Voters are pressuring Western governments and central banks to find magic bullets to restore financial markets and economic growth to the robust 1980s and 1990s levels.  My recent book, The Age of Deleveraging: Investment strategies for a decade of slow growth and deflation, says none exist. The deleveraging of financial institutions globally and US consumers along with seven other retardants should hold real GDP growth to 2% annually compared to 3.7% in the 1982-1990 salad days.

The sluggish current economic recovery reflects this subdued long-term outlook, with downside risks in coming quarters. Persistent US high unemployment and falling real incomes point to renewed consumer spending weakness. Budget deficits and underfunded pensions are depressing state and local government spending and employment. Housing is poised for another 20% price drop due to excess inventories.  Federal deficits limit new stimuli. Business uncertainty curtails capital spending.

US exports are limited by sliding foreign demand, especially in recession-bound Europe, with its unresolvable and contagious financial crisis. China's attempts to cool her high inflation and property bubble will probably result in a commodity-boom-killing hard landing.

With global slow growth, only minor setbacks will turn it negative, and a worldwide recession in 2012 is likely. Accordingly, portfolios we manage focused on owning long Treasury bonds and the dollar, especially against the euro. Conversely, we're short commodities and stocks.