Two years ago, Shinzo Abes election as Japans prime minister led to the advent of Abenomics, a three-part plan to rescue the economy from a treadmill of stagnation and deflation. It now appears that the European Central Bank has a similar plan in store for the eurozone.

The escalating conflict in Ukraine between the Western-backed government and Russian-backed separatists has focused attention on the Kremlins long-term objectives. Though Russian President Vladimir Putins immediate goal may have been limited to retaining some influence in Ukrainian affairs, his longer-term ambition is much bolder.

Like individuals and private firms that rely on bankruptcy procedures to reduce an excessive debt burden, countries sometimes need orderly debt restructuring or reduction. But the ongoing legal saga of Argentinas fight with holdout creditors shows that the international system for orderly sovereign-debt restructuring may be broken.

In the aftermath of the 2008 global financial crisis, policymakers success in preventing the Great Recession from turning into Great Depression II held in check demands for protectionist measures. But now the backlash against globalization has arrived, and we know from bitter experience what could come next.

The most pressing geopolitical issue of our time is not the prospect of conflict between Israel and Iran over nuclear proliferation or rising tensions between Russia and the West over Ukraine. It is the challenge of managing China's rise and ensuring that peace and prosperity prevail in Asia.

The world?s economic, financial, and geopolitical risks are shifting. But, as in the run-up to the global financial crisis in 2008, investors seem unable to estimate, price, and hedge tail risks properly.

Industrialization, urbanization, and the rise of a middle-class consumer society were supposed to boost emerging-market countries' long-term economic and sociopolitical stability. But in many countries recently wracked by political unrest, it is the urban middle classes that have been manning the barricades.

The financial turmoil that hit emerging-market economies in the spring of last year, following the Federal Reserves "taper tantrum" over its quantitative-easing policy, has returned with a vengeance. But the immediate trigger for these pressures should not be confused with deeper causes: Many emerging markets are in real trouble.

The global economy will grow faster in 2014 than it did in 2013, while tail risks will be lower. But, with the possible exception of the US, growth will remain anemic in advanced economies, and emerging-market fragility - including Chinas uncertain efforts at economic rebalancing - could become a drag on global growth.

What we are witnessing in many countries looks like a slow-motion replay of the last housing-market train wreck. And, like last time, the bigger the bubbles become, the nastier the collision with reality will be.

As below-trend GDP growth and high unemployment continue to afflict most advanced economies, their central banks have served up an alphabet soup of unconventional monetary policy measures. But, with asset prices continuing to rise, many countries may have more helpings than they can stand.

A little more than a year ago, in the summer of 2012, the eurozone, faced with growing fears of a Greek exit and unsustainably high borrowing costs for Italy and Spain, appeared to be on the brink of collapse. Today, that risk has diminished significantly but the factors that fueled it remain largely unaddressed.

During the height of the Iraq war, then-US Secretary of Defense Donald Rumsfeld spoke of known unknowns foreseeable risks whose realization is uncertain. Today, the global economy is facing many known unknowns, most of which stem from policy uncertainty.

Some of the better-managed emerging-market economies will continue to experience rapid growth and asset outperformance in the coming decade. But many BRICS countries and a few other emerging markets may hit a thick wall, with growth and financial markets taking a serious beating.

The prices of a wide range of risky assets have been rising, despite sluggish GDP growth worldwide. This discrepancy portends a new period of asset-price volatility one that could mark the beginning of a broader de-risking cycle for financial markets.

The run-up in gold prices in recent years from $800 per ounce in early 2009 to above $1,900 in the fall of 2011 had all the features of a bubble. And now, like all asset-price surges that are divorced from the fundamentals of supply and demand, the gold bubble is deflating.

It may be too soon to say that many risky assets have reached bubble levels, and that leverage and risk-taking in financial markets is becoming excessive. But the reality is that credit and asset/equity bubbles are likely to form in the next two years, owing to loose US monetary policy.

In a fragile global environment, has America become a beacon of hope? While the US is experiencing several positive economic trends, Europe continues to stagnate, and China will be vulnerable to a hard landing in 2014 unless its new leaders accelerate the pace of reform.

Most observers regard unconventional monetary policies such as quantitative easing as necessary to jump-start growth in today's anemic economies. But questions about the effectiveness and risks of such policies have begun to multiply as well.

The global economy this year will exhibit some similarities with conditions prevailing in 2012 no surprise there. But there will be some important differences, as fiscal austerity spreads to more advanced economies, the risk of a hard landing in China rises, and the threat of war in the Middle East grows.

The tail risks of a Greek exit from the eurozone or a massive loss of market access in Italy and Spain have been reduced for 2013. But the fundamental crisis of the eurozone has not been resolved, and another year of muddling through could revive these risks in a more virulent form in 2014 and beyond.

