The Fiscal Cliff:
The political and economic ramifications are too big for Washington to let the larger tax increases and spending cuts take effect. This in not to say that the journey will not be contentious and could also be a cliffhanger. Simply said, doing nothing would inflict too much damage on individuals’ wallet. A compromise will be worked out. The possibility of a double dip recession is the most important reason to believe that the President and Congress will reach some accommodation. Without agreement, financial markets will crater; sequestration cuts from the military and across the board discretionary spending are too crucial, lawmakers will be forced to make responsible choices in cuts; could backfire on political parties’ constituents and affiliations; it also could lead to progress in cooperation to resolve other issues.
We will see a very tough 2013 and 2014. The solvency of the Fed is concerning; Inflation is worrisome; immigrant bashing is wrong, actually foolish, we need these people; finally we are Americans and we must begin to act for the good of our economy, our families and our country.
WE ARE now at the end of the fourth quarter of 2012. That means that it has been five full years since the American economy first tipped into recession amid a gathering financial storm. How have we done since that time?
Europe is in a political crisis, not an economic one. Integration needs to be a more conscious decision. It is much more like 1930, rather than 1939! Thankfully those wars now exist mostly as movie reels in European imaginations. The most important point is that Germany now really must ‘Lead’. Chancellor Merkel has herself said that Europe had to stay intact, though the external populace is becoming angry. Meanwhile Germans are doing their homework by reforming and becoming more competitive. Greek debt was reduced by 40 billion euros, to 124 percent of GDP by 2020. The 17 country Eurozone has fallen back into recession and surveys point to increasingly depress conditions across the Eurozone. Unemployment is high, fears that the recession will deepen and make the debt crisis even more difficult to handle. The Eurozone economy is worth about 12.1 trillion dollars, about the same size as that of the US economy. The region with its 332 million population is the US’s largest export customer. Nothing to sneeze at. The US managed to claw its way back from its recession of ’08 and China continues to grow, though at a slower pace, Europe’s economies have been on a downward spiral. There are few signs of improvement.