Fiscal cliff this and fiscal cliff that. Mathematically it is game over. Tax the rich, cut benefits to the needy; it doesn’t matter because the debt itself is un-payable not to mention the interest. Let’s assume that the Congress does “cut a deal,” it will buy some time only (maybe very little) and cannot avoid the final resolution. The final resolution being default, whether it be non payment or devaluing the currency it will still be a default where someone somewhere (many everywhere) loses “value” and does not get paid.
Whether a “deal” gets done before Jan. 1 is a moot point because whatever is actually done will do nothing. As a side note, I find it revolting (typical) that Congress plans to adjourn before the first of the year and President Obama plans a 3 week Hawaiian vacation whether or not a deal is struck. I am not saying that the current bankruptcy is this President’s or Congress’s sole fault; it is not (but they did help put the cherry on top). What I am saying is that it is THEIR job to at least TRY to find a solution. That is what “the people” entrusted in them when they voted for them. In my opinion, the president and Congress should lock themselves in a room (viewable with full audio on C-SPAN) and come up with something…anything… because that is their job and they do get paid taxpayer money for their “work.”
That said, if I were “king,” I would have a different solution with much less drama leading up to Jan. 1. I would tell the public (I try through my writings) that “game over” has arrived and the “reset” button needs to be pushed. I would tell the whole country, “Let’s everyone hold hands and jump off the fiscal cliff together singing Kumbayah!” We have been kicking the can into the wall at the end of a dead end street for years, no matter how hard you keep kicking the “can” it can go no further and do no good. It is time to “fess” up and admit failure (if not fraud).
Follow this through, actually “going over the cliff” is THE only way to balance the budget, REALLY and TRULY balance the budget. If the federal government doesn’t have the revenue… they can’t spend it can they? Add to this a NO vote on raising the (unlimited) debt ceiling and presto, we have to live within our means! Yes I know, the financial world will come to an end as will our standard of living. The economy will contract AT LEAST 8% (which is the amount of current deficit spending) plus the ripple effects from this “stimulus withdrawal.” The economy very well may contract 50% or more initially when things grind to a halt and possibly level out at a level 25-35% lower than where it (falsely) is now. At least it will then be “real.” “Paper pushers” will need to get real jobs and the economy will morph its way back to one of actual production rather than being one of paper speculating.
Virtually ALL financial institutions will be bankrupted. This is simple logic, if the government is bankrupted… that means the currency is worthless (because it is full faith and credit fiat)… which means all savings and paper collateral are worthless. As I have said before, “everything is worth nothing” and no matter how hard you kick the can or fraudulently shroud this fact, it is nevertheless FACT. The only missing piece to this becoming “known and understood” is perception. People today know in their gut that something is really REALLY wrong but just keep going forward because they know nothing else to do. They don’t want to admit to themselves (because it is just too horrifying) the reality of the situation. “This” can never happen in the U.S. because it never “has” and…”this is the U.S.”
One way or the other, this exact scenario WILL happen, it has to per the laws of Mother Nature. The U.S. is not immune to the laws of Mother Nature any more than any other individual, state, province, country or previous empire. So, as I said earlier, let’s JUMP off the fiscal cliff together and let EVERYTHING come down in a smoldering heap. We should have done this 10-20 years ago and the actual economic hardship would have been far less but we didn’t. No, instead we decided to “blow the bubble” higher and higher through the use $ trillions upon $ trillions (eventually over $1 quadrillion) of derivatives. These derivatives were employed time and again to HIDE reality by rigging markets. The realities of what free markets would have exposed. Now, everything everywhere has already been “hocked” and the ability to “lever up” further is no longer available. The inability to lever up further is exactly what each kick of the can was made of, because of the current inability to lever further we may miss the can entirely with the next kick. It’s time to go over the cliff with our eyes wide open! When it comes to “austerity”, sooner is always better than later, unfortunately, the current time frame is definitely later… much too much “later”.