As consumers, firms, and investors become more cautious and risk-averse, the equity-market rally of the second half of 2012 has crested. And, given the seriousness of the downside risks to growth, the correction could be a bellwether of worse to come for the global economy and financial markets in 2013.

The US Federal Reserves third round of quantitative easing, or QE3, has many observers arguing that the effects on risky assets could be greater than in previous rounds. But, despite the Feds commitment to aggressive monetary easing, QE3's effects on the real economy and on US equities could well be smaller and more fleeting.

Worldwide, political leaders are putting off the economic reforms needed to avoid a painful, if not catastrophic, endgame. But, as everyone kicks the can down the road, the can is getting heavier and, in the major emerging markets and advanced economies alike, is quickly approaching a brick wall.

Germany and the ECB are now relying on the hope that large-scale liquidity will buy time to allow the adjustments needed to restore growth and debt sustainability in the eurozone periphery. But, if a eurozone breakup can only be postponed, delaying the inevitable would merely make the endgame worse much worse.

Whether the eurozone is viable or not remains an open question. But what if a breakup can only be postponed, not avoided? If so, delaying the inevitable would merely make the endgame worse much worse.

For the last three years, the consensus has been that the US economy was on the verge of a robust and self-sustaining recovery that would restore above-potential growth. That turned out to be wrong, as a painful process of balance-sheet deleveraging implies that the recovery will remain, at best, below-trend for many years to come.

Dark, lowering financial and economic clouds are, it seems, rolling in from every direction: the eurozone, the United States, China, and elsewhere. Indeed, the global economy in 2013 could be a very difficult environment in which to find shelter. For starters, the eurozone crisis is worsening, as the euro remains too strong, front-loaded fiscal austerity deepens recession in many member countries, and a credit crunch in the periphery and high oil prices undermine prospects of recovery.

The Greek euro tragedy is reaching its final act: it is clear that either this year or next, Greece is highly likely to default on its debt and exit the eurozone.Like a doomed marriage, it is better to have rules for the inevitable breakup that make separation less costly to both sides.

The honeymoon for the ECB's new president Mario Draghi has turned out to be brief. The trouble is that the eurozone has an austerity strategy, but no growth strategy and, without that, all it really has is a recession strategy that makes austerity self-defeating, because, if output continues to contract, deficit and debt ratios will continue to rise to unsustainable levels.

Todays fragile global economy faces many risks: the risk of another flare-up of the eurozone crisis; the risk of a worse-than-expected slowdown in China; and the risk that the US economy's recovery fizzles (again). But no risk is more serious than that posed by a further spike in oil prices.

Since late last year, a series of positive developments has boosted investor confidence and led to a sharp rally in risky assets, starting with global equities and commodities. But at least four downside risks are likely to materialize this year, undermining global growth and negatively affecting investor confidence and market valuations of risky assets.

Macroeconomic indicators for the US have been better than expected for the last few months. But, despite the favorable data, US economic growth will remain weak and below trend throughout 2012.

The outlook for the global economy in 2012 is clear, but it isnt pretty: recession in Europe, anemic growth at best in the US, and a sharp slowdown in China and in most emerging-market economies. Restoring robust growth is difficult enough without the ever-present specter of deleveraging and a severe shortage of policy ammunition.

The eurozone crisis seems to be reaching its climax, with Greece on the verge of default and an inglorious exit from the monetary union, and now Italy on the verge of losing market access. But the eurozone's problems are much deeper. They are structural, and they severely affect at least four other economies: Ireland, Portugal, Cyprus, and Spain. With Italy too big to fail, too big to save, the endgame for the eurozone has begun. Sequential, coercive restructurings of debt will come first, and then exits from the monetary union that will eventually lead to disintegration.

This year has witnessed a global wave of social and political turmoil and instability, with masses of people pouring into the real and virtual streets. While these have no unified theme, they express in different ways the serious concerns of the worlds working and middle classes about their prospects in the face of the growing concentration of power among economic, financial, and political elites. Any economic model that does not properly address inequality will eventually face a crisis of legitimacy.

The latest economic data suggests that recession is returning to most advanced economies, with financial markets now reaching levels of stress unseen since the collapse of Lehman Brothers. The risks of an economic and financial crisis even worse than the previous one-now involving not just the private sector, but also near-insolvent sovereigns-are significant. So, what can be done to minimize the fallout of another economic contraction and prevent a depression and financial meltdown? The best way to avoid the risk of repeating such a sequence is bold and aggressive global policy action now.

