Last year in January, I made a list of what I thought the top financial stories would be in 2011. Recently I reviewed that list and was happy to see that I had accurately summed up 2011 at the start of the year. So I decided to give it another try for 2012. Here’s my list of what I think will be the most important economic topics of the year.

1. Unless employment improves in the US, we can expect more street protests, once the weather improves.

In September 2011, Occupy Wall Street spread across the country in a matter of days, and was only suppressed by a combination of cold weather and coordinated police tactics in dozens of cities across the country. Who knows what form the next series of protests will take. Certainly, the grievances and hardships suffered by the 99% are not going away any time soon, even if the US shows a slightly higher growth rate this year, as many economists have predicted. Of course, that growth will mostly benefit the 1%, as growing income inequality has proved.

2. The lack of funding for state and local governments will lead to serious shortfalls in basic services.

Recently, in a New York Time article in which six economists were asked what should be done to help the US recover from the economic downturn, Christina Romer, a former Obama administration economic advisor and a noted scholar on the Great Depression (of the 1930’s—it’s now necessary to specify which one) said that the federal government should give stimulus money to state and local governments. She’s not far wrong. Many states have already been hammered with lawsuits by parents and teachers over inadequate education funding (including a recent court decision in my own state of Washington). Failing roads and transportation infrastructure, overstressed health services, and overwhelmed food banks and homeless shelters are becoming commonplace problems. Even cops and firefighters—usually the last public services on the chopping block—are feeling the pinch.

If tax revenues continue to fall—and they almost certainly will, with the double pressure of lower growth plus a political culture of tax cuts—then we can expect more state and local budget deficits, more cuts, and more shortfalls in services that we all take for granted in a civilized society.

3. Interest rate will stay low, but prices for basic goods will continue to rise, creating a disconnect between the official inflation rate and real prices.

Like so many statistics designed to measure economic health in the US, the official inflation rate is a political construct as much as a economic tool. It doesn’t include “volatile” items that can fluctuate severely: food prices, oil prices, and housing. Unfortunately, these items are what lower income and poor people (about 48% of Americans) spend the most money on.

In 2011, the prices of all three of those items rose, for several reasons. First is the scarcity problem: global warming and associated extreme weather events are effecting food production, while oil is becoming more expensive to extract and is of lower quality, requiring higher costs to refine it. Secondly, there’s higher demand: the human population is continuing to grow, and developing countries are demanding more food and fuel. And, finally, there’s speculation: global, electronic commodities markets are largely unregulated (in spite of the Dodd-Frank Act and new bank regulations in Europe), so they remain a Wild West where hedge fund managers and wealthy investors can drive up the price of commodities in search of their next big return. Commodities has been the hot investing trend for the last three years; just ask Warren Buffett.

Now, I can hear a lot of people saying, “But housing is different, right?” Well, no. House prices have continued to fall, yes, but rental rates have increased, especially in areas where the housing market was hit the hardest. As more people have lost their homes, the supply of renters have grown and so has the demand for rental units. Rents will continue to rise, but economists will continue to measure the health of the economy only by the drop in housing prices.

In the meantime, the US Federal Reserve has assured us that interest rates will remain near zero until at least the middle of 2013, and economists are pushing them to make that promise until the end of 2014. This disconnect between nominal interest rates that banks pay to borrow money (which suppresses the amount of interest savers can earn on their savings accounts, certificates of deposit, and money market funds) and the prices people pay for basic necessities, is a structural problem. It’s one of the measures that reveals how truly dysfunctional the economy is, how bad the downturn really was, and how poorly the current system serves the majority of US consumers.

4. Expect the US Congress not to do much of anything to address real economic problems.

There’s a lot that Congress can do to make things worse: lower taxes, cut the budgets of financial regulatory agencies, cut loose Fannie Mae and Freddie Mac from their federal guarantees, hack the federal budget down to the bone, cut grants to state and local governments…the list goes on and on. And, sadly, all of these things have already been proposed by Republicans, and a few Conservative Democrats, in Congress.

There’s no shortage of things that Congress could do to make things better. Congress could let the Bush tax cuts for the wealthy expire. They could turn that additional revenue around and use half to pay down the deficit and half to stimulate the economy. Congress could give bankruptcy courts the ability to renegotiate home mortgages so more Americans could get out from under their housing debt. Congress could mandate that banks be required to renegotiate mortgages for homeowners who are underwater, and lay down some rules for how and when this must be done. Congress could take healthcare reform seriously and expand it instead of trying to the undermine the bill that passed a couple of years ago.

But don’t expect any of that to happen in 2012. It didn’t in 2011, and Congress has not changed since then. And 2012 is an election year, which means divisiveness will be the defining characteristic of our political culture until at least November, if not beyond.

5. Expect the European debt crisis to get worse.

In 2012, European governments will have to refinance hundreds of billions of dollars worth of sovereign debt, most of that in the first four months of the year. US pundits have been advising investors to stay away from European sovereign debt, so the crisis will probably come to a head in the next four months. This will dominate the news cycles in the first half of the year. And how the major European nations respond will determine the political course of the European Union for the next decade or more. It’s very exciting and very, very scary.

6. Expect fraud and risky practices to continue in the US housing and financial markets.

As I noted above, Congress is doing its best to limit re-regulation of the financial markets—the very thing that could save us from another economic collapse similar to 2008. This year, investigative journalists will peel away more layers of financial shenanigans, but Americans will have to search long and hard to find these stories. Being a news detective has its rewards: these stories do sometimes appear, and when they do, they reveal the fundamental workings of the US markets. They also often foretell where and how the next crisis will happen, although not when—that part is entirely unpredictable.

7. Solutions will have to be local.

I want to end this list on a hopeful note. I have a strong belief in human ingenuity and resourcefulness. And so I think that 2012 will be the year when average Americans start investigating alternatives to corporate America and finding different ways to stimulate their local communities. In 2011 we saw an exodus of Americans turning away from large, national banks to their local credit unions. This may be the year when credit unions and cooperative banks really surge.

Economists often point to small businesses as the driver of the economy, but small businesses have been ailing recently because of tightening credit. Community banks could change that dynamic.

In addition, 2012 might be the year when Americans start experimenting with cooperative business models, which allow many people—even a entire community—to pool resources to start businesses, and then allocate the profits from those businessed back to the community.

After all, when the system no longer works for you, sometimes you have to set up a different system. These alternatives have existed for a long time, but the incentive to try them has never been stronger than right now.