Topic: us fiscal cliff: what is it? - page 3. (Read 3712 times)

It's actually a pretty real possibility, obviously the country itself isn't going to cease to exist lol but perhaps something will happen to the current federal government for sure.

come on i asked for no super-paranoid stuff. :-)

are you guys sure?

http://en.mercopress.com/2011/03/15/china-became-world-s-top-manufacturing-nation-ending-110-year-us-leadership

http://investing.curiouscatblog.net/2011/12/27/top-10-countries-for-manufacturing-production-in-2010-china-usa-japan-germany/

Basically the US economy will cease to exist in 1-2 years.

HAHAHAHAHAHAHAHAHAHHAHAHAAAA!!!!!

^_^


This guy has it right, a lot of America is made up of military spending, hence why you have people that rant about the military industrial complex which is what that is.

The manufacturing is largely defense related (government expenditure).  China manufactures consumer goods.

i thought the united states had a huge manufacturing base, second only to china?

The Fed is buying up treasuries... in other words lending money to the Federal Government.  Treasury prices move inversely to interest rates.  The government can't afford for interest rates to rise, without the Fed writing down their debt, which other (foreign) investors might see as a default, and will certainly add inflationary pressure.  In order to keep rates down, they must buy more and more treasuries.  Operation twist has been the Fed buying long term treasuries (to keep the long term interest rate low) using proceeds from selling short term treasuries (on the open market).  This would normally drive the short term rates up, but there is plenty of demand from outside investors who want to exchange their long term US debt for bonds that mature sooner.

Unless the winds change, Operation Twist will come to an end in January 2013.

Now think of the market minus this distortion.

The Fed's buying pressure ceases ending the support of the long term prices (they stop holding long term rates down).  The selling pressure ceases ending the resistance to the short term prices (they stop the upward pressure to short term rates).  Sure, many bond investors will recognize this, but it takes a while to turn a market of that size.  The market (in the short term) will drive down the short term rates, spurring cheap, short-term lending/refinancing (the kind of debt that people pay off), but decreasing investor appetite.  The market will simultaneously drive up the long term rates, increasing investor appetite but at the cost of interest rate increases on mortgages and other long term loans.  However, QE-infinity involves purchasing mortgages, so the hope is that they can at least keep rates low there.

The spiking long term rate will add leverage to force the politicians to fix the cluster-fuck they have created, at the expense of the long term debt markets.  This will hurt corporations who rely on financing for construction projects, but many corporations are flush with cash now.

Cash will be king soon, but its reign won't last.

The growth that the establishment economists are talking about is phony, the reason it's going to have such a 'catastrophic' effect is because it is forcing companies to stop unproductive businesses that aren't making anything which is what a big percentage of western countries are made up of, they can't tax the private sector any more to get their money because there is barely any private sector left and they can't borrow the money because no one wants to lend any more. For years now we've essentially been leeching off countries like Germany and China that are production based economies whereas the countries that most of us live in don't make anything and don't have anything of value so the whole system is collapsing in on itself.

So really in simple terms, the fiscal cliff is the end of a long running con that many western countries have been perpetrating and many stupid pillocks have been voting for unwittingly because they didn't know any better and they seem to think that the politicians are actually capable of keeping it going judging by the fact they've re-elected Obama for the second fucking time. I think I'm going to avoid using the word fiscal cliff because I think this is actually some made up PR word to make the people think people less of the situation they're in, I actually think what they're talking about is a recession/depression and it's going to come in hard on the U.S

Edit: Here's a little link where Peter Schiff explains pretty well what's going on with the U.S economy: https://www.youtube.com/watch?v=IlWpGm9POwQ

In my opinion Fiscal Cliff = Recession/Depression PR word

Well the important number isn't amount of total GDP, but how it cuts into growth.  Average annual GDP growth is 3%.  If we had 4% GDP growth before, and subtracted a half percent after, we're still above average.  If we're already in recessionary 1.1% GDP, and get knocked down to 0.6% that's basically kicking the economy while it's down.

But I don't think it's as doom-and-gloom as the media tries to make things out, and I think there will be a compromise, although that might be a few weeks into 2013.

is a 1/2 % reduction in GDP really that big of a deal? why is everyone making so much of a fuss about it?

is a "recession" really that bad if that's all that happens, or is the concern that it will lead to some kind of a chain reaction?

In 2011 the president wanted to raise the 'debt ceiling', the maximum amount of money the federal government can borrow by law.

The Republicans would only approve the deal if there was a provision for massive spending cuts at the end of this year.  This also coincides with Bush-era tax cuts ending.  The intent was to intentionally paint the government into a corner, so that they would have to come up with a plan that Democrats and Republicans could agree on.

I believe the numbers I heard was that the total impact would end up being a 1/2% reduction in the United States GDP, but I don't have a source for that now.  Corrections are welcome.

Some people thing this reduction would hurt the recovering economy, possibly causing recession.

TLDR: Politicians played games so they could increase government debt while saying they were against it, and now they're playing games to show either they're (a) anti-deficit and the other guys want to raise working peoples taxes, or (b) the other guys don't think the rich should pay their fair share, want to raise taxes for everyone, and slash government programs.

in the u.s. the economy is running at a 15 trillion dollar pace (gdp 15 trillion a year).  

but the government is borrowing over a trillion dollars a year and spending in the economy.   so take away that spending and the gdp will likely drop.  a dropping gdp is the definition of a recession.

to "keep the party going" congress would need to borrow more, but there is a "debt ceiling" law preventing that from occurring.

so without the power of being able to use fiscal policy (taxing and spending by the government) to avoid recession, the term fiscal cliff describes what awaits.

this started in 2007, 2008.  instead of dealing with the problem then, instead there was tarp, then "stimulus", qe1, qe2, and now qe-eternity and the can got kicked to where it lies today.  simply kicking the can causes a bigger, heavier can and trying to kick the can further now could break your foot.

so tricks and politics have led us here, to the edge of the fiscal cliff.   enjoy the view because it is going to get ugly real soon,

can someone explain it in simple terms, holding back on the paranoia a little.

what is it?
what is it going to accomplish for the united states?
why?