The U.S. didn’t come anywhere near defaulting said David Gordon, head of research at Eurasia Group and keynote speaker at the 2011 Risk Management Conference. However, the country faces some big risks according to Gordon there are five major trends that will shape the U.S. in 2012.
One: “What you see isn’t what you get anymore,” said Gordon talking about the media frenzy surrounding negotiations for a debt deal in the U.S. With the media’s predilection for creating headline-worthy crises, it will get harder to get a clear view of the political process as it unfolds.
Two: The debt limit package is “smoke and mirrors” Gordon said, noting that it will have virtually no impact on spending which will continue to rise. The U.S. is not headed towards European-style austerity.
Three: Until the next election, the country will remain at a powerful political impasse. In fact, the Fed will be the only player with room to move.
Four: There won’t be a double-drip recession said Gordon however, the US will continue to deal with a “Reinhart and Rogoff” reality where recovery from a financial recession will take a long time.
Five: The 2012 election will be fought over two opposing fiscal visions. Obama is down but not out, however both parties have an equal shot at winning.