The world's largest bond fund manager is picking a bleak year ahead for developed countries as the traditional models of running their economies fail.
Pacific Investment Management Company's quarterly cyclical review forecasts zero growth for the developed world, with some countries tipping into recession.
PIMCO's head of global portfolio management, Scott Mather, says there will be several more years of economic turmoil until countries work out new ways of tackling their debt.
He says heading into 2012 almost every major economy in the world is promising to cut fiscal spending, which will be a drag on growth of 1% to 2%.
Mr Mather says some of the traditional areas that would be expected to make up for that are not there, such as new construction and increased corporate investment, which are flat.
He says it is a very different environment from the last couple of decades, which makes it a more uncertain world, and people should be more risk-averse than in the past.
Mr Mather believes Japan could be heading for a financial crisis.
Notwithstanding falling commodity prices, he says, New Zealand is better placed than most developed countries - because debt to GDP is lower in New Zealand than in other parts of the world and the country can still use fiscal and monetary policy to help manage the economy.