When economies fall apart, it isn’t just the guilty that get punished. Exports make up forty percent of Germany’s GDP, so they can ill-afford to go back to a strong deutsche mark. The talk of a Eurozone break up is overdone as the ECB will step in as lender of last resort and buy European debt. In keeping with ‘never let a good crisis go to waste’, Mrs. Merkel’s intransigent stance is to extract the best deal for Germany in a dangerous game of who blinks first. The bottom is not going to fall off the markets in 2012 and US equities are preferred over European equities. Swap lines from central banks will keep the credit crisis in check but high sovereign indebtedness means books have to be balanced; a recession in Europe will follow and our best hope is for it to be a shallow one. As more money is printed, Gold still looks good. China’s desire to shift to domestic demand-led growth will be a key decision impacting global markets. It will cut rates and it will cut reserve ratios too and this should engineer a soft landing in China.