orban and his Fidesz party in power in parliament, it looks like democracy and the rule of law are in retreat. A constitution that went into effect at the start of this year has dismayed Hungarians and foreign observers alike. New laws rammed through parliament in the last months include changes which gut the judiciary and compromise the independence of the central bank. In addition, there have been an increasing number of restrictions on media and Roma rights. The EU and the IMF are already putting pressure on Hungary to rescind some of these changes, but no one knows how far democracy and the rule of law will backslide. As this economic malaise continues, it’s frightening to think that more countries may turn to extreme governments in Europe. While this threat to democracy is on the back burner, authoritarianism has a way of creeping into place and revealing it’s true intentions only when it’s too late.
Of course, these are just four of the many challenges likely to face the world this year. Who knows what surprises will pop up in 2012 that no one can foresee? Whatever happens though, we know one thing: 2012 is not the end of the world.