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Fiscal Cliff
Fiscal Cliff
Courtesy of Russ Winter of Winter Watch at Wall Street Examiner
My underlying game theory holds that the great majority of income earned by consumers, and especially the big crony capitalist corporatist sector is directly attributed to government largess from the massive unsustainable deficit spending. Quoting from Charles Hughes Smith: "Roughly 40% of all households receive a check or equivalent from the Federal government, while at the top Power Elite crony capitalists skim capital gains and pay an average of 17% of all income."

Adding insult to injury, banks are willing to lend once again to overstretched consumer. Consumers are now borrowing well in excess of their income gains and have been doing so for a year and a half. The credit bubble du jour, where lenders have found a new scam to work, has been student lending. Some might argue (I think correctly) that big student debt hurts normal new household formation, and thus housing demand.

Much of the government's borrow, spend and transfer largess is scheduled to run off automatically without a major legislative effort to extend them. What is now required is going to be a bipartisan effort to deliberately budget another FY 2013 trillion deficit in an election year. That would actually have to be legislated, passed and signed by the President. The default steep cuts and tax increases are automatic, if there is no legislation.
I posted in comments a few days ago an email I received from the progressive group MoveOn.org on the issue of extending the Bush tax cuts. It is a fight to the death for MoveOn. I am also receiving emails from Tea Party sources that also make spending a fight to the death issue. A strange political compromise around continuing the status quo spending and tax regime almost looks impossible to implement.
The next Nomura chart shows the effect of loopholes in the corporate tax code. When you hear that the statutory rate is among the highest in the world, that would only be for those who don’t have tax lobbyists or the best tax accountants and lawyers. IBM has had a substantial stock run, and Tuesday reports flattish YoY revenue, and still faces the fiscal cliff. Incredibly the tax rate compared to last year was down five points from 25% to about 20%. Too much of the value of these companies are the tax angles, financial engineering, and government largess.

Nomura puts the effect of the fiscal cliff at almost 5% of GDP in 1H, FY 2013, which starts October 1, 2012. I would argue that government spending addiction is so ingrained that the GDP drop will be much larger depending on the degree of the cutbacks either in terms of taxation and largess. Still this gives us a good idea of the impact of trillion dollar deficits year after year. It’s back to the Herb Stein sustainability theory once more. Put simply, if the US Government can’t run these huge deficits, the addicted economy will swoon. And if it continues to run them, ditto.

For additional analysis on many topics, including trading ideas, subscribe to Russ Winter’s Actionable – risk free for 30 days. Click here for more information.
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Yet for today, all is well.
ZH isn't a doomer site; it's a reality site.
And reality isn't optional.
The punditocracy and the corportocracy that influences 99% of the way they think are gonna realize one day it isn't sustainable, and when that roller coaster falls off....its going to land right on their house.
And they'll never see it coming.
Okay kids, it's your bedtime.
Im beginning to think that all doomer sites (including ZH) are just part of the psyop.
Impending doom, whatever guise it takes (economy, police state, comets, peak oil, etc etc) all makes me feel hopeless and helpless. that I can;t sdo anything is a given- its coming down the pike, and its unstoppable.
There's a fine line between acceptance and apathy. But deluge us all with enormous helpings of hopeless information, and we'll default to apathy pretty fast.
Gotta be part of the plan... The Bernaysian controllers know that the alt news sites breed sheeple.
Mess I guess reading this site and calling it doom and gloom is from your perspective. I never let what I read make me apethetic. Yes if you think there is nothing you can do about your doomed. I and alot of people here are not doomed but what ZH posts is for the most part backed with verifiable facts. What you choose to do with information is not my problem. Sure we have our doomers and gloomers but that is what happens when you have freedom of speech. Yes we do have those articcle that are out there or are stating what some of us already know. Come and learn and you will be better off forthe experience. Your masters want you the way you sound.
Read an article do your reseach and decide. Personally after taking a bloodbath in 2008 and after reading this and many other sites I am better equipped to invest my money and yes I do buy physical gold. But I have bought and sold gold for 30 years. I made some great returns after coming here though. Why because instead of fundamentals you have to play TPTB games to make some money. I have read this site since late 2010. Registered last year.
Acceptance does not mean apathy unless you choose to be that way. You also have to understand that this is an election year and the nuts are out here trying their best to make any reasonable article look stupid, thats what they do. Good day to you.
You are very wrong about this. ZH is the best way to keep track of the slow-motion train wreck that is the economy, and stay out of the way of the ever-expanding debris/shrapnel cloud. Many of us have significant assetts we are trying to position for protection and growth. Many of us have cash flow and investments, lives for that matter, tied to the status quo that will be expensive and painful to eject. ZH is giving us essential information to time our moves and ultimately abandonment of a collapsing system. The gallows humor (Merkle's complaint about financial markets not helping for example) keeps my morale up.
