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Your Complete Guide To The Coming Fiscal Cliff

Tyler Durden's picture


All you need to know about the fiscal cliff which will savage the US economy in under 5 months, unless Congress finds a way to compromise at a time when animosity and polarization in congress is the worst it has ever been in history.


Key dates:


The cliff in graphics:


The cliff in numbers:


The players:

And a Q&A from Goldman with its DC political economist Alec Phillips:

What is the “fiscal cliff”?

Alec: It’s the unhappy coincidence of about $600bn in tax increases and spending cuts that come about on January 1, 2013. Last year, we started calling this the “fiscal cliff.” On the tax side, the most significant policies are the income tax cuts enacted in 2001 and 2003, and the payroll tax cut that has been in place for the last two years. The spending cut comes mainly from the “sequester,” with a smaller effect from the expiration of expanded unemployment benefits.

What do you mean by the “sequester”?

Alec: When Congress raised the debt limit last year, the bill it passed included over $2 trillion over ten years in projected spending cuts, from capping annual spending bills and a flat $109bn per year cut in spending known as the “sequester” that would take effect if a deficit reduction “super committee” failed to agree on $1.2trn in savings. The super committee failed, so now the sequester is scheduled to cut spending at the start of 2013, applied equally to defense and domestic spending.

How does the debt limit fit in?

Alec: It’s indirectly related to the fiscal cliff, since Congress will need to address it either at the end of this year or early next year. The debt limit is a legal cap on the amount of debt the Treasury can issue—it currently stands at $16.4 trillion—and covers publicly held debt as well as debt in the Medicare and Social Security trust funds. We think the limit will become binding on the Treasury by February 2013, though hopefully Congress will raise it when they deal with the fiscal cliff at year end.

What happens if the debt limit isn’t raised?

Alec: The Treasury brings in about $200bn each month, but pays out about $300bn, so it would be able to pay most but not all  of its bills, with missed payments going into arrears. For some areas a sort of “first in first out” system might make sense, but it  seems likely that the Treasury would prioritize interest payments.

What would be vulnerable to cuts in this situation?

Alec: Payments to federal employees, contractors, and health providers under Medicare would probably see effects right away. States, which receive hundreds of billions per year in federal grants, could also see a reduction in revenues. Social Security and other types of payments would probably also be delayed.

What are the key dates ahead for these issues?

Alec: The House recently voted to extend the 2001/2003 tax cuts in their entirety, and the Senate voted to extend the tax cuts on income under $250,000. Spending authority will need to be extended for the coming fiscal year before the current one ends on Sep. 30, but that looks fairly likely to happen without too much controversy. The election on November 6 will be the next key  date, after which Congress is expected to come back and deal with the fiscal cliff, but any resolution most likely won’t occur until the end of December. If there is no resolution by then, Congress may come back early in 2013 and address it retroactively. We expect to hit the debt limit in February, which is around the same time that the semiannual interest payment on Treasury debt is due (see Page 3).

Will the election influence how this gets resolved?

Alec: Yes. Overall, the Republican position is to extend all of the income tax cuts and to avoid the defense cuts. Most Democrats prefer avoiding defense and non-defense cuts, and would like tax revenues to replace some of the lost savings from doing so.  They also oppose extending the income tax cuts on upper incomes.

Will the election influence when this gets resolved?

Alec: Probably, but it’s not clear in which way. A clear-cut election victory by either party could hasten an agreement, while a close election could lead to a more protracted debate. On the other hand, if one party—the Republicans, for example—were to gain control of Congress and the White House, they might opt to delay action until they gain control 2013 if they can’t win concessions in 2012. A status-quo election outcome—i.e., the President wins reelection and the Democrats hold the Senate—might make an agreement in the lame duck session of Congress more likely. Of course, there is no clear-cut answer in any of these scenarios.

Will the fiscal cliff happen?

Alec: It’s not our central expectation. We assume that Congress will act in the lame-duck session after the election to  extend most of the current policies until sometime in 2013. A three-to-six-months extension would allow them to address the debt limit and provide some time to come up with a longer-term fiscal plan that may involve tax reform and/or entitlement (Social Security/ Medicare) reform. The only part of the fiscal cliff that we expect to take effect at year end is the expiration of the payroll tax cut (because there seems to be broad agreement that this will eventually need to expire), along with continued phase down of emergency unemployment benefits.

What are other scenarios and their probabilities?

Alec: You have two general scenarios, one is that they extend the policies past the end of the year and the other is that they  don’t. We think the odds that the fiscal cliff is allowed to take effect at the end of the year are probably about one in three. If that happened, Congress would probably step back in 2013 and reverse some of it, though even a temporary lapse could be disruptive for markets and the real economy. A long-term agreement before year end (i.e., longer than a full year) seems to be the least likely outcome.

Will the debate be cleaner or messier than last year?

Alec: Messier. First, the issue is just bigger. Last year, we just had the debt limit, whereas this year we have that same threat plus the fiscal cliff. Also, in order to resolve the issue last year Congress was able to agree to lower overall spending levels withoutspecifying where those cuts would come from. Now that those “easy” savings have been used, the options left are more specific spending cuts or tax increases that are more politically painful. Also, some politicians may find it advantageous to let the tax cuts expire, which would enable them to come back next year and enact tax relief on a smaller scale than exists currently. Even though it would lead to an overall increase in revenues, this would allow them to cast a vote to cut taxes next year (once rates have increased) rather than a vote to raise them this year.

What is the economic impact of your base case?

