Supersonic Fiscal Free Fall

Tim Knight from Slope of Hope's picture

From Slope of Hope's Sunday favorite BDI, here comes Evil Plan 93.0:


Well, my fellow Slope-a-Dopes, I've been hearing a lot about the dreaded "Fiscal Cliff" for quite some time now.  So I decided to take a flying frog freelance free fall leap into the woefully written word abyss, to see if I could sort out for myself, when and how we would experience the coming sensational supersonic splat

First off, let's review what the term "Fiscal Cliff" actually means. In order to understand something it's usually best to know exactly what it is.  


This definition from

“Fiscal cliff” is the popular shorthand term used to describe the conundrum that the U.S. government will face at the end of 2012, when the terms of the Budget Control Act of 2011 are scheduled to go into effect.

Among the laws set to change at midnight on December 31, 2012, are the end of last year’s temporary payroll tax cuts (resulting in a 2% tax increase for workers), the end of certain tax breaks for businesses, shifts in the alternative minimum tax that would take a larger bite, the end of the tax cuts from 2001-2003, and the beginning of taxes related to President Obama’s health care law. At the same time, the spending cuts agreed upon as part of the debt ceiling deal of 2011 will begin to go into effect. According to Barron's, over 1,000 government programs - including the defense budget and Medicare are in line for "deep, automatic cuts."

Now that we are facing this self inflicted sequestration law that the U.S. Congress has imposed on itself (Budget Control Act of 2011), the Government has three basic options moving forward:

1)  They could simply let the stated law scheduled for the beginning of 2013 go into effect. This draconian, albeit way overdue fiscal budget policy measure, features a number of tax increases and spending cuts that are expected to weigh heavily on economic growth, which would most likely drive the economy back into a recession or even worse. The positive side of taking this bold step, would be that the deficit, as a percentage of GDP, would be cut in half.

2)   They could repeal some or all of the scheduled tax increases and spending cuts, and once again raise the debt ceiling. This would of course add to the current $16 trillion mega debt deficit, and demonstrate to the world that the Nation is unwilling or unable to get its unmanageable fiscal budget under control, increasing the odds that the United States could face a crisis similar to that which is occurring in Europe.

3)   They could draw up some middle of the road map, with a combination of moderate tax increases and fewer spending cuts, in a measured attempt to address the run away budget deficit over a longer period of time, which would have a more modest impact on current growth.  The critical issue here is, would this approach be viewed as credible, or simply seen as just another bogus boot of the same proverbial can.

Fiscal-cliffHere is my take on how it will all go down. Obama wins a very close presidential election by a mere 25-35 electoral votes. The Republicans remain in control of the House 240 to 195, and the Senate ends up with a very slim Democratic majority. Basically status quo as far as party control goes, except that the Republicans feel most energized about their unexpected national resurgence, perhaps even winning the popular vote outright.  Leaving BamBam with a much less intimidating mandate club in his puny little hands, then his first swing around. As it turns out, old Flintstone Mitt sure gave him one heck of a run for the money, literally I might add.  

After Bambi's narrow victory, the market gives him a minor reward, and pops back up towards this years highs. However, once the big eared Asses have finished their obligatory week long celebratory partying, and the Elephants are done crying into their trunks. Suddenly seemingly out of nowhere, equities will reverse course, as the investor class starts pressing the politicians to get their act together on the long term fiscal sustainability of the United States of America.

The market wants a very viable veritable verifiable budget deal on the table now, and wants it fast. After all, we can't become gonzo gringo goners, like a bunch of goofy Greeks with greedy greased palms.  The S&P will start heading below 1400 in a hurry. The pressure will brutally build big time, for a solid state long term deficit real deal resolution, before the 2011 sexy Cinderella sequester drop deadline of midnight December 31st perilously passes.

The rabid resurgent Republicans feeling their oats, will decide to use the market like a hammer on Obumer's pin head.....bam.....bam....bam. Pressing the bet for fewer tax hikes and more spending halts. The definately determined demolition crew conservatives will man handle the late night jackhammers, taking the grand bargain vote down to the eleventh hour. Sorry for all the ear piercing noise emanating from torn up Pennsylvania Avenue Mr. President, no soulfully singing merry Christmas carols with Sasha, Malia & Michele this sour Santa season.

