Economic Slowdown Will Get Worse

However, rising labor costs and increasing revelations of corruption and intrigue, up to the highest levels of China's leadership, are causing investors to cast a more jaundiced eye on the Middle Kingdom as a place to invest for serving markets in North America and Europe.

A crisis of confidence in China could disrupt both the Chinese and U.S. economies, and such an event has a much higher probability than zero.

2. Dodd-Frank regulations are severely handicapping small and moderate sized banks. Writing conventional mortgages has become an increasingly challenging activity, and securitizing commercial loans quite difficult. Despite the fact that these bank woes pose significant barriers to recovery in the housing sector and jobs creation among small and medium-sized businesses, Washington appears disinterested and smaller banks are selling out to their larger brethren.

Wall Street banks now control more than 60% of deposits nationally. The absence of competition in many markets has driven down CD rates. Seniors are losing a lot of purchasing power as interest on their retirement savings shrink. Wall Street banks are less interested in making loans to Main Street businesses than were the regional banks they absorbed.

3. The European Union is in recession and remains in deep trouble -- fixes for Greece, Portugal and Ireland are inadequate and eventually will need to be reworked. Spain is teetering on crisis -- a failure of its government to meet budget targets or a further spike in unemployment, already about 23%, could set off a contagion beginning with Italy.

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European banks are highly stressed. Those have not used the grace afforded by easy credit from the European Central Banks to properly add to capital and rework loan portfolios. Rather, they have often adopted gimmicks to paint up bad loans or move those into offshore vehicles -- all reminiscent of tactics employed by U.S. major backs when mortgage backed securities became problematic before the financial crisis.

4. U.S. higher education loans -- now more than $1 trillion -- are a ticking bomb. Undergraduates are borrowing too much against future incomes, and many graduate students are borrowing to obtain degrees that will not markedly improve their circumstances.

Most education loans are not dischargeable through bankruptcy and big debt coupled with disappointing pay will become an increasing drag on consumer spending.