Alec: We assume a drag on GDP growth from fiscal policy of about 1.5% in 2013, due to the expiration of the payroll tax cut along with some smaller factors. Even if Congress extended everything, we think that federal fiscal policy would still weigh slightly on growth, particularly since federal spending is slowing.

What would the impact be of falling off the cliff?

Alec: If Congress took no action, we estimate around a 4% hit to GDP growth in 2013. If you assume an underlying trend of around 2.5%, that is likely to put the economy into recession. There might be some mitigating factors: Consumers might initially tap savings or borrow and not all of the federal spending cuts would kick in on day one. It is also possible that some business investment or hiring has already been delayed and could restart once the uncertainty has passed. But overall, letting these policies lapse all at once would be a very negative outcome. Of course, a short lapse that the new Congress quickly addresses in January would do less damage to the economy, though damage to policy credibility and markets might still be significant.

What is the Fed’s role here, if any?

Alec: In our base case we already assume that the Fed is going to ease policy in September, with renewed balance sheet  expansion late this year or early in 2013. If we fall off the cliff in a more significant way, then the likelihood of easing and the  magnitude of this easing would go up. But the Fed can’t offset a fiscal contraction of the size we’re talking about.

What sectors would be most impacted?

Alec: Defense and healthcare are the most obvious sectors, because they have relatively large shares of revenue from the Federal government, and they are also two places that the sequester is scheduled to hit hard at the end of the year if Congress doesn’t act. The cut to defense spending in particular would be almost certainly greater than 10% and may be closer to 20%. The fiscal cliff would also hit consumers’ disposable income, which is an important distinction with last year’s debt debate, in which most of the policy discussions were confined to a narrow set of industries and had little direct impact on consumers.

How concerned is the market about these issues?

Alec: To assess this, you can look at a basket of stocks that our colleagues in equity research have put together, which tracks
companies with large shares of government-related revenue. This index dropped very significantly on a relative basis to the S&Pabout a month ahead of the debt limit last year and it never fully recovered. We are starting to see some of that again this year, but the magnitude is obviously not the same so far. The other area where you would expect to see it is in consumer  onfidence and we have seen some weaker confidence numbers recently, though, again, nothing like we saw around the debt limit last year.

Allison: Will the market react sooner this time?

Alec: Potentially, but it’s unclear. Last year we saw a clear reaction to the debt limit debate only about a month before the deadline. One would imagine the reaction this year would come further in advance of the event, since it’s a bigger issue and also because there are plenty of people who were caught off guard by last year’s developments and might be more proactive this time. That said, my sense is that many in the market are withholding judgment until the election happens, because it’s just so hard to predict before then how all of this will be resolved. That could mean a sharper reaction post-election, depending on the situation.

Will the US be downgraded again this year?

Alec: Probably not. It wouldn’t make much sense for the rating agencies to take a strong view on fiscal sustainability just ahead of the election and resolution of the fiscal cliff. They have implied as much in their recent commentary. That said, I believe the risk of a downgrade reemerges again next year, depending on how these fiscal issues are resolved. If a longer-term fiscal agreement either doesn’t happen next year and Congress continues with a sort of muddle-through approach, or if the agreement is just not as substantial as some would expect it to be—i.e., they aren’t able to stabilize the projected debt/GDP ratio by later in the decade—then a downgrade seems possible.

Will this series of events ultimately serve as a positive catalyst for longer-term fiscal reform?

Alec: Hopefully. The good news is that both parties seem optimistic that tax reform will be enacted next year. If it happens, it could also allow for entitlement reform. The bad news is that they need to bridge fundamental disagreements to get there. They are also working from a smaller segment of the budget—neither party appears comfortable with significant cuts to Social Security or Medicare in the next decade, and they disagree on how to handle taxes and some other areas of the budget. That doesn’t  leave a lot of areas of the budget to work with to achieve savings.

Source: GS


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Thu, 08/09/2012 - 14:32 | 2691789 ReallySparky
ReallySparky's picture

Alec, I'll take Gold for 1650.

Thu, 08/09/2012 - 14:45 | 2691823 Beam Me Up Scotty
Beam Me Up Scotty's picture

Don't forget the silver at $28 too.

Thu, 08/09/2012 - 14:48 | 2691834 Pladizow
Pladizow's picture

Where's the Willey Coyote?

Thu, 08/09/2012 - 14:59 | 2691859 Comay Mierda
Comay Mierda's picture

he's getting ready to drop bombs on Iran to distract the sheeple

Thu, 08/09/2012 - 15:05 | 2691872 economics9698
economics9698's picture

Obama would suck a Jew cock to get re-elected. 

Thu, 08/09/2012 - 15:16 | 2691904 sickofthepunx
sickofthepunx's picture

if that's the case, i ahudder to think what romney would do.....

Thu, 08/09/2012 - 15:19 | 2691911 economics9698
economics9698's picture

Snort a line of coke?

Thu, 08/09/2012 - 15:45 | 2692008 fuu
fuu's picture

"Source: GS"

Which part am I supposed to fade?!?

Thu, 08/09/2012 - 17:53 | 2692309 slewie the pi-rat
slewie the pi-rat's picture

this ain't gonna help...

...but :>  Report Reveals IRS Failing to Detect or Prevent Fraudulent Tax Returns Aug 9th, 2012, 12:29 - FGI (Length: 2300)  <:

lindaGreen has a brand new bag?  my inner sherlock is thinking "hi-speed integrated accounting fraud tied to vaporwear?" 

let's do the IPO, BiCheZ!