The market will make multiple lower lows heading into bawling bare baby Jesus week at sub 1330, and approach the New Year lurching back and forth 30-40 SPX points at a clip, as the law makers continue their decidedly dangerous death deifying dueling debutant dance, nearly wiping out the entire year's stock gains. Finally, just as Cinderella is about to make her big bad ballroom exit, a marginally magnificent deal is magically struck as the clock strikes twelve, whereby the market maker mavens then surge the intensely ignited indices right back over 1370.  Happy New Year you seriously stressed Slopers!

All is well again in America's forever fiat fairyland...........or is it.............stay tuned for a superstitious supersonic shit storm in 2013...........Evil Plan 93.0 man the terrifying turbo torpedoes.


     BDI SOH's Idiot Savant

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janus's picture

(janus's uncle played football with 'hack-saw' jim duggins...oh the stories i could (but won't) tell.  they're still pretty good friends.  but where the fuck are the british bulldogs? if you grew up in the 80's, the above clip will bring back a  bunch of memories.  pro-wraslin was HUGE!)

to the unsung hero, The Villan:

we are a misunderstood lot. i place most of the blame for this misunderstanding on other people.  they are the problem; and since i know that i cannot change them, i reckon i may as well have some fun.  because, in the final analysis, fun is fun.  furthermore, i've discoverd something in my intercourse with human beings, and that thing is this: they're pretty fucked-up.  don't get me wrong, i'll give the devils their due -- they do make some pretty cool gadgets, craft fine homes, engineer exciting autos...some of the food is supurb...i absolutely love Art & Music.  but, when it comes to their modes of living; their values; their priorities; and, most of all, their hypocracy...well, i'll be gracious & measured; i'll only say that human beings can be so wantonly vile, depraved and demented that the decent despair and the virtuous affect the villan.

again, it's the hyprocracy of it all that drives the noble one to distraction.  the insightful and sensitive among men take note of a rather explicit, but nevertheless unspoken, arrangement between societies and the individuals that people them.  the tacit contract stipulates that individuals cede their individuality (and a varying portion of their liberty, depending on the society) to the amorphous group; in exchange for security, the availability of desireable goods, the availability of desirable people, and other desirable bric-a-brac one finds in a given society, the individual adopts the mores and sensibilities of the group, whether or not he agrees with them, for propriety's sake.  this has gone on for time immemorial.

all who are partially perceptive or even of limited lucidity are forced to make certain concessions.  there is an evil that permeates all societies.  there is no utopia; and if there were, people would move there and befoul it beyond recognition -- for the greater good, of course.  we know that all good things are tinctured with a certain molarity of badness; that the tares remain among the wheat.  even so, it is inflexibly true, in any group or society, that there will be some that think themselves perfectly Good; and that because they are Good, they -- ipso facto -- can think nor do any wrong. they do not reflect on their actions or motivations, because thoughtful reflection is pointless when your every act is gilt-edged and godly Goodness.  these are the 'good guys' in society; these are our preachers, professors and politicians.  these are the artful altruists that lead the heedless to a perdition of tinsel and artifice...where all that glitters is nothing but glitter.  it is when those who think themselves Good convince the majority of this falseness that the villian must step in.  this is when the tincture saturates the solution.

this foul off-scouring of filth is, it seems, an inevitable residue...a stain left by the activity of society itself.  they are an eyesore and a bacterial stew to boot...we ignore it until it's presence is past all ignoring.  enter the bad guys with their black hats, bleach and scrub-buckets. 

this is one of the things that makes calvinism so compelling; the "T" in TULIP stands for Total depravity.  whatever else calvin got wrong, he nailed it with this one.

so, here we are amorica, your bad-boys...your to do the dirty work that none of you can stomach.   because, in this empire burlesque, the curtain's bout to close and the lights are are flickerin on.  ever seen a dirty whore in the light of day?  you're about to.

besides, good girls like bad boys...yet another inflexible truth.

speakin of which, i bettah go buy some tobacco before the store closes due to sassy-sandy.  see ya in a bit, bitchez.

he's so bad/

he's so bad-bad-bad,



philosophers bone's picture

Economy tanks, War Starts and politicians "reach across the aisle" to agreed to full on spending increase for military and domestic spending in the national security and economic interests of the US of A.  Same as it ever wuz.


orangegeek's picture

It's deflation folks.


