Best of the Week
Most Popular
1.UK House Prices BrExit Crash NOT Likely Despite London Property Market Weakness - Nadeem_Walayat
2.BrExit Morning - New Dawn for Britain, Independence Day! - Nadeem_Walayat
3.LEAVE Wins EU Referendum - Sterling and FTSE Hit Hard, Pollsters, Bookies and Markets All WRONG! - Nadeem_Walayat
4.BrExit Implications for UK Stock Market, Sterling GBP, House Prices and UK Politics... - Nadeem_Walayat
5.Trading BrExit - Stocks, Bonds, Sterling, Opinion Polls, Bookmaker Odds and My Forecast - Nadeem_Walayat
6.FTSE and Sterling Brexit Trading, Deconstruction of the EU Referendum Result - Nadeem_Walayat
7.UK Interest Rate Cut to 0.25% Imminent and More QE Money Printing - Nadeem_Walayat
8.Trading BrExit - British Pound Plunges, FTSE Stock Futures Slump on LEAVE Shock Referendum Win - Nadeem_Walayat
9.The Stock Market is Reading it Wrong! - Chris_Vermeulen
10.Breakouts Galore in Gold and Silver - Jordan_Roy_Byrne
Free Silver
Last 7 days
Gold Stocks Benchmark Battle - 30th July 16
Top 10 Pokemon GO Playing Tips, Tricks and Secrets! - 30th July 16
Asset Bubbles Tend to Crash with a Vengeance - 29th July 16
Retirees Are Risking Their Life Savings on Junk Bonds - 29th July 16
The Next Recession is Coming - Expect Around 0% Returns for the Next 7 Years - 29th July 16
SPX is Shaking and Rolling - 29th July 16
Stock Market Insiders Are Secretly Selling, Cycle Top Next Month - 28th July 16
FOMC Interest Rates and Their Impact on the US Economy - 28th July 16
The State Of The Economy - 28th July 16
Elliott Wave Crash Course - 3 Ways the Elliott Wave Principle Enhances Your Trading - 28th July 16
Japan's "Helicopter Money" Play: Road to Hyperinflation or Cure Debt Deflation? - 27th July 16
Monetary Zika - The Insidious Nature of Credit Expansion - 27th July 16
Gold and Pork Bellies - 27th July 16
Silver Is Insurance Against The Worst Part Of This Depression - 27th July 16
Don’t Buy The SPX Hope Stock Market Rally! - 27th July 16
Bitcoin $650 Still in Play - 26th July 16
Deutche Bank Stock Price Crash - The EU Has Problems Far Beyond the Brexit - 26th July 16
The Forex Markets Are Getting Exciting! - 26th July 16
Underpriced Silver Is the “Rip Van Winkle” Metal - 25th July 16
Declines in Multiple Market Indexes - 25th July 16
Retailers Are Doomed as Most Americans Are Too Poor to Shop - 25th July 16
Here’s One Currency That Could Go to Zero - 25th July 16
Stock Market Top is Expanding - 25th July 16
Silver Manipulation – Because They Needed the Eggs - 25th July 16
Silver Market COT Stuns: What's Going On Here? - 24th July 16
Gold Demand Remains Stable During Sector Weakness - 24th July 16
Sernova, Diabetes and Haemophilia - 24th July 16
Russia: Tensions, Turmoil, and Western Hubris - 24th July 16
Soybean Commodity Price to Soar Again - 23rd July 16
SPX Stock Market Uptrend Continues - 23rd July 16
Gold And Silver – Debt Addiction Will Carry Precious Metals Higher, Guaranteed - 23rd July 16
Pokemon Go - How to Play, First Use, Balls, Stops, Catching Pokemon's... Great Excercise! - 23rd July 16
7 Signs That the Gold Market Remains Resilient - 23rd July 16
Basic Income in The Time of Crisis - 23rd July 16
Silver Bull Faces Correction - 22nd July 16
The Serious Warning No One’s Talking About - 22nd July 16
Stock Market Insight from Greed, Volatility, and Put/Call Ratio - 22nd July 16
What Will Happen To the Stock Market When Interest Rates Rise? - 22nd July 16
How to Escape the World’s Biggest Ponzi Scheme - 22nd July 16
Addicted to Debt - We Can’t Borrow from the Future Anymore - 21st July 16
Not Everything Is Bullish for Gold - 21st July 16
Don’t Get Sucked Back Into the Stock Market - The Big Picture Hasn’t Changed - 21st July 16
Silver – Caught Inside - 21st July 16
Forex: "The Markets Are Getting Exciting!" - 20th July 16
China Economic Troubles - Is Kyle Bass Finally Getting His Revenge? - 20th July 16
Why Lithium Will See Another Price Spike This Fall - 20th July 16

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

The Power of the Wave Principle

Why the Fiscal Cliff Will Happen… For About a Week

Politics / Financial Markets 2013 Dec 10, 2012 - 10:00 AM GMT

By: Investment_U

Politics

Alexander Green , writes: A few weeks ago, The Oxford Club held its special Post-Election Conference at the luxurious Willard Intercontinental Hotel in Washington, D.C.

