Saturday, December 31, 2011

Somebody is huffing too much happy gas

Bloomberg has a look at the year ahead that is quite optimistic. In fact, if you believe in a reality based world you can say it is a fairy tale. For some strange reason they believe that US efforts at austerity combined with the effects of European austerity will not influence the US economy.
Rising confidence, fewer firings and gains in holiday sales show the U.S. economy is picking up, defying a slowdown in Europe and much of the rest of the world.

The divergence will become even starker in 2012 as the world’s largest economy accelerates, the 17-member euro area sinks into a recession and growth in emerging markets cools, according to economists like Maury Harris of UBS Securities LLC and Barclays Capital Inc.’s Dean Maki.

“There is a sense of decoupling,” said Harris, chief economist at UBS Securities in New York, whose team was the most accurate in forecasting the U.S. economy in the two years through September. “We can still have a decent year here in the U.S. even with the rest of the world slowing down.”

An improving job market and freer credit may underpin American household sentiment and spending just as the debt crisis in Europe prompts additional belt-tightening overseas. Stabilization in housing will erase a source of weakness at the same time vehicle replacement demand benefits companies like General Motors Co. (GM)
What we may see is that bright flame up before the economy follows the rest of the world. We no longer have sufficient economic base to support the dreams of autarky inherent in the imagined decoupling.

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