When consumers stop spending, producers must lower prices to sell/stay in business.  Never mind what the government reports - their data has already proven suspect and will likely continue that way for decades.


To all those "peak oil" fanatics - take a look at the prices folks.  Stirring up "scarcity" is identical to the OPEC crisis in the 1970s which was completely man-made.

northerngirl's picture

Anyone being completely honest with themselves knows it will not matter who the next President is, or which party controls the House or Senate.  Until the individual stops looking to the government for the answers nothing will change. 

Never One Roach's picture

Old paradigm: Retirees live well on 8% return on their retirement nest egg. They house appreciates 3% per year.


New paradigm: Retirees cut back and size down as they lose 6-10% per year in purchasing power on their 0.03% yielding CDs and treasuries nest egg. Their house value drops 5-10% per year.

bilejones's picture

New Paradigm: A new improved strain of the 1918 flue virus appears and wipes out everybody over 70.

Problem solved.


Note the tone:

"Re-creation of the 1918 influenza virus: the work is beginning to pay off"


Of course it is, of course it will.

Jugdish's picture


Old Paradigm : Dump Grandpa/ma at nursing home

New paradigm: Retirees make cutbacks, can't afford nursing home. Stay in home, turn off heat in winter, buy pet food for sustenance.

odatruf's picture

You forgot: kids move back in with older parents to "help with the upkeep".

Long full sized freezers to keep mom on ice so the SS checks will still cash.

ebworthen's picture

Bailouts for Bankers and Bullshit Storm for the common citizen to continue, whoever wins.

For the Bankers and other money-grubbing gutless parasites of Wall Street it is all about $$$; morals, ethics, people, and nation be damned.


Widowmaker's picture

You forgot fellatio and TARP bailouts just to make payroll for the fraud-squad.


Setarcos's picture


Cretinyahoo wins, with ceaseless standing ovations in Congress, for front-running the US into war with Iran ... with the Zionist objective of creating Greater Israel, with liebenraum (living room) for the Chosen People from the Nile to the Euphrates.

If this kinda reminds you of NAZI ideology, then so it should, including Hitlers assertion that it was all or nothing ... that he was prepared to see Germany utterly destroyed in pursuit of a "Thousand Year Reich".

Well the labels have changed, but psychopathic personalities have not ... hence the Samsom Option of Zionists willing to take down the global economic system and to risk nuclear war, which would wreck the world; not least Israel.

Who are the more dangerous?  Mainly Jewish banksters and MSM owners?  Or bought and paid for Goyim politicians?

It's a crazy world when Romnobomber is the only 'choice' for either "full spectrum global dominance" or, that failing, total destruction.

These psychopaths have never grown up past the emotional age of 3-5 ... nasty little kids who typically ruin a game who throw the cards across the room if they are losing.

But when these 'kids' get big enough, they throw WMD around the world.

cranky-old-geezer's picture



One thing I've seen last 4 yrs is they won't let any sudden collapse happen.   It'll be more of the same slow slide (to oblivion) we've seen last 4 yrs. 

Steadily growing government debt (and Wall Street bailouts) funded with steadily growing printing causing steadily increasing currency debasement aka steadily increasing inflation causing steadily increasing prices steadily pushing people closer to poverty. 

See, pretty boring isn't it?


LawsofPhysics's picture

Yes, that has certianly been the impression I have gotten as well.  Unfortunately, there are several exponential equations working against that theory.  We have been here before, just not with 7+ billion mouths to feed.  Hedge accordingly.

OldPhart's picture

I miss MoneyMcBags.

robertocarlos's picture

The results were broadcast the other day. Obam wins 43% to 40%. If you don't like Obama then don't lsten to him. However, resistance is futile.

Tombstone's picture

If The Dictator scams another win, forget the fiscal cliff, the stock market and all the rest of it.  Our country will be in severe danger of implosion and a long hard road to serfdom.  The Kommies will take no prisoners.

hawk nation's picture

Its called the freedom cliff if obama wins

CompassionateFascist's picture

It does not matter which ZOGstooge wins. Vote early and vote often. It's fun!

