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Macro trends - elongated recession or reform based growth?


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There is no question that north america will see some inflation in 2011 because of the increasing cost of commodities, food and clothing. The Obama social security tax cut will also add stimulus so the chances of a recession in 2011 or early 2012 is unlikely.


However, the picture gets interesting in 2012. The stimulus funds given to states are going to expire in 2012 as is the social security tax cut. This means the states will have to adjust their budgets. The government workers have been the protected class in the great recession. As we are seeing in Wisconsin, it is likely that they will be asked to bear more of the costs reducing the deficit between private and public sector.


However, reform in the public sector is badly needed. If the reformists are successful, it is likely to make US productive again as opposed to being a moribund aging economy as is the case with Japan.




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