We were there to talk about the election results and how they are likely to impact your stock portfolio in the months ahead. Here is a brief re-cap of my analysis.


Before the election, the Democrats controlled the Senate, the Republicans controlled the House and Obama was in the White House. The same is true today. This is dispiriting to many, not least of all because this is the same gang that has dithered on important policy issues, spent like drunken sailors, and generally hampered the recovery over the last two years.

There are good reasons for optimism, however, beginning with the so-called “fiscal cliff,” approximately $600 billion in automatic tax increases and spending cuts set to take place beginning January 1.

How can this be good? First, because it isn’t going to happen. And, second, because it will set the stage for genuine reform. Here’s what I mean…

The first rule for an educated citizenry is to forget everything your politicians say and watch only what they do. And what they are not going to do right now – despite the claims of the fear mongers and propagandists on both sides of the aisle – is throw the economy back into recession by letting the fiscal cliff become a reality.

I know both politicians in both parties are saying they are far apart but this is simply how the game is played. In particular, if Republicans are going to cave on their promise not to raise taxes they have to wait until after January 1. Why? Because then the top tax rate rises to 39.6% automatically.

Once it becomes law, they can restore all the Bush tax cuts except for the top 2%, lower their new top rate to, say 38%, and try to save face by claiming they cut the top tax rate instead of raising it. (Even though it will be higher than the current top rate of 35%.)

Cynical? Yes. Wrong-headed? Yes, but it is likely to happen anyway. Polls show that 60% of voters will blame Republicans if everyone’s taxes go up.

As for the spending, let’s get real. Republicans and Democrats have never had a problem coming together to let federal spending flow and this time isn’t likely to be any different.

This compromise – which we are likely to see fairly quickly – will only be a short-term patch by a lame duck Congress. But when the new Congress comes to town, expect to see something like Simpson-Bowles II. Only this time Obama isn’t likely to ignore the bipartisan commission’s budgetary and entitlement reform proposals.

You’re skeptical? Don’t be. Obama owns this budget deficit now. He knows that if he doesn’t do something about the long-term fiscal crisis we face, his legacy will be mud.

Bill Clinton, for instance, was no Ronald Reagan. But he did cut the capital gains tax, reform welfare, sign NAFTA into law and preside over a budget surplus. Clearly, it is possible for a Democratic administration to sign pro-business, free-market reforms.

There’s an old saying in politics: “Only Nixon could go to China.” The implication is that only someone like Richard Nixon, a man of unquestioned anti-Communist convictions, could reach out 40 years ago and engage constructively with the Chinese without fear of being labeled an appeaser.

Expect something similar in Obama’s second term. Perhaps only a man clearly committed to a strong social welfare network can rein in runaway entitlement spending without being labeled heartless, uncompassionate, or a toady of the rich.

Exactly how we’ll get there is unclear, but reforms will almost certainly include some combination of delayed eligibility for future recipients, means testing, spending cuts and increased revenue. Neither the right nor the left will be entirely satisfied with the result – and there will be plenty of name-calling and hyperbole before we get there – but that’s why we call it compromise.

In short, the real looming crisis is not the fiscal cliff on January 1. It’s the current entitlement system that – in its present form – is absolutely guaranteed to come undone by time and arithmetic.

Progress on this front – which we are likely to see next year – will be good for the dollar, good for the stock market, and good for the future of the United States.

Govern your portfolio accordingly.

Good Investing,

Alex

Source : http://www.investmentu.com/2012/December/the-fiscal-cliff-will-happen.html

by Alexander Green , Oxford Club Investment Director Chairman, Investment

http://www.investmentu.com

Copyright © 1999 - 2012 by The Oxford Club, L.L.C All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Investment U, Attn: Member Services , 105 West Monument Street, Baltimore, MD 21201 Email: CustomerService@InvestmentU.com

Disclaimer: Investment U Disclaimer: Nothing published by Investment U should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investment advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication or 72 hours after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Investment U should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Investment U Archive

© 2005-2016 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments

assetmgr44
10 Dec 12, 21:55
Fiscal Cliff

Alex:

You have a fuzzy memory of political facts. It was a REPUBLICAN-led Congress that proposed welfare form in the 1990s. Clinton simply signed it into law. That hardly qualifies for giving him full credit for it. That's like awarding the Nobel Peace Prize to President Obama (for doing nothing). As far as the budget surplus of the 1990s goes, need I remind you that CONGRESS prepares, authorizes, and appropriates budgets, NOT the President. Once again, give credit here where credit is due (which does NOT happen to be due to Pres. Clinton).

As for our current budget disaster much (if not all of it) can be traced back to January 2007, when the Democrats assumed total control of Congress. Since that time gas prices have exploded, housing prices collapsed, and other commodity prices have soared. Just do the math. If you do, you will find that Dems are totally incapable of restraining any spending, because they provide "candy" to just about every major interest group i,e, unions, teachers, lawyers, feminists, minorities.

So to conclude, your hopes of Obama coming to the rescue of this economy are ill-founded. The man is a social engineer and committed demagogue. He is not interested in solving this country's problems. He wants to tear it all down and start all over where everything is "fair and square".

C.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Catching a Falling Financial Knife