Stuck on Zero's picture

Or this scenario...

Friday Nov 2:  After the markets close the U.S. announces that Iran has attacked it's ships in the Persian Gulf with lots of fast boats.  Heavy damage is sustained by two frigates.

Saturday Nov 3: Obama calls joint session of Congress.  They jointly suspend the budget cuts and authorize the President to respond.

Sunday Nov 4: Iran announces: huh? U.S. unloads 50,000 tons of ordnance on Iranian military installations.  Lucky we had a lot of carriers in the area.

Monday Nov 5: The Democratic party says that Americans must vote for the incumbent during hostilities.

Tuesday Nov 6: Americans put the incumbent back in office by a wide margin.  ZHers pull their hair out.



DeadFred's picture

At that point you put a heavy short on interest rates particularly the risky stuff.

Pejorative Requiem's picture

The risky stuff is the only thing left.

willwork4food's picture

And go long beer.Alot of beer.

Preferably Heineken.

marathonman's picture

Heineken?  That stuff tastes like it was brewed in dead skunk carcass.  No sense in hoarding that swill.

robot07's picture

And remember, if you don't hold it, you don't own it!

andrewp111's picture

Obama won't win by 25 or 30 EV. If he wins at all, it wil be by single digit EVs.  But it looks like Harry Reid will retain Senate control regardless.

RockyRacoon's picture

I'm ready.  Let 'er rip.

I could have done without the cheesy alliterations, however.

bilejones's picture

"I could have done without the cheesy alliterations"


Said Rocky Racoon......

RockyRacoon's picture

Ain't nothin' cheesy about that classic tune.

Zer0head's picture

Fuck you Tim Knigjht

the only ZH contributor that contributes with contributors' from his own miserable site


in three words

eat shit asshole



Dearest BDI forgive me for ranting about Timmay  you sir look  marvelous  even in your sunset years, though I would encourage non-sloppers to avoid clicking. 



janus's picture

Dear zerohead,


long: meaningless vitriol & vacuous invective

short: substance & sound argument

this in not a fruitful trade in the marketplace of ideas.

but i appreciate your passion.

p.s. i have never visited tim knight's site...but now i think i might (you've convinced me).

you've also inspired me to write a brief homage to the 'bad guys'...the men in black...the villians.  think of zerohedge as sort of...well, as if it's a fight club.  it's a stretch; but indulge me.  so, in any fight-club, or hippodrome, or arena, or pitch...whatever...there has to be good guys & bad guys.  it's not that one or the other is truly Bad or Good; it's just theatrics...something to keep the mob swaying and the haters steamin.

well, i'm packin up my game and i'm gonna head out west/

where real women come equipped with scripts and fake breasts/

...start an escourt service for all the right reasons/

and set up shop in the top of four seasons,


lasvegaspersona's picture


Sherff Joe Arpaio has proven that there are 'serious issues' with the birth certificate 'file' he presented on the White House web site, his selective service card has only 2 year digits (supposed to have 4) and one of those digits was flipped over cause they couldn't find the correct number in the correct font AND he apparently has 2 (bad) social security numbers....whacha bitchin about???

And not one of the pussies in Congress will acuse our emperor of being naked...pathetic!

seataka's picture
The truth does not matter because: "Propaganda is to a democracy what the bludgeon is to a totalitarian state." Noam Chompsky
Vincent Vega's picture

Budget Control Act either pushed out a year or scrapped all together regardless who is Pres. Debt ceiling raised and lots of promises to get it all worked out in due time. "Patience" will be a buzz word of the politico's in 2013. Fitch downgrades U.S. to AA. Unemployment drops to 7% simply because of so many unemployed being uncounted. Fuck You Bernanke continues printing. Europe continues jawboning with no real progress. <imho> Fuck it all; I'm thinking of going Galt.

knightowl77's picture

Not sure who wins...I am greatly worried by the fact that some 48% plus Americans will vote for lil Barry Sotero....After the shit he has done, it simply amazes me....I get the fact that Romney is no prize but Obummer/Sotero is lying incompetent sack of shit ......

