U.S. economy heading straight for the cliff

Discussion in 'Americas' started by pakdefender, Jun 6, 2012.

  1. pakdefender

    pakdefender SENIOR MEMBER

    Joined:
    Aug 7, 2009
    Messages:
    4,730
    Ratings:
    +3 / 3,963 / -17
    Country:
    Pakistan
    Location:
    Pakistan
    Washington (CNN) -- You do not have to be an investor in the stock market or real estate or looking for a job to be alarmed when several highly regarded observers warn that the United States economy is about to be driven "off the cliff" by increasing debt, the expiration of tax cuts and the prospect of deep spending cuts.

    The alarm should concern anyone who cares about our democratic system.

    The reason we are getting awfully close to the edge is because the Democrats and Republicans are inclined to pull the steering wheel in opposite directions. Granted, alarms are often sounded, but as we shall see shortly, this time there are strong reasons to fear that our gridlocked political system will prevent us from responding before we go over the edge.

    The most authoritative voice speaking out this time is that of Ben Bernanke, the chairman of the Federal Reserve. He stated recently that, "It is very important to say that if no action were to be taken by the fiscal authorities, the size of the fiscal cliff is such that there is, I think, absolutely no chance that the Federal Reserve could or would have any ability whatsoever to offset that effect on the economy."

    Mohamed El-Erian, the highly regarded CEO of the investment management firm Pimco, wrote recently in an article in The Washington Post headline "The Fiscal Cliff Cometh" that, "In the next few months, possibly within weeks, markets here and abroad will be looking for signals that our politicians understand the severity of the situation and are able and willing to act appropriately. If clear signals are not forthcoming, markets could react early to the looming trouble, compounding the uncertainties that weigh on the U.S. economy."

    The Economist changed the metaphor but not the point.

    Under the title "cliff diving," it predicts that Congress is unlikely to pass a "grand bargain" before the end of the year and that "[c]redit-rating agencies may well lose patience" before lawmakers get their act together. This in turn would lead to higher interest rates that might well push the fragile economy into another recession.

    The main reason Bernanke and other financial and political observers are worried is that by the end of the year, we will face what might be called a triple witching hour. At that time, the Bush tax cuts will expire and the payroll tax holiday will end. Additionally, Congress has committed itself to cutting spending by about $100 billion next year and more than $1 trillion over the next decade.

    If the Bush tax cuts and payroll tax holiday are extended, and Congress wriggles its way out of its commitment to cut spending, the deficit will swell to the point where alarmists see us going the way of Greece.

    If the Bush tax cuts and payroll holiday are not extended, and Congress lives up to its commitment to cut spending, the drag on the economy will be severe. The economy is expected to decline by 3.5% to 5% ; that is, it will be pushed back into a serious recession. No wonder some predict "Taxmageddon."

    Dealing with this dilemma requires political cooperation between the GOP and the Democrats, between both houses of Congress and the president. Few expect the sides to reach a major deal before the elections. That is, under the best of circumstances, we will come close to the edge of the financial cliff because these matters must be settled by the first of the year, and markets often do not wait for the actual date to tank -- they anticipate.

    Assuming we somehow will be spared until the elections -- what will happen after November 6? While that depends on the election results, people should note that the current power setup will be in place until January 20.

    Thus, even if Mitt Romney is elected president, Barack Obama will still be in the White House when the master deal must be struck, the Democrats will still have a majority in the Senate, and the GOP will still be able to filibuster and control the House.

    Ajay Rajadhyaksha of Barclays Capital aptly described the evolving conditions as "a slow-motion train wreck." Marion Blakey, president of the Aerospace Industries Association, asked, "How do you plan for chaos? It's almost a unique moment in government because there's so much at stake. And there's nothing that inspires confidence that [a congressional deal] will get done."

    Political theorists hold that democracies need crises to focus leaders' and voters' minds and get bickering parties to work together to find a solution.

    This is not what happened in Greece and may well not be in the cards for several other European nations that are challenged by a similar crisis.

    I assume we will do better, but investors may do well to pull in their horns, and citizens ought to tell their representatives in no uncertain terms that the time to act in unison is now -- we can't afford to risk waiting until after the November election.

    Fasten your seat belt, because even if it all works out well in the end, it will be a cliffhanger.


    U.S. economy heading straight for the cliff - CNN.com
     
  2. lem34

    lem34 MEMBER

    New Recruit

    Joined:
    Jun 3, 2011
    Messages:
    0
    Ratings:
    +0 / 17,733 / -0
    Americans need to start living within their means
     
  3. TheJewverine

    TheJewverine FULL MEMBER

    Joined:
    Apr 30, 2011
    Messages:
    902
    Ratings:
    +0 / 1,848 / -0
    Country:
    Israel
    Location:
    Israel
    :blah::blah:
     
  4. Sashan

    Sashan SENIOR MEMBER

    Joined:
    Feb 11, 2012
    Messages:
    4,294
    Ratings:
    +2 / 4,158 / -0
    U.S overcame even the great depression and emerged a stronger nation and a super power. The situation today is nothing when compared to 1929.
     