Hopium hits from the MSM would be an easier path for you, until it isn't.
Its a constant stream of 'we're screwed, pretty soon here', which does nothing. Constant barrage of doom and gloom and although it may very well be true, wheres anyone doing anything about it, or saying what needs to be done? 'Ahhh we're sliding into the abyss, at this rate or that rate'...yea ok so what now?
Yawn - the end is nigh...
We can only die once.
Bush Tax Cuts is just a code word for Obama (Carter II, Nixon II, Bush III) Tax Hikes.
The guy does not have the huevos to take responsibility for anything.
If these tax hikes go through it will be a disaster, which he plans to blame on Bush (II).
"Fed's QE is due to inability of US political system to agree on continued deficit spending" because everyone including the rich depends on government deficit spending."
EVERY president spent deficit on wars abroad.
-Economist Ha-Joon Chang on Currency Wars, the G20 and Why "There's No Such Thing As a Free Market"A hearty handshake and a slap on the back for anyone who can tell me WHEN. As we learned in an earlier post early is the same as wrong and there's a wide range of potential starting times for the main event. Monday is one. Watch for front running tomorrow. Maybe Apple is an early warning signal.
Yea sure seems like although we're screwed, they drag it on however long they like.
12-21-12
"I am also receiving emails from Tea Party sources that also make spending a fight to the death issue. A strange political compromise around continuing the status quo spending and tax regime almost looks impossible to implement."
Damned straight.
Of course they are going to make a deal. The 'Move On' group and the Tea Party are going to have to suck it up.
Never going to be any changes until there are bodies in the streets. That's always the way it is in America ...
Progressive group MoveOn??????????????? FUCK YOU!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
Pre 1900 were they not called American Communists?
They ARE the American Communist Party today.
Progressive is th epolitically correct way for the left to say socialist without saying socialist...
and Tea Party is synonymous with KKK, racists and of course closet fascists but mostly it's a bunch of old white farts like the ones posting on ZH.
Yo goforgin - you are a non thinking slime ball, ya fuck stick.
Go back to the Huffing and Puffing Post...if they are still around, and spout your brainless tripe.
No real Party affilaition here....but the Tea Party is for less Gov't spending, period.
Vic, you are absolutely correct. Subscribe and you can even call me Edgar if it pleases you.
So boring --- when do the Kardashians come on?
Well, Kim is running for mayor out in Glendale Kalifornica...clearly the fifth seal of the apocalypse ;-)
The funny thing is, I have NO idea who these Kardashians are at all! I just see the name bandied about, and am under the impression that they are some shallow, brainless celebrity bimbos, which is really all I need to know about them anyway.
basically it's an entire family that has been made famous by 2 things:
1) a slut (Kim) who made a very clear and nasty sex video (forget Paris Hilton with nigth vision goggles) with Ray Jay (a rapper) made it widely available on the net for free.
2) got noteriety because her step father is Bruce Jenner
The rest is the power of TeeVee on the mush we call the American Mind. Mostly the same folks that will vote for Oblunder.
I'm sorry to corrupt you by making you aware of this info...
I saw one of them once on TV. She's got a nice big round ass that probably looks good at age 30 but you know will be a disaster by age 40. One day she'll just be a middle age fat chick
Pretty much sums it up.
anytime you like at Celebrity Porn Scandal dot com
if the servers are down it's the SEC staffers taking up all the bandwidth
Nothing wrong with this analysis ilene. And I don't know Russ Winter from Edgar Winter. But let's consider...
...this article opens with a slam on 'Power Elite crony capitalists' but then ends by telling me I should sign up for Edgar's newsletter, presumably to make money. I guess that would make those who give Edgar money for trading "ideas" wanna-be crony capitalists? Or poor man's crony capitalists?
If I have something wrong, pls explain.
Neither Russ nor I have the money, power, importance, or anything else, in any way, to be a part of "crony capitalism"... trying to make a living - is that a problem?
The president, the unions, the democrats, the unions, the teachers and OWS say yes there is a problem with that..so, it is. You've selected the wrong type of work.
Sorry.
Thanks for a good post though.
I hope they don't make a deal. Big cuts to defense and discretionary spending, and a bump in taxes, but only to 2002 levels. Both sides take some sour medicine.
If Congress were smart (which they aren't) they should take advantage of this opportunity to blow a new deal and force these cuts and tax hikes while pretending they hate it.
The trouble is that the "cuts" never materialize. Compare this years and 2008. Revenues in 2008 were almost exactly the same as 2011-2012 but spending has risen 1 trillion. It is so infuriating to hear yapping that we need a "balanced" approach when all the increase has been on the spending side. Besides, NO ONE has even suggested that massive tax hikes will actually cut the deficit when one considers the blow to the economy of removing trillions more from the private sector.
