Congressional Budget Office
Get ready for a failure in these negotiations
What's Obama going to say?
By now everyone knows how Americans feel about America: one quarter of the population (the half of the less than half that voted) is convinced the US is plunging into a socialist void that would make the USSR proud, another quarter of the population is furious at the wealthy and demands that they be taxed up the wazoo because "they didn't build that" but certainly profited from it, and is demanding wealth and income redistribution, while the silent majority is quietly picking up whatever pieces it can, and batting down the hatches, seeing very well, beyond the fog of bias and subjectivity, the inevitable epic deleveraging disaster, followed by even more epic printing that is coming this way. But how does the rest of the world see the US, especially now that the fiscal cliff (and the much less discussed debt ceiling debate: why, we don't know - it was "merely" the debt ceiling that led to a 20% drop in 2011). Yesterday, German financial media Spiegel provided a glimpse into just how Europe, which is in deep feces itself, sees America. The verdict: the next Greece.
Do not expect any changes to the trends of polarization and party non-conformists is the message from JPMorgan's CIO Michael Cembalest. As he explains moderates like Blue Dog Democrats and Rockefeller Republicans are now artifacts in the Natural History Museum, having given way to their more ideological offspring (through retirement or after having been beaten in primaries). If anything, Cembalest believes the House may become even more partisan after apparent losses by moderates in both parties. After a better than expected night for Democrats given Senate results, the fiscal cliff looms; With the status quo maintained, a divided government goes back to work to solve the Mutually Assured Fiscal Destruction problem. However, electoral results suggest the country is in no mood to address entitlement issues right now, will defer them to another day, and continue to shift towards a high-Federal debt economic model that bears some resemblance to Europe and Japan. In the 1950’s, the solution to 80% Federal debt was not taxation, austerity or inflation, but growth.
It’s really hard to ignore what’s happening today; the election phenomenon is global. The entire world seems fixated on this belief that it actually matters who becomes the President of the United States anymore... or that one of these two guys is going to ‘fix’ things. Fact is, it doesn’t matter. Not one bit. And we’ll show you why mathematically... This is not a political problem, it’s a mathematical one. Facts are facts, no matter how uncomfortable they may be. Today’s election is merely a choice of who is going to captain the sinking Titanic.
What is really causing the economic malaise that the U.S. faces today? Most economists believe that it is the lack of aggregate demand that is causing the problem which can be rectified by continued deficit spending. The current Administration believes that it is simply the lack of the "rich" not paying their "fair share" and that a redistribution of wealth will solve the issue. Romney believes that his 5-point plan will create 12 million jobs in the near future. All are wrong.
Define headline heaven? Any time you can gratuitoulsy insert the names Art Cashin, Becky Quick and Paul Krugman in the same title. Like in this case. HERE'S WHAT YOU NEED TO KNOW.
Just how much havoc does living within one’s means wreak?
Even if both the Bush tax cuts and emergency unemployment insurance are extended, the 'sequester' is mostly postponed, and the fresh fiscal drag is confined to the expiration of the payroll tax cut and the new taxes to pay for Obamacare, Goldman estimates suggest that fiscal policy would shave nearly 1.5% from real GDP growth in early 2013. While it seems the 'market' believes that some compromise will be enough to lift the market to new stratospheric heights; we believe, as does Goldman, that the risks are almost exclusively on the downside of this 'not so good' fiscal scenario.
80% of the people who contribute to SS get less than what they paid in.
Bill Gross: The US Is A Debt Meth Addict - Unless The Fiscal Gap Is Closed Soon "The Damage Will Be Beyond Repair"Submitted by Tyler Durden on 10/02/2012 07:37 -0400
The highlights from Bill Gross' latest monthly piece:
- Armageddon is not around the corner. I don’t believe in the imminent demise of the U.S. economy and its financial markets. But I’m afraid for them.
- Unless we begin to close this gap, then the inevitable result will be that our debt/GDP ratio will continue to rise, the Fed would print money to pay for the deficiency, inflation would follow and the dollar would inevitably decline. Bonds would be burned to a crisp and stocks would certainly be singed; only gold and real assets would thrive within the “Ring of Fire.”
- If the fiscal gap isn’t closed even ever so gradually over the next few years, then rating services, dollar reserve holding nations and bond managers embarrassed into being reborn as vigilantes may together force a resolution that ends in tears. The damage would likely be beyond repair.
- The U.S. and its fellow serial abusers have been inhaling debt’s methamphetamine crystals for some time now, and kicking the habit looks incredibly difficult.
Investors remain convinced, it would seem, that the fiscal cliff will not happen because our great-and-good politicians in Washington know full-well that the economic repercussions will be too great. Even though Ben's foot is to the floor, he has stated that monetary policy will be unable to offset the negative economic impact of the tax hikes and spending cuts. The prospect of agreement among a deeply polarized politik and just as Goldman expects, we worry that the S&P 500 will fall sharply following the election once investors finally recognize the serious possibility that the 'fiscal-cliff-problem' will not be solved in a smooth manner. In order to clarify that thinking, Bloomberg Brief has provided 12 charts on the timelines, impact, uncertainty, and possibilities surrounding this most obvious of risk events.
"Electric vehicles cost thousands of dollars more to purchase than conventional vehicles of comparable size and performance."
There is a common problem underlying the economic troubles of Europe, Japan, and the US: the symbiotic relationship between politicians who heed narrow interests and the growth of a financial sector that has become increasingly opaque (Igan and Mishra 2011). Bailouts have encouraged reckless behaviour in the financial sector, which builds up further risks – and will lead to another round of shocks, collapses, and bailouts. This is what Simon Johnson and Peter Boone have called the ‘doomsday cycle’. The continuing crisis in the Eurozone merely buys time for Japan and the US. Investors are seeking refuge in these two countries only because the dangers are most imminent in the Eurozone. Will these countries take this time to fix their underlying fiscal and financial problems? That seems unlikely. The nature of ‘irresponsible growth’ is different in each country and region – but it is similarly unsustainable and it is still growing. There are more crises to come and they are likely to be worse than the last one.