It's All About Real Estate.(Global Investor)

Byline: Holger Schmieding; Schmieding is chief European economist of the Bank of America.

The real concern for the global economy in 2008 will continue to be fallout from the subprime-mortgage crisis in the U.S.

It's the New Year, but will it be a happy one? Global investors are not in the mood to write cheerful greeting cards, but are instead bracing themselves for a rough winter. The doomsayers have a point or two. While the U.S. housing market continues to implode, losses related to U.S. mortgages are rattling financial institutions around the world. Some of the once hot property markets outside the United States are following Uncle Sam's lead by turning south as well -- for instance, in the United Kingdom, Ireland and Spain. To make matters worse, high gas and food prices have spoiled the mood of consumers on both sides of the Atlantic.

Storm clouds are gathering, but the storm will probably not last very long. While financial stocks have suffered a correction, most equity markets are robust thanks to corporate profits. Companies continue to reap the benefits of globalization. At the same time, workers and consumers enjoy rates of unemployment that are either very low, as in the United States, the United Kingdom and Japan, or falling rapidly, as in Continental Europe, where labor markets have also become more flexible in recent years.

Also, commodity traders are betting against their moodier colleagues on the bond side, who seem to be pricing in at least a mild recession by pushing yields on secure two-year government bonds to ultralow levels. High oil prices of more than $90 per barrel have not led to doom and gloom for the Western world. Many believe they simply reflect ever-stronger import demand from the likes of China and India.

In this case, the United States, Western Europe and Japan should be able to piggyback on the revival of post-socialist Eurasia by exporting ever more goods and services to the growing number of consumers in the world's most dynamic region. More and more consumers in areas ranging from Poland to China and India are now rich enough to afford Western consumer goods, and brand-conscious enough to finally buy the imported originals rather than domestic fakes.

Alternatively, if oil prices fall back instead, Western consumers would benefit nicely from having to pay less for their gas and heating oil. This would also reduce the risk of a serious economic downturn. The truth could well lie in between these two scenarios this year, with a modest easing of oil prices helping Western consumers, and buoyant exports to Asia, Eastern Europe and the oil countries putting a smile on the faces of Western exporters.