Strange how taxes go up but SPENDING NEVER goes down in any significant amount!
In a perfect world tax hikes and spending cuts would be the "solution", which would usher in the next deflationary depression.
But, have you ever seen tax hikes actually generate more revenue?
Have you ever seen real cuts in government spending?
Given that this is an election year, does anyone really expect higher taxes and lower spending?
Is there any real solution to $1.6T and $15T in government deficits and debt?
sschu
Sorry, your numbers are out of date. Think we're close to 16T but, by the time you fix your numbers, it'll be close to 17T.
Oh, don't forget the unfunded future liabilites, don't let those numbers get out (psst, close to 100 T!). That's without Oblundercare...
:-)
I pointed out that despite the recession, revenues remained about the same over the last four years yet spending increased over a trillion. And no, there is no solution to the deficit since any proposals to cut are met with cries of moral outrage that folks want granny to starve or the kids to go unschooled or sick folks to die in alleyways.
Yes, Yes and YES!
This is all happening anyways. Most of the extra trillion is being squandared on BS and kleptocrats.
exponential equations (espically when it come to world population) are indeed mis-understood by most. So are thermodynamics and numerous complex biological cycles that sustain life in it's current form. I don't worry about it, the planet is pretty good at shedding parasites from time to time.
Tax hikes ? Over my dead body. How much more than 50% of my income do I have to give to taxes, hmmm ? Not to mention that hidden tax, inflation, pushed by the fucktards in DC.
Fuck them all, and everyone who sucks on the government dick. Not one dime more. They can just stop spending every fiat dime and get back to basics. No more War on Drugs, War on Terror, civil "servant" shindigs, drunken revels in Cartagena, swap lines amongst the CBs, gold-plated pensions and benefits, etc etc etc.
....and don't forget the War on Pakistani Wedding Parties, the War for Libyan Gold Reserves, the Why Are We In Yemen? War, and the War on The Persian Gulf and Hormuz Strait, various Proxy Wars and any other wars that are not currently receiving proper media attention.
Oh, I forgot the War on Black Families, aka SNAP and rent vouchers, and the War on the Middle Class, aka Ben Bernanke's Qwik-Print Shop.
Oh yes, and the War on Graduate Solvency, better known as government-guaranteed, non-dischargeable student loan programs.
You forgot The War to Annihilate Afghani Goat Herders, The Financial War on Persia, the War on Drugs, the War on Dangerous CrimeThought...and my favorite The War on Science. Only country in the world with an "evolution problem"...in other words there are people who actually don't believe in it.
I was with you until you wandered into the fever swamp of "the war on science" and the typical, clueless reference to "an evolution problem". Evolution, in the sense of life starting with a single-celled organism and turning into everything else up to and including mankind, is mathematically impossible and without scientific evidence. That's why it is the THEORY of evolution. I suggest that you read a book titled "Genetic Entropy" by Dr. J. Sanford and then rethink your apparent belief in evolution. Entropy, a long established scientific idea, posits that things go from a state of order to a state of disorder unless acted upon by an outside force. For instance, iron can turn into a heap of rust but a heap of rust will never turn into an iron ingot without external intervention. Likewise, the DNA in every cell of every living organism here on Earth is incredibly complex and will, under natural circumstances like radiation, degrade.
The "war on science" is being waged by the left, ignoring factual evidence to propound such idiocies as man-made global warming and evolution - there is no archeological evidence of one species turning into another - while attempting to pin the label on their ideological opponents. This is a typical leftist ploy, nothing more than accusing opponents of the very things that they, themselves do. Science should be devoid of ideology, political or religious. Let the facts speak for themselves in an honest manner.
Geezer, I somehow lost my arrow ability the other day, or I'd give you a few hundred up arrows. Too much science has been turned into a religion by persons who NEVER studied it. Be it co2/global warming, evolution, energy/power production, transit technology, etc, too often those that get the megaphone tend to be those with the loudest voice and the least intellectual ability to speak on it. Algore/Clooney/anyotherhollywoodstarlet anyone?
"and my favorite The War on Science. Only country in the world with an "evolution problem"...in other words there are people who actually don't believe in it."
That is one of those WTF are they thinking puzzles.
The obvious lineage from spineless worms to warmongering cocksuckers couldn't be more clear.
Or evolving from pond scum into Al G.
You forgot the war on our senses...
How do these two statements square with each other?
"The low Capital gains tax is to reward people who put their money at risk."
The maxim for the wealthy is: "Never risk your own money. Risk someone elses."
low capital gains tax is because the money was already taxed once. The earnings you get will be after taxes are paid.
You can risk someone elses money and keep the gains. You only return them thier money not the gains.
Warning these are observations through the bottom of a beer bottle. Hic