  5. lem34

    lem34 MEMBER

    New Recruit

    Joined:
    Jun 3, 2011
    Messages:
    0
    Ratings:
    +0 / 17,733 / -0
    Yea well you would say that wouldn't you. As a nation who lives of American charity you stand to get wiped out.

    The situation today is different in that it is a systemic failure. Your comment in any event is self serving as you hope to receive American help against China cos you can compete with the dragon in any field
     
  6. TheJewverine

    TheJewverine FULL MEMBER

    Joined:
    Apr 30, 2011
    Messages:
    902
    Ratings:
    +0 / 1,848 / -0
    Country:
    Israel
    Location:
    Israel
    Ironic coming from someone who is Pakistani. Israel has one of the strongest economies in the world. What shall we say? Nice try, or better luck next time?
     
  7. lem34

    lem34 MEMBER

    New Recruit

    Joined:
    Jun 3, 2011
    Messages:
    0
    Ratings:
    +0 / 17,733 / -0
    No it does not you have polarised society that is why you had demonstrations last year. Your country has no natural resources and would be in the Jordan bracket without the external assistance your country enjoys and when America goes bust your country will disappear
     
  8. Sashan

    Sashan SENIOR MEMBER

    Joined:
    Feb 11, 2012
    Messages:
    4,294
    Ratings:
    +2 / 4,158 / -0

    Once you started talking about my flag, I understand that I can't have rationale discussion. Peace.
     
  9. lem34

    lem34 MEMBER

    New Recruit

    Joined:
    Jun 3, 2011
    Messages:
    0
    Ratings:
    +0 / 17,733 / -0
    A report compiled and prepared for Members and Committees of Congress in America

    https://www.fas.org/sgp/crs/mideast/RL33222.pdf

    btw welcome back. I liked your old avatar lol

    But it is a fact that Indians especially on this forum have taken to ingratiate and wish well to the Americans
     
  10. Sashan

    Sashan SENIOR MEMBER

    Joined:
    Feb 11, 2012
    Messages:
    4,294
    Ratings:
    +2 / 4,158 / -0

    I wish well for America as I earn my bread and butter in this country and this country has treated me well and I feel comfortable here having lived here for more than 13 years. There are so many great things about this country and my loyalty lies with this country but that has nothing to do with the discussions here.
     
  11. lem34

    lem34 MEMBER

    New Recruit

    Joined:
    Jun 3, 2011
    Messages:
    0
    Ratings:
    +0 / 17,733 / -0
    Wishing a country well is one thing but dreaming is another. Mate I live in UK we stand after Israel to lose out the most by American economy failing but hey I can see what is coming. Americans simply must start living within their means
     
  12. TheJewverine

    TheJewverine FULL MEMBER

    Joined:
    Apr 30, 2011
    Messages:
    902
    Ratings:
    +0 / 1,848 / -0
    Country:
    Israel
    Location:
    Israel
    Care to back that up with any facts, or are you just going to continue blasting out negative anti-Israeli opinions without any basis?

    1) Israel is one of the top economies in the world, which is even more impressive given its small size

    2) No natural resources? Really? There is a large reserve of natural gas which would like to argue that point.

    3) Israel is a one of the worlds most developed countries for a reason, they lead in manufacturing and education. For a country that has only been around for less than 100 years to be a greater force than many countries that have been around for 1000s of years is quite impressive to me.

    4) "When America goes bust your country will disappear" You keep saying that over and over, last time I checked Pakistan is one of the top receivers of US aid. The only difference is Pakistan doesn't have the industry to compensate if they were to lose aid. Israel doesn't rely on aid, they are a highly developed industrious nation.

    I think America will be fine, they are too big to fail.
     
  13. lem34

    lem34 MEMBER

    New Recruit

    Joined:
    Jun 3, 2011
    Messages:
    0
    Ratings:
    +0 / 17,733 / -0
    Try opening the link. Then read and then cry:

    A report compiled and prepared for Members and Committees of Congress in America

    https://www.fas.org/sgp/crs/mideast/RL33222.pdf

    btw welcome back. I liked your old avatar lol

    Source: http://www.defence.pk/forums/u-s-de...omy-heading-straight-cliff.html#ixzz1wxOFN8Ay

     
  14. Ulysses

    Ulysses FULL MEMBER

    Joined:
    Aug 11, 2011
    Messages:
    379
    Ratings:
    +0 / 256 / -0
    Country:
    United States
    Location:
    United States
    Im not sure if you people are aware of this.... but did you know our Government makes 3 Trillion a year on property taxes alone in the USA?

    We only have a 15 Trillion in debt.... Im sure if we balance our budget things will be ok....
     
  15. TheJewverine

    TheJewverine FULL MEMBER

    Joined:
    Apr 30, 2011
    Messages:
    902
    Ratings:
    +0 / 1,848 / -0
    Country:
    Israel
    Location:
    Israel
    1) Even your link states that the aid Israel receives is primarily military aid. Israel has received the most US aid cumulatively, not currently. There is a huge difference there, also not sure why that would make me cry?

    2) I liked my old avatar as well, apaprently Asim Aquil did not, because he kept sending me messages to change it (Why I don't know, it doesn't violate any rules, so maybe he just doesn't like me... :P )

    3) Not sure what you meant in your last statement so I can't comment.