Thu, 08/09/2012 - 19:39 | 2692546 AldousHuxley
AldousHuxley's picture

no statue of limitations on robbing uncle sam.

Thu, 08/09/2012 - 20:07 | 2692626 lemonobrien
lemonobrien's picture

with a millions dollars its fairly easy to leave and never come back.

Fri, 08/10/2012 - 11:09 | 2694015 short-swap
short-swap's picture

"In our base case we already assume that the Fed is going to ease policy in September, with renewed balance sheet  expansion late this year or early in 2013."


Priced Fixed in.

Thu, 08/09/2012 - 23:28 | 2693033 StychoKiller
StychoKiller's picture

"There once was a crooked man, and he did very well!" -- Inner-City Mother Goose

Thu, 08/09/2012 - 15:38 | 2691977 LFMayor
LFMayor's picture

Oh, something wild and over the top.  Like flog his dog to the women's bra and undwear section of JC Penny's catalogue.  That guy seems so straight laced and his ass squinched so tight i bet he shits copper wire when he accidentally swallows pennies.

freak out!

Thu, 08/09/2012 - 15:50 | 2692030 azzhatter
azzhatter's picture

Next we'll see a report he discovered his long lost Uncle Moshe is from Tel Aviv

Thu, 08/09/2012 - 15:19 | 2691909 ParkAveFlasher
ParkAveFlasher's picture


Thu, 08/09/2012 - 14:52 | 2691844 hannah
hannah's picture

hope you filled out that 1099k form so the governmant can track your gold......

Thu, 08/09/2012 - 17:28 | 2692264 JohnKozac
JohnKozac's picture

At first I thought it said, "Fiscal Cliff Members"....not "fiscal cliff numbers."


Thu, 08/09/2012 - 17:51 | 2692303 Arnold Ziffel
Arnold Ziffel's picture

Congress Repeals the Obamacare 1099 Requirement

Posted by James Wilson, April 21, 2011
Thu, 08/09/2012 - 14:34 | 2691798 mrktwtch2
mrktwtch2's picture

yes..god forbid we should live within our we will just let the next generation pay for it..

Thu, 08/09/2012 - 14:43 | 2691819 A Lunatic
A Lunatic's picture

Charge it to my SNAP card.........

Thu, 08/09/2012 - 15:13 | 2691894 economics9698
economics9698's picture

When the feds borrow money and the new money is created you do pay for it as soon as the new money hits the street in the form of inflation. 

Thu, 08/09/2012 - 16:53 | 2692192 A Lunatic
A Lunatic's picture

There is no inflation. Only drought.......




Thu, 08/09/2012 - 17:07 | 2692230 pemdas
pemdas's picture

Speaking of SNAP cards, a woman at checkout was having trouble getting her card to work.  She says, "These things are such a nuisance, I have three of them, and I can never remember which PIN goes with which card."  Probably not a fan of voter ID either.

Thu, 08/09/2012 - 14:46 | 2691827 Beam Me Up Scotty
Beam Me Up Scotty's picture

Why stop at the next generation.  We can suck from every generation until the sun goes nova.  Then who cares?

Thu, 08/09/2012 - 16:46 | 2692177 OneTinSoldier66
OneTinSoldier66's picture

"What has the next generation ever done for us?" -Hugh Jidette

Thu, 08/09/2012 - 14:54 | 2691849 FreedomGuy
FreedomGuy's picture

You mean the next- next generation, right? I think we've caged three or four generations with debt already. So what's a fifth generation matter?

Thu, 08/09/2012 - 16:58 | 2692210 HardAssets
HardAssets's picture

Some day in the distant future historians will shake their heads in amazement at our criminal run 'civilization' built on the illusions of 'credit' and 'debt'. (All made up out of thin air). - - - Theyll wonder why people went along with it. - - - Makes as much sense as enslaving people to build pyramids so the Pharoh can go on to the afterlife. 


Thu, 08/09/2012 - 18:56 | 2692444 centerline
centerline's picture

Some day, alien archeologists will...

... not surpised at all of thier findings that humans did not survive thier adolescence as a species, but impressed at how far we made it in terms of technological advances before we exhausted the possibilites for our survival."


"On a long enough timeline..."


Thu, 08/09/2012 - 19:00 | 2692452 Axenolith
Axenolith's picture

No, they won't.  They'll do the exact same thing, denominated in something like quatloos or chits, and there will be an eclectic tiny minority of intelligent people tilting at their ponzi windmill (like us) and wondering how they can do this YET AGAIN after having seen it happen time and time again in the past...

ALl the time they're doing it again, the sheeple will be assured via their cybernetic links to the metaverse that "it's different this time"...

Thu, 08/09/2012 - 21:40 | 2692833 ZeroAvatar
ZeroAvatar's picture

Axenolith, if you're not Charles Hugh Smith, I'll be a stockade mule.

Thu, 08/09/2012 - 15:58 | 2692057 blunderdog
blunderdog's picture

The only part that really requires attention was at the very end:

neither party appears comfortable with significant cuts to Social Security or Medicare in the next decade

Thu, 08/09/2012 - 16:45 | 2692189 OneTinSoldier66
OneTinSoldier66's picture


Thu, 08/09/2012 - 16:47 | 2692191 DaveyJones
DaveyJones's picture

translated into english: neither party is anything more than an incompetent, paralyzed, two-talking whore

Thu, 08/09/2012 - 17:42 | 2692290 object_orient
object_orient's picture

Or this: We assume that Congress will act in the lame-duck session after the election to extend most of the current policies until sometime in 2013. A three-to-six-months extension would allow them to address the debt limit and provide some time to come up with a longer-term fiscal plan...


