Thursday, November 15, 2012

The Looming Financial Cliff

Are we headed for a double dip, and will we go over the looming financial cliff? Many economist question whether we ever really exited the grip of the "great recession". We should note that the Great Depression had more then one stage. I find myself wondering if the recent higher consumer confidence is merely based on an acceptance of a economic reality called "the new normal" and the result of a positive spin manufactured by a pro Obama media during the election?

To my surprise I recently discovered that many people are so poorly informed that they do not even know about the fast approaching fiscal cliff. This term refers to the convergence of two events on December 31, 2012 — the expiration of almost every tax cut enacted since 2001, and a scheduled reduction in government spending. If the experts are to be believed, when taken together these two events threaten to bring the American economy to a schreaching halt.

Middle and higher income earners will most likely receive a tax increase, but reality is that all, including the poor are looking at less disposable income going forward. All the government's spending does have a price. To many the answer is  putting on another patch attached to another promise, hope abounds we can avoid the pain tomorrow and kick the can further down the road into the future. 

Just yesterday I heard several financial television shows putting out the idea that the "fiscal cliff" may be more like a "bunny slope" and not have the impact that many of us fear. One fella pointed out that the financial cliff is not etched on the earths landscape but made by man. This optimist went on to say that Washington was ready to make the hard choices and do the right thing.

Is this really our economic doomsday? Even the most diabolical demons could not have created a more daunting economic ditch or troubling monetary trough. If the most optimistic forecasters wish to call what faces the American economy a bunny slope they should at least be honest enough to concede that it is ugly. Their so called "bunny slope" may go on, and on, and on forever, and only end when it reaches the depths of hell. 

If you have time please go on to read my post about government debt;

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