Now is the time to deal with the Fiscal Cliff

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Originally Posted by Hazir

Same question I have really even though I can follow the logic somewhat; countercyclical and all that, it just seems to me that what Wiggin is proposing, is tantamount to doing nothing because the economy isn't growing. That seems a bit old school to me; hoping that growth alone will take care of the problem. We already know that that's not really going to happen. And do we really want just another lost decade like in Japan only on a bigger scale?

BTW, am I right in thinking that the current deficit stands at close to 100% of discretionary spending?

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If you exclude military spending (which ironically enough currently stands at $666 billion :) ).

Seems like Obama has just done whatever one does to make a gun ready to fire it :D (clearly no NRA member here)

Chambered a round? Flicked off the safety?

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Originally Posted by LittleFuzzy

Chambered a round? Flicked off the safety?

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That sounds about right. I mean, NYT is flashing that he refuses to extend the Bush tax cuts, that is a declaration of war under the present circumstances? Or to quote from another part of the world 'he opened the gates of Hell'.

On the positive side: If he refuses to extend the tax cuts there's no reason to avoid the sequestration.

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Originally Posted by ar81

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Ironically, CDS spread is low for US. At the beginning of 2013 US will run out of money, so the debt ceiling must be raised and more money must be printed.

2008 crisis was caused by unregulated credit, plus the dangers of derivatives that infects the rest of economy.

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Spreads, swaps, yields....the debt derivatives and financial engineering of previous decades has been astounding. It's infected the rest of the economy with little or late notice. Certain "agendas" have managed to make it so complex and opaque, that anyone demanding better oversight or Regulation can be painted as anti-market, anti-business, anti-capitalism. Even on this forum. Some posters like to make accusations of ignorance or paranoia, or pull the Chicken Little or Luddite Card. Wait for it....

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Recessions are not a natural disaster, they are man made.

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Recessions might be normal ebbs of normal economies. Financial Disasters are definitely manmade.

The economy is man-made. We can go back to nature, be hunter-gatherers if you prefer. Just don't think of using a spear to hunt with.

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Originally Posted by GGT

Spreads, swaps, yields....the debt derivatives and financial engineering of previous decades has been astounding. It's infected the rest of the economy with little or late notice. Certain "agendas" have managed to make it so complex and opaque, that anyone demanding better oversight or Regulation can be painted as anti-market, anti-business, anti-capitalism. Even on this forum. Some posters like to make accusations of ignorance or paranoia, or pull the Chicken Little or Luddite Card. Wait for it....



Recessions might be normal ebbs of normal economies. Financial Disasters are definitely manmade.

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Shall we try not to do that whole thing again in a discussion about the US budget? Last time I checked the budget was not about opaque investment tools.

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Originally Posted by RandBlade

Lets get one thing straight: The cliff even if implemented in full is not taking the deficit down to zero. It is certainly not running surpluses which is what counter-cyclically ought to be done right now. It is a start and nothing else.

In that perspective, then January 1 is not the deadline for resolving the crisis that is the US budget. Its the deadline for starting to do so.

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Ok I think this goes and spells out why we are butting heads. I have been talking all along about what is referred to generally as the Fiscal Cliff Crisis - specifically the expiring Bush Tax Cuts, the expiring payroll tax cuts and the sequestration from the debt ceiling Can Kick, all due to take effect on Jan 1, 2013. I have never been talking about the 'crisis that is the US budget.' Assuming you have always been talking about that, then no wonder.

The Fiscal Cliff is NOT a crisis. Its putting a bandage on a gaping wound that requires surgery or else amputation will be coming.

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Originally Posted by EyeKhan

Ok I think this goes and spells out why we are butting heads. I have been talking all along about what is referred to generally as the Fiscal Cliff Crisis - specifically the expiring Bush Tax Cuts, the expiring payroll tax cuts and the sequestration from the debt ceiling Can Kick, all due to take effect on Jan 1, 2013. I have never been talking about the 'crisis that is the US budget.' Assuming you have always been talking about that, then no wonder.

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Wasn't that clear from the strange time path in the OP ?

You already made up your mind what the bigger risk is? Is the bigger risk that the US goes over the cliff or is the bigger risk that it doesn't? I mean, kicking the can down the road goes as long as the road is.

I'm almost hoping we'll fall over the fiscal cliff in January 2013, just to see what happens. Sequestration would kick in, meaning automatic cuts in spending -- including military/defense -- and tax payers losing deductions like home mortgage interest. My guess is this wouldn't last too long before "the markets" started trending downward and every "investor" began freaking out....on the threat of double dip recession.

The eurozone as a whole is experiencing another recession. Spain is a fricking mess. It's tempting to think more deficit spending might help...but currency trades and monetary policy can't do all the heavy lifting.

What Spain, and most of Europe, needs is some thorough spring cleaning in its bank sector, but I don't see any of that happening before 2014 as we still have to demolish national bank supervision and the nationalist tendencies that comes with that first. If they manage to at least let the ECB have the tools to instruct banks all over the zone or even close them down, that would be a good thing. I think banking licenses should be the remit of the ECB too.

Huntsman 2016.

Seems like the plans being negotiated so far amount to a marginal kicking of the can.