Kick the can for another 6 months

Thu, 08/09/2012 - 14:37 | 2691799 Clint Liquor
Clint Liquor's picture

This a non-issue. They will come together to pretend and extend at the very last minute, like always.

The 'Players'! A list of people that can kiss my ass.

Thu, 08/09/2012 - 14:46 | 2691830 Winston Churchill
Winston Churchill's picture

Pretend and pray the bond traders do not notice.

Its too late anyway unless drastic real cuts are made at once.

Not going to happen.

The SHTF moment  is coming,as late as 2014 or any time in between.

Keep preparing.

Thu, 08/09/2012 - 15:08 | 2691879 Gunga
Gunga's picture

Bond traders have noticed. That is why the Federal Reserve buys 60+% of the US Treasury bonds that are auctioned.

Thu, 08/09/2012 - 16:14 | 2692099 Winston Churchill
Winston Churchill's picture

Let me rephrase that;

Short end bond traders.

NOBODY is buying long dated UST's except the Fed.

They are junk and will never be repaid.

Thu, 08/09/2012 - 15:25 | 2691925 NotApplicable
NotApplicable's picture

Exactly. They just have to wait for enough pain to create a "mandate."

This shit ain't rocket science.

Thu, 08/09/2012 - 16:52 | 2692204 DaveyJones
DaveyJones's picture

kissing your ass is way too kind sir

Thu, 08/09/2012 - 18:58 | 2692447 moonshadow
moonshadow's picture

no way they cud kiss MY ass! their mouths are too dirty...all that kissin up to anything w' votes or money that moves and in every way possible. i dont want them Near my ass. plus im not into pols

Thu, 08/09/2012 - 23:34 | 2693057 StychoKiller
StychoKiller's picture

Com'on, you wouldn't hit this?

Thu, 08/09/2012 - 14:37 | 2691801 Hype Alert
Hype Alert's picture

That's ridiculous!  The Super Committee fixed that last year!

Thu, 08/09/2012 - 15:09 | 2691869 CrashisOptimistic
CrashisOptimistic's picture

I believe this guy has some errors in what he laid out.

First and foremost, the Sequester is not 2 Trillion, it is a bit over 1 Trillion. The other Trillion he refers to IS ALREADY CAST INTO LAW AND OUTYEAR SPENDING PROJECTIONS.

The 1 Trillion Sequester divides between Defense and non Defense, but the other Trillion was already embedded in the spending profiles for upcoming years.  These were DEFINITELY not lumped as the same thing.  The Sequester was argued as a partial tax revenue possibility, but the other Trillion has no such thing -- it is to be purely spending cut.  

That non Sequester trillion is backloaded so that FY 2012 only saw $4B of cuts, but they do sharply kick in starting next year and I think this guy has that wrong.  His number for magnitude of cut next year is only the Sequester portion, not the other Trillion.

This means GS's projection of GDP impact is understated.  Perhaps most important of all is the response by the credit rating agencies, who held off following S&P's lead last year and left AAA in place because this debt ceiling deal did indeed take 2 Trillion off planned spending.

If ANYTHING is done to lessen that, AAA will be lost across the board.

Thu, 08/09/2012 - 15:13 | 2691899 Hype Alert
Hype Alert's picture

IMO, the credit rating agencies have dug their own grave, again.  To the point that a downgrade will be ignored or the rating will be eliminated as a requirement.  Just the threat of another QE should have had them rattling their sabres, but there is nothing but silence that I see.

Thu, 08/09/2012 - 15:29 | 2691918 CrashisOptimistic
CrashisOptimistic's picture

A valid point, but the more compelling one is GS's error above is on the order of 0.5% GDP.  The contraction will be well north of 4%.  

And so tax revs dry up and the whole deficit computation goes to hell.

Or if they undo all the contraction, then we have another year of 1.2 to 1.3T deficit and we expect the agencies to say nothing to that?

I think they have to act.  Especially in the wake of what they have done in Europe.

Overall, this agency constraint needs to get more MSM time so it stops being a matter of politics where all they want to write about is Congress can't agree on stopping the cliff.  There's a LOT more involved in Congress not agreeing.  If they DO agree, it may be worse because as you alluded, a lot of pension funds and state holdings will have to divest, given they have proportion requirements of AAA and above for their portfolios.

Not many noticed last year the weekend S&P acted, Geithner spent that weekend drafting documents for all the pension funds and various holders of US Ts, giving them cover for not executing sales per their bylaws, stating that the S&P move was not universal and thus the paper remained AAA.  He can't do that if all the agencies cut.

Thu, 08/09/2012 - 17:59 | 2692326 object_orient
object_orient's picture

 [Geithner] can't do that if all the agencies cut.

Sure he can. It's about time for governments to nationalize the rating agencies anyway. Sovereign debt is too important to be scrutinized by private businesses, etc.

Thu, 08/09/2012 - 15:27 | 2691926 sessinpo
sessinpo's picture

The MSM misinformed everyone again. It was really a supper committee. Apparently they all just sat around eating food.


I imagine if they form a committee to tackle the drought conditions that will turn the mid west into a desert, it will really be a bunch of fat bastards eating cake and ice cream.

Thu, 08/09/2012 - 14:39 | 2691806 Cognitive Dissonance
Cognitive Dissonance's picture

Problem, reaction, solution.

Looks like a ready shovel made problem to me.