Everytime he speaks I get violently ill.............Can't take another 4 years of TOTUS

willwork4food's picture

Agreed, but mittens will bring back all the jobs he helped ship to China? Really?Can I have some of the drugs you're on?

Nadaclue's picture

Ya know, I hear this shit a lot from the progessives. Please cite just what jobs Mitt Romney shipped overseas, with citations, thank you.

Please don't respond with the standard "you're a fucking racist" meme. I'm not and have two ethinic groups in my close family, so that won't work, wonk.

fijisailor's picture

Yea I can see it.  You are lost in the "bipartisan" cesspool.

Radical Marijuana's picture

I like the work of Matt Taibbi



I find it an amusing sign of the times that some of the best reporting on financial matters gets published by the Rolling Stone magazine.

GeezerGeek's picture

After reading the first linked article I got the impression that Romney (as part of Bain) got rich by taking advantage of tax laws and purchasing companies by using those companies as the collateral necessary to borrow the money needed to buy the companies. The companies seem to have been in poor financial health to begin with, and some ultimately were saved and others ultimately failed.

Bain got paid whether the companies succeeded or failed. I'd guess that they made more from the companies that were saved, but really don't know. A surgeon gets paid whether the patient lives or dies. Big deal. Life's like that.

What's most important to me, in the political realm, is that Romney may have taken advantage of the laws - none of which he created - but never used the force of government to compel acquiescence on the part of the targeted companies. That is much different than the current president's tendencies to use the power of his office - indeed, more than the legitimate power - and the force of the US government to accomplish his ends (regardless of what one thinks of those ends). Personally, I find what Romney/Bain did (was accused of doing, anyway)  to be far less onerous than the actions of Obama with his death lists, collateral damage from drone strikes, etc.

BTW, I don't like Romney's past political stances much, and he probably isn't being forthright in depicting his actual intentions/preferences. On the other hand, I absolutely detest the actions performed by the current president and lament the obvious detrimental effects of such. As with most of my votes, mine goes to the lesser of evils; I'm voting to minimize the potential for future damage, and going third party won't accomplish that.

marathonman's picture

Bain was really good at using junk bonds to raid already weak companies, buy them out, pump up the financials, and dump them on even bigger fools.  Maybe Romney does have something going for him as POTUS.... 

On voting record, Romney and Obama are not that far apart.  Both lead as Northeastern liberals.  Expecting any difference is foolish.

OneTinSoldier66's picture

Representative Democracy through electoral politics is a myth conjured up from the TPTB propaganda pool.

Midas's picture

Yeah, it's looking like the public will tolerate a president killing american citizens without a trial.  What's left?

steveo77's picture

Yep he raped the constitution, it is a farce.

CompassionateFascist's picture

It was no virgin to begin with. And if you understand that the only way we'll get the Republic back is via Civil War II, then Barry is the Man. Actually, with Soros' Spanish operation counting most of the votes, I'm not real worried about the outcome. 

GeezerGeek's picture

It almost sounds like you're not particularly bothered by rape except where virginity is terminated. Extend that attitude to government vis-a-vis taxpayers: well, you already get taxed on your income, so if you have your property confiscated it's only an extension of the prior taxation.

Debeachesand Jerseyshores's picture

IMHO,Romney wins,maybe the Reps take the Senate and they keep the House.

What will be more exciting to the Reps is that they will continue their surge on the State,Countyand local level.

Controlling from the bottom up is more important than from the top down.

There will be a continuing resolution to put the "fisca cliff" on hold for at less six months until the Romney Administrstion gets its team in place and up and running.

max2205's picture


Romney wins by landslide spx goes to 1200 by eoy

Senate goes to republicans

Spending cuts go all in

900 spx by April

Ben gets fired in feb

Rates on the 30 go to 6% by April

Short rates 2 yr go to 2%

QE ends by May

Riots in major cities as snap drawsdown

Markets start to clear as riets crash

We start all over again.....

Widowmaker's picture

You are dreaming, only failure wins.

disabledvet's picture

what do you mean "start all over again"? you mean "and then we finish what we started." what do you mean "why is the Exxon Valdez in Lake Michigan headed straight for Chicago with no brakes?"

andrewp111's picture

Ben is in to Jan 2014 regardless, and then he reverts to being a mere governor of the Fed.