Happy New Year everyone and yes, I am optimistic about 2012.
Why you may well ask?
Well, there are many reasons to be pessimistic but with that kind of outlook it is very difficult to move forward. So after joining the pessimistic crowd for a couple of years, I looked for the reasons to be optimistic. There are some good reasons, believe it or not.
Let us start with the Olympics coming to Britain in the summer. Yes it has cost a lot of money, but most of that has been spent, so now we can enjoy the benefits, and there are many. In the first place there is the volume of visitors which will be coming to the London Olympics, who will all spend their valuable dollars, yens, euros and whatever other currency they come with.
I have no doubt the Olympics will be a great success. No nation is as good at organising events like this as Britain is. Look at Wimbledon, Ascot, Henley and other world leading events which only get bigger and better every year. The Olympics will be memorable and spectacular.
An interesting side effect of the Olympics taking place is that a lot of infrastructure work will be completed. The mess on the M25 will be completed, not to mention the mess on the east side of London. Railway projects will be completed as well as underground projects and all of these will serve us all well afterwards. If you, like me, have no intention of going to any of the events, at least you will be able to get around better, after the Olympics, to do business.
Inflation should come down. In each of the last two years we essentially suffered a 2.5% increase in VAT at the start of the year. Now I do not know what the exact impact is of VAT on inflation as not all goods and services incur the full wrath of this tax, but there is no doubt that there is a serious impact. So inflation should drop by up to 2.5%, which will make everyone feel better and allow me to retain at least some of the value of my supermarket pounds.
The noise about the Euro will die down as people lose interest. The Euro has its challenges as does the pound and the dollar, not to mention the yen. The real cause of the problems I believe are caused by speculators who by now almost need to see it fail. As a whole the Euro is not in that bad a position – the problem lies mainly with the lack of ability to control things from the center (or is this in fact a blessing in some form?). The recent Italian bond issue may not have been the complete world class success one might have hoped but it certainly was a lot more positive. 2012 will see the Euro-noise go as we each focus again on our own problems.
Human nature. In every economic cycle we have seen how people start to fight back. We have all had enough of the damage done by our banking community, but let’s face it, that damage was done a few years ago now. It is time to get over it and move on (though I still think the banking sector has not done enough to pay back both the damage it caused and the bailout it received from you and me). We are seeing increasing numbers of businesses starting up and fighting to make a go of it despite the best efforts of banks not to make this easier.
There are going to be some interesting elections about. The French will get to reconsider Sarkozy and the Americans can decide whether Obama is what they want. First of course the Republicans will have to decide whether they can in fact choose a candidate – good luck with that lot! The Greeks have a new government and the Italians are still talking about the matter. Dave and Nick love each other despite the frustrations about this in both the conservative and lib dem camps so the speculation will continue about whether the coalition will survive – I think it will. Whatever the case may be, there is enough political room to blame previous governments, and to give hope for the future to make 2012 a good year.
2012 is going to be a good year but we will have to work at it. I am game – I hope you are.