Thu, 08/09/2012 - 15:08 | 2691881 Simplifiedfrisbee
Simplifiedfrisbee's picture

The pot don't feel any hotter than it did last year.

Thu, 08/09/2012 - 17:24 | 2692256 Pubcoceo
Pubcoceo's picture

yes, also see Ordo Ab Chao...


Thu, 08/09/2012 - 14:41 | 2691814 Debtonation
Debtonation's picture

Doesn't everyone remember the Section 4 of the 14th amendment thing: "The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned"

No doubt that the markets will question it though.

It will be QE to infinity!

Thu, 08/09/2012 - 15:27 | 2691932 NotApplicable
NotApplicable's picture

Well then, the markets will be thrashed for doing so.

Thu, 08/09/2012 - 15:40 | 2691989 Thisson
Thisson's picture

We are not questioning it's validity, rather, we are questioning its payability.

Thu, 08/09/2012 - 14:43 | 2691818 Beam Me Up Scotty
Beam Me Up Scotty's picture


Thu, 08/09/2012 - 16:51 | 2692200 krispkritter
krispkritter's picture

I like this version:

It's got weepy music and a long drawn out downhill...which is what I expect we'll see...(bonus: it's a GM product!)

Thu, 08/09/2012 - 14:44 | 2691820 kito
kito's picture

what coming fiscal cliff??????...........dont look down wile e.coyote!!!!!!! passed the last piece of terra firma a lonnnnngggg time ago..................

Thu, 08/09/2012 - 14:47 | 2691832 Beam Me Up Scotty
Beam Me Up Scotty's picture

There will be alot of fat asses that will hit the ground before I do.  Hopefully they will cushion the fall for me.

Thu, 08/09/2012 - 14:49 | 2691838 optimator
optimator's picture

That's like the idiot that fell off the observation deck on the Empire State Building.

As he passed the 40th floor he yelled out, "I'm O.K. so far."

Thu, 08/09/2012 - 14:44 | 2691822 Buzzworthy
Buzzworthy's picture

Correction, this is the second most polarized Congress ever.  I'd say that Congress on the Wednesday after Abe Lincoln was elected in 1860 was a tad more polarized.

Thu, 08/09/2012 - 14:53 | 2691846 LawsofPhysics
LawsofPhysics's picture

Oh the irony. made it from Abe to Barack...

Thu, 08/09/2012 - 15:05 | 2691870 kito
kito's picture

i call bullshit on the polarization of congress...if anything congress needs the country more divided now than ever to distract from their desperate tactics....they know the end is near and they need to galvanize their respective herds like never think congress is polarized??????......perhaps you should look at some very telling bills that were passed happily by both parties:


h.r. 1540--permitting the indefinite detainment of american citizens without due process
h.r. 658 --allowing for the use of 30,000 drones in domestic airspace, yes as in domestic espionage h.r. 347  -- "anti protest" bill that is so purposely so vague as to ensure a citizen can be arrested merely for gathering in a space near an area where a government official is visiting. senate bill 1813 allowing for the government to strip you of your passport if they allege you owe more than $50,000 to the irs. this is done without due process. all that is needed is that their notice of lien. the same bill (strangely enough) mandates that starting in 2015, all new vehicles must be equipped with black box recorders. isnt that great?!? there is also h.r. 3523 the "cyber intelligence sharing and protection act" , which is pending, with both parties itching to pass, that will trample on your on line privacy. again, another bill that has no transparency

Thu, 08/09/2012 - 16:21 | 2692119 tenpanhandle
tenpanhandle's picture

This information is so disturbing that my first instinct was to junk you for bringing it to my attention. On another note, production of 30,000 drones ought to lift the economy out of depression.  We have a good start on that number already as there are 5 or 6 hundred drones sitting in congress/senate.

Thu, 08/09/2012 - 16:46 | 2692194 krispkritter
krispkritter's picture

Minor nitpick...I think he was talking about drones that actually work...

Thu, 08/09/2012 - 18:33 | 2692401 centerline
centerline's picture

+1.  Tip of the iceberg.  The politicians might be the stooges for the bankers, who are the mules for the elite.  But, most of these folks are much closer to the real game than any of us.  It's an outright grab at the world's real wealth, resources, etc. before a "real" tipping point is reached.  People forget too easy or overlook that the total lack of prosecution here against financial crime says a hell of alot about what is really going on.

 I guaran-damn-tee that what we see now is just a fraction of the shenanigans taking place to keep this pig afloat while the looting is in progress.

On a more disturbing note, stopping the looting isn't going to change our course... just the dynamics of how it goes down.  

Thu, 08/09/2012 - 14:45 | 2691826 azzhatter
azzhatter's picture

Fiscal Cliff?? Bring it

Thu, 08/09/2012 - 14:49 | 2691836 A Lunatic
A Lunatic's picture

Alls we gots to dooo is declare War on fiscal cliffs......

Thu, 08/09/2012 - 14:50 | 2691839 LawsofPhysics
LawsofPhysics's picture

More spending (defense or otherwise) ?!?!?  What part of broke do these fuckers not understand?

Thu, 08/09/2012 - 14:55 | 2691852 SemperFord
SemperFord's picture

Their paychecks depend on them no understanding so they will keep this rolling for a while unfortunately.

Thu, 08/09/2012 - 17:30 | 2692269 HardAssets
HardAssets's picture

"Their paychecks depend on them no understanding so they will keep this rolling for a while unfortunately." - - SemperFord

Shhhhhhh . . . dont let those dumb ass lawyers know that their paychecks are in useless fiat paper dollars. (Most of them know squat about economics - theyre in the extortion/protection racket.)

