As readers of this blog know, I have long regarded the return of economic crisis as an inevitability (because the core energy and no-growth predicament facing the Western world wasn’t solved in 2008-9 but merely kicked further down the road by increasing debt and printing money). It looks like 2012 will be the crunch year, as a series of inter-related crises are rapidly converging: (1) The European sovereign debt crisis; (2) The continuation of the chronic US inability to balance its books, and of instability in the Middle East; (3) The probable onset of serious declines in global oil production, as new oil megaprojects are no longer able to compensate for accelerating decline from existing fields; (4) heightened risks of a war with Iran, as the narrow window opens between the start of US delivery of the next-generation bunker buster MOP (from November 2011) and the culmination of the Iranian nuclear weapons program and its hardening against air strikes (next year or two).
The European debt crisis dominates headlines, with the Anglo-Saxon media crowing about the lazy, shiftless Meds (as opposed to the diligent and careful Germans) and blaming socialism for their problems. This of course has a number of flaws within it. Greeks work the most hours in the EU – 2000 per year, relative to 1300 in Germany. And the only major EU nations without huge debt and fiscal problems are the Scandinavians, who are about as “socialist” as one gets nowadays.
But this is all sidestepping the fact that debt and fiscal crisis afflict the entire Western world, and it is just that – due to the special political weaknesses of the Eurozone – have manifested first and foremost in Greece, Italy, and Spain. However, a look at the actual statistics reveals that even the “serious” countries are in a great deal of trouble. For instance, in 2010 both the US and Britain had bigger primary deficits (cyclically adjusted) than “basketcase” Greece, whereas Italy’s was actually positive! The Meds’ total net government debt is larger, but on the other hand, if even France is beginning to experience perturbations – a country whose fiscal balances are better in every way than Britain’s or America’s – then it surely cannot be long before the crows come home to roost in the Anglo-Saxon world.