Top 5 Things You Need to Know About the Fiscal Cliff
We’ve all heard it by now, the Fiscal Cliff, the combination of these words ring terror into most politicos and economists, and something has to be said about it and the future scenarios that might unfold in either direction.
The Fiscal Cliff is a large, all-inclusive expiration date on a host of government tax cuts, finance relief programs and budget increases. Once the expiration date on these numerous programs runs out, it is expected the United States will go into a political gridlock, with both parties fighting bitterly for their own ideology and agenda which might sink the US into a second recession.
#5 A House Divided
It’s no surprise that with the reelection of President Obama, little will change in terms of bitter political rivalry between The Blue White House and the Red, Republican controlled House of Representatives. The past four years have shown many ugly sides of our political system, and the four years ahead won’t be any different.
The issues of the Fiscal Cliff are all well known, and both sides don’t want the US to go into a second recession, yet the stubbornness and disgust of a diplomatic consensus is a huge factor that is taken into the doomsday equation by economists and analysts.
The issues of the Fiscal Cliff aren’t scary by their numbers, tax hikes or government cuts; they scare the living shit out of everyone because they reveal a gridlocked, unproductive Washington.
#4 Austerity, Austerity, Austerity
The word “Austerity” is a disgusting word by itself, yet the meaning of it and the consequences shown on European economies deserves a whole new adjective itself.
Austerity, plainly spoken, is government tax rises and program cuts mainly made to fight unbalanced deficits. The word was popularized by the struggling European Nations like Greece, Spain, Ireland or Latvia. All of these countries are known for their draconian austerity measures, mainly dictated to them by the Big Boss, the IMF.
Austerity leads to a poor economic performance, unemployment and a recession, which lead to less government revenues, which leads to more austerity, which leads to even harder economic times. And this might by our future.
If the US goes through the Fiscal Cliff, it will implement austerity. This will hurt the still struggling, neurotic economy and send it down the gutter.
#3 American Dominance Diminished
With China becoming stronger each year, and US still in uncertainty, it’s not wild to predict that a damaging Fiscal Cliff would diminish American influence abroad. This isn’t to say that’s a bad or a good thing, it depends on your perspective and ideology, but in the context of economics, it could be disastrous.
If China sees a struggling US, coupled with a still hazardous Europe, it could make quite a few power moves with Russia and its eastern allies to weaken the US dollar, waken it’s petroleum dominance and in turn, gain significant foreign influence, especially in the Middle Eastern, oil-producing regions.
If the US loses its grip on oil, we’re quite frankly, fucked.
#2 Violent Protests Might Happen
The severity of these cuts is still only speculation, yet after the last year’s Occupy movement it’s not wild to predict protests against austerity. We all have seen what might happen in Oakland and in New York if young, unemployed people get angry enough. If these cuts do lead to a second recessions and consequently to higher unemployment (which hits college grads the hardest) you can expect to see