Thu, 08/09/2012 - 14:57 | 2691854 Clint Liquor
Clint Liquor's picture

What part of broke do these fuckers not understand?

The part where you have to quit spending.

Thu, 08/09/2012 - 18:45 | 2692423 centerline
centerline's picture

Well, according to most mainstream economic theories, our situation requires massive government borrowing and spending right now.  I say "lets do it to it" and find out if those theories work or not.  Not like anyone is going to stand a chance of actually balancing the budget.  So, stand the fuck back and I will push the damn button.  Pussies.

Hell, if not that, let's test ye' old private sector limited debt jubilee thing and find out precisely how the "global" economy responds to such behavior.  Crank up the check printing and let's distribute those funds.  Hookers and blow for those riding the .gov gravy train.  lol.... at least they get to go out in style (die like man thing).

Which one kicks the can slightly further down the road?  Hmmmm.....



Thu, 08/09/2012 - 14:57 | 2691856 TideFighter
TideFighter's picture

Ben Davies over at KWN said gold is poised for a big move, up or down.

Wouldn't I be better off to fade Goldman Sux than a coin toss?

At least I get odds better than 50/50.

Thu, 08/09/2012 - 17:47 | 2692296 Gadocat99
Gadocat99's picture

I hope it moves down. I would like a deep discount asap. I know where it will eventually end up.

Thu, 08/09/2012 - 14:58 | 2691858 Blue Dog
Blue Dog's picture

The only reason there's polarization is that the Democrats refuse to cut spending. They always lie about any possible spending cut. Obama wants the coming economic collapse and martial law that will go with it.

Thu, 08/09/2012 - 15:27 | 2691931 sdmjake
sdmjake's picture

Blaming one of the sides of the same coin.... Wake up! Ya been had. Ya been bamboozeled

Thu, 08/09/2012 - 15:00 | 2691860 EmmittFitzhume
EmmittFitzhume's picture

My short position insurance policy matures in 5 months

Thu, 08/09/2012 - 15:02 | 2691865 haskelslocal
haskelslocal's picture

How does a Patriot Act when Citizens United fall off a Fiscal Cliff?

Fucking names. 



Thu, 08/09/2012 - 15:06 | 2691875 magpie
magpie's picture

The USA needs a non-auditable ESM to solve its fiscal problems.

Thu, 08/09/2012 - 16:26 | 2692136 tenpanhandle
tenpanhandle's picture

The USA needs a non-traceable EMP to solve its fiscal problems.

Thu, 08/09/2012 - 16:33 | 2692155 magpie
magpie's picture

So no fake military coup or stuxnetting the Bernank's console ?

'Just haarp the place from orbit'

Thu, 08/09/2012 - 15:13 | 2691895 chancee
chancee's picture

Yes, it's true.  The stock market is not going to be allowed to fall during the Olympics.  Phony, phony, phony, phony ES futures action.  Comedy.

Thu, 08/09/2012 - 15:16 | 2691906 DeadOnArrival
DeadOnArrival's picture

Will the US be downgraded again this year?

Alec: Probably not.

Downgrade once, shame on you...downgrade twice, shame on me.  Maybe after the second downgrade the Government and Wall Street will start taking this seriously.  They need to call it the "Fiscal End of The World - 2012".  End of times prognostications always seems to chatch the public's attention.


Thu, 08/09/2012 - 15:32 | 2691953 NotApplicable
NotApplicable's picture

Thing is, it looks like we'll make it to 1/1/2013.

In your face, Mayans! (in my best Homer Simpson impersonation)

Thu, 08/09/2012 - 15:44 | 2692007 CrashisOptimistic
CrashisOptimistic's picture

He's right.

It won't be this year.  

It will be January or February 2013 when the deal is cut to continue another year of 1T+ deficit.  Then the agencies cut across the board and trigger the required bylaw sales by pension funds who must hold XX% of holdings AAA.

Thu, 08/09/2012 - 17:57 | 2692318 Arnold Ziffel
Arnold Ziffel's picture

Pension fund shortfalls are another 'black swan' issue:


SPRINGFIELD, Ill. (AP) — Recession-plagued states diverted scarce money away from pensions to pay for more immediate concerns, leaving a $757 billion hole in the retirement funds covering millions of public employees, according to a study released Monday.


Orange County alone is $10 billion in the hole:

I wonder when they will start cutting services?

Thu, 08/09/2012 - 15:21 | 2691916 Neethgie
Neethgie's picture

ok zero hedger's i think its time we combined our resources to build a spaceship and get the fuck off this planet.


Thu, 08/09/2012 - 15:50 | 2692032 shovelhead
shovelhead's picture

I keep looking for the mothership to arrive.

I won't even bitch about the anal probe as long as it's free.

I'm paying for the one I'm getting now and I don't even get a window seat.

Thu, 08/09/2012 - 15:55 | 2692044 exi1ed0ne
Thu, 08/09/2012 - 15:24 | 2691923 rsnoble
rsnoble's picture

Oh boy, more threats about the US "might" go into recession when there's millions of people sitting around with their fucking thumbs up their asses right now. Of course that doesn't count. Neither do high food prices, gas prices exploding rents etc etc etc all hail the GDP and corporate bullshit profits and all our insolvent banks. I guess everything is better than I think, look at the DOW.