The massive volatility and sharp equity-price correction now hitting global financial markets signal that most advanced economies are on the brink of a double-dip recession. A financial and economic crisis caused by too much private-sector debt and leverage led to a massive re-leveraging of the public sector in order to prevent Great Depression 2.0. But the subsequent recovery has been anemic and sub-par in most advanced economies given painful deleveraging.

The eurozone crisis is reaching its climax. Greece is insolvent. Portugal and Ireland have recently seen their bonds downgraded to junk status. Spain could still lose market access as political uncertainty adds to its fiscal and financial woes. Financial pressure on Italy is now mounting. By 2012, Greek public debt will be above 160% of GDP and rising. Alternatives to a debt restructuring are fast disappearing. A full-blown official bailout of Greece?s public sector would be the mother of all moral-hazard plays: extremely expensive and politically near-impossible.

Mario Draghi appears well-placed to succeed Jean-Claude Trichet as the president of the ECB in October, leading to speculation about who will replace him as governor of the Bank of Italy. Four names are floating around: Lorenzo Bini Smaghi, Vittorio Grilli, Fabrizio Saccomanni and Ignazio Visco, the deputy director general of the Bank of Italy. Eurozone horse trading could support Bini Smaghi, but domestic politics could help Grilli, and frequently new governors have been sourced from within the Bank of Italy.

S&P?s decision to cut its outlook for U.S. government debt from stable to negative?a historic first?sent markets tumbling: On April 18, the Dow Jones Industrial Average and the S&P 500 both recorded their biggest one-day drops in nearly a month (though U.S. Treasurys and the dollar did well). The landmark outlook downgrade reinforces what we have been saying since 2010: The United States is on an unsustainable fiscal path from which it cannot exit without political consensus. The key question is whether the gridlocked U.S. political system can respond in time to avert a bond market revolt.

Malaysia?s policy makers have been forced to confront the factors blocking the country?s rise to high-income status. Facing higher labor costs, the economy has been unable to maintain a growth model based on low-value-added manufacturing that was largely successful for the 30 years prior to the 1997 Asian financial crisis.

In our 2011 Outlook, we revised up our growth forecasts for Latin America, in anticipation of resilient domestic demand, improved external conditions and elevated commodity prices. We now envision annual growth rates of 4.7% in 2011 (compared to the forecast of 4.1% we set in September) and 6.1% in 2010 from 5.7% previously. If we are correct, 2010 will mark Latin America?s strongest economic performance of the last decade and its fastest growth since 1980.

Though Chinese policy makers will spend most of 2011 cleaning up after the effects of their fiscal stimulus measures and loose monetary policies, all the while they will be laying the foundation for financial reforms that will lead to increased use of price controls in lending decisions, further internationalization of the RMB and eventually the opening of the capital account.

In Egypt, although the National Democratic Party (NDP) has a solid grip on power, the election cycle is adding to policy uncertainty that could worsen prospects for the foreign investment needed to kick-start domestic investment and diversify growth away from consumption. As RGE notes in its 2011 Global Economic Outlook, policy implementation delays in Egypt could add market volatility and restrain inward FDI as investors monitor the country?s political risk.

Claiming insight into what Pyongyang will do next is self-delusion. Judging from recent revelations by WikiLeaks, this frustration and confusion goes right up to the highest levels in China and the U.S., leaving their respective intelligence agencies to make educated guesses. The current heightened tensions between North and South Korea are unlikely to erupt into an all-out military confrontation, given the inherent human and economic costs as well as the shared interest of China and South Korea in avoiding a collapse of the North?s dictatorial regime.

November data clearly calls for caution. The stall in the improvement in wages and the average workweek is especially concerning. Sustainable growth in aggregate consumption will be driven by wage growth, which needs to improve from its severely depressed levels. Most importantly, it is quite clear that future employment gains will be well below the levels required to make a meaningful dent in the unemployment rate, which will continue to be just shy of double-digit territory for some time.

Spain shares some of Ireland's key vulnerabilities, including a housing bubble more pronounced than that in the United States and large nonperforming loan overhang in the banking sector. Though Spain's housing bubble is less severe than Ireland's, and though the Spanish banks' commendable loan-loss provisioning system is providing a buffer, a comparison of price-to-rent ratios shows that the bulk of the housing price correction and loss recognition has not yet come. Thus, the pressure on the banking system is bound to increase going forward.

RGE considers the extent of public and bank debt held by non-residents, as well as the external balance sheet of other sectors of the Irish economy, as these factors will influence negotiations and the ultimate burden sharing between domestic and foreign creditors.

The Central Economic Work Conference in early December should signal an end to the 'moderately loose' monetary policy that has allowed the long cycle to dominate the short since late 2008. There will likely be little commentary about renminbi (RMB) flexibility at the conference; nevertheless, we expect that technocratic control of China's monetary policy should marginally increase the rate of RMB appreciation against the USD.