Thu, 08/09/2012 - 15:35 | 2691966 NotApplicable
NotApplicable's picture

Just wait until they figure out those thumbs are good for looting. I figure the 200+ people flashmobs at  WalMart are just starting.

While there are benefits to selling everything one needs all under one roof, there are also drawbacks.

Thu, 08/09/2012 - 15:24 | 2691924 youngman
youngman's picture

What I am confused about is all the talking heads are saying buy dividend stocks...and dividends are going to be hit hard with the new tax rules....I forsee a lot of capital gains selling starting soon.....I would not wait until December 31st....they are missing Obamacare will "save" nothing....and cost here we go....our GDP is going to drop ....our revenues will drop....but our expenses unless we cut them are going to go up...and I don´t think even a congress full of Tea partiers and a Republican President can cut expenses enough...we need to cut 30% of the budget....all from Social Security , Medicare, Medicaid, state and local government pensions.......among a 100 stupid "programs".....sorry old folks...but you had the cake already... won´t happen

Thu, 08/09/2012 - 15:37 | 2691971 NotApplicable
NotApplicable's picture

Why on Earth would you bother listening to those people?

Talking heads have to talk about something. Dividends are the last carrot they've got left to tie to the stick.

Well, at least until the next false-flag...

Thu, 08/09/2012 - 17:26 | 2692260 Helix6
Helix6's picture

Notably missing from your list of cuts are two wars, subsidies to Oil producers, and ratholes such as Ethanol programs.

Here's the deal: the only fair way to handle the "fiscl cliff" -- a scare tactic if there ever was one -- is to let the tax cuts expire.  All of them.  Then get out the lawn mower and begin shaving every category of Federal expenditure.  All of them: Defense, HHS, Social Security, Medicare, Federal Retirement, Unemployment,... all of them! 

The bottom line is that federal deficits in excess of the percentage growth in GDP is inflationary and will eventually result in financial destruction.  And as for the "it's a bad time to do this right now" argument, hey, it's <i>never</i> a good time to have to cut back.  But the alternative is suicide. 

Thu, 08/09/2012 - 15:27 | 2691934 rsnoble
rsnoble's picture

"wind down emergency unemployment compensation". Makes perfect sense at peak disaster time. LOL. Save me the debt speech im just saying.

Thu, 08/09/2012 - 15:31 | 2691949 govttrader
govttrader's picture

Here's what you need to know about the fiscal cliff...over the next 20 days, the Fed is about to buy 10bln 30yr bonds of the 16bln that the treasury just sold.  Time to buy dips in treasuries.

Thu, 08/09/2012 - 15:35 | 2691964 ebworthen
ebworthen's picture


They'll just build a bridge to nowhere and put a sign up that says "Road to Xanadu".

Thu, 08/09/2012 - 17:15 | 2692242 Helix6
Helix6's picture

Actually, it would be better to maintain some of the bridges we already have.

Thu, 08/09/2012 - 15:38 | 2691969 CheapBastard
CheapBastard's picture

How about all those $300 psf boxes finances with near zero down?

"Some think just because the government is backing every loan that somehow things are all rosy.  FHA insured loans are seeing a growing rate of defaults.  Keep in mind this is a due diligence loan with a very low down payment.  That is, lenders are examining the total income and debt profile and yet people are still facing problems.  Let us not even discuss the 11 million nationwide home owners that are underwater."


Are they supported by the Cali unemployment picture?


And how about the massive public debt?

But remember, I'm a cheap bastard, especially in this Downward Deflationary Debt Death nosedive. I wouldn't pay more then the cost to build----$75 psf.


Via con Dios!

Thu, 08/09/2012 - 15:42 | 2691996 NEOSERF
NEOSERF's picture

As much as I appreciate ZH and it's point of view, given everything we have learned in the last 3 years about governments perpetuating their own jobs, and not addressing the issue at hand is there really any chance that this won't get put off 1 year so that neither candidate's party is seen as hurting their candidate this election year.  Both parties will declare victory and claim it was their side that avoided catastrophe...Both sides will be HAPPY to fight tooth and nail a year from now when it is clear they have something to win.

Thu, 08/09/2012 - 18:47 | 2692428 centerline
centerline's picture

The math eventually wins.

Thu, 08/09/2012 - 15:44 | 2692005 JamesBond
JamesBond's picture

I think we can agree that September 30th is the line in the sand.



Thu, 08/09/2012 - 16:05 | 2692078 vertexa
vertexa's picture


No more recession if hes re-elected? 

Thu, 08/09/2012 - 16:26 | 2692135 CABill
CABill's picture

America is doomed if Obama is reelected.

Obama's intentional goal is his continued destruction of America.

One and done, damage in his first term will take decades to fix.

Thu, 08/09/2012 - 18:49 | 2692433 centerline
centerline's picture

I really hope you aren't going to spout off about some other policitian/party who is going to save the day instead.

Thu, 08/09/2012 - 18:59 | 2692449 toomanyfakecons...
toomanyfakeconservatives's picture

He must be... only the coming MASS ARRESTS will dismantle the system and return the Constitution to it's rightful place in American life and law...

Thu, 08/09/2012 - 23:18 | 2693003 Anusocracy
Anusocracy's picture

The culture wired into Romney's brain developed 10,000 or so years ago.

The culture wired into Obama's brain develop hundreds of thousands of years before that.

Neither is suitable to the modern technological era.

Both will continue to fail.

Thu, 08/09/2012 - 16:27 | 2692142 denny69
denny69's picture

Guess one could say, "Down with capitalism!"; but it's not capitalism happening out there.

Thu, 08/09/2012 - 16:44 | 2692182 Ungaro
Ungaro's picture

Who is Cliff and why is everybody picking on him? I asked the mayor of my city if the federal, state and municipal debt was a problem. He said, "Nah, the government will just print more money."

What could go wrong?

Thu, 08/09/2012 - 16:54 | 2692207 lolmao500
lolmao500's picture

Here's the real fiscal cliff.

The U.S. fiscal gap, calculated (by us) using the Congressional Budget Office’s realistic long-term budget forecast -- the Alternative Fiscal Scenario -- is now $222 trillion. Last year, it was $211 trillion. The $11 trillion difference -- this year’s true federal deficit -- is 10 times larger than the official deficit and roughly as large as the entire stock of official debt in public hands.

Thu, 08/09/2012 - 17:04 | 2692224 Heroic Couplet
Heroic Couplet's picture

Deficit: the dry drunk former President stated the Iraq War would pay for itself in oil revenue. Has it? He hasn't come out of his hole in Crawford, Texas. He isn't speaking in Tampa. For all the bullcrap about Solyndra, the subsidies to Big Oil are much larger.

The tax cut have been in place for 11 years. Where are the US jobs?

Jon Corzine is walking around free. So is Phil Gramm. How much of the fiscal cliff gets laid at Phil Gramm's feet? Republicans want deregulation; they're too dumb to figure out that deregulation in the finance is the worst possible approach. Let's rejoice that four hedge funds have gone belly up and more are probably facing the same result. Good riddance. Let's see the employment in the finance sector shrink to 1930 levels. If the Chinese have a problem, they can keep what started in the finance sector in the finance sector and take their complaints to Phil Gramm. Good riddance.

Thu, 08/09/2012 - 17:12 | 2692233 Helix6
Helix6's picture

Of course, what is lost in this whole discussion is the fact that the Federal finances are on a completely unsustainable course.  Deficits of 10% of GDP in an economy that is expanding by, at best, 3%, is fiscal suicide.

The US is behaving like a drunk that won't face his problem.  But sooner or later, the drunk must either face the problem or hit bottom.  We can either bite the bullet now and try to right the ship, or we can all go down with it.  Our choice.

Thu, 08/09/2012 - 17:13 | 2692238 ptoemmes
ptoemmes's picture

Life imitates art:

I wish I could overdub...

Too had about the T-Bird.

Thu, 08/09/2012 - 17:30 | 2692270 alfred b.
alfred b.'s picture


    I'm gonna hold off for "Fiscal Cliff", the movie before making any comments

Thu, 08/09/2012 - 18:56 | 2692445 toomanyfakecons...
toomanyfakeconservatives's picture

You can also hold off for "MASS ARRESTS, THE REALITY SHOW", coming to every channel 24/7 before making any comments. Like 99.9% of Americans, you and I will be little more than spectators. It's what comes after that we are all going to have to get involved in.

Thu, 08/09/2012 - 17:45 | 2692294 Zero Govt
Zero Govt's picture

" a time when animosity and polarization in congress is the worst it has ever been in history."

There's actually considerably more common interests amoungst the Parasite Class of Govt than there are differences

don't you worry, this human scum will work out a way to keep feeding off society and binging on other peoples money.. it's in a parasites genetics to find food when they're hungry dieting here

Thu, 08/09/2012 - 17:48 | 2692298 booboo
booboo's picture

You do know that "Gang Rape" is a anagram of the word "Comprimise"

Well, it is in D.C.

Thu, 08/09/2012 - 18:07 | 2692352 Frastric
Frastric's picture

Let's talk about cuts when the US loses its full AAA rating (from all major credit rating agencies). Until then expect jawboning about cuts and spending galore to be the norm. Only when they realise actual cuts will be needed then it will be too late...

Thu, 08/09/2012 - 18:16 | 2692373 Zap Powerz
Zap Powerz's picture

Such theatrics.

Why do we even have a tax code when we can just print all the money we need?

Or did I miss something?  Surely, based on recent events, nothing bad can possibly happen by running the printing presses 24/7 to pay for, well, everything.

Thu, 08/09/2012 - 18:53 | 2692437 toomanyfakecons...
toomanyfakeconservatives's picture

Your Complete Guide To The Coming MASS ARRESTS, dissolution of the FED, repudiation of the debt, and the restoration of the Constitution...

Thu, 08/09/2012 - 20:03 | 2692616 alfbell
alfbell's picture

There is only one question to ask in these "we're fucked, every man for himself" times...

How can I profit or benefit from this?

Thu, 08/09/2012 - 21:17 | 2692783 haskelslocal
haskelslocal's picture

Tyler posted the script for how to manipulate people.

Fiscal Cliff? Well no fucking kidding if you stop spending then the spending baromotor will drop.

Fuck GDP. It's meaningless in a magnitude of ways.

Thu, 08/09/2012 - 23:25 | 2693025 illyia
illyia's picture

Thank you for posting this Tyler(s).

Thu, 08/09/2012 - 23:49 | 2693085 ankehaton
ankehaton's picture

even the msm is talking about the fiscal cliff. look for a surprise to the upside, 

Fri, 08/10/2012 - 00:00 | 2693106 squexx
squexx's picture

Don't forget that Goldman Sux was Obongo's 2nd largest contributer last time around. Must've upped the payments to Obongo's and Eric Holder's Cayman Island accounts this time!

It's time we started hunting down the Satanic Tribe behind it all. Shoot them down in the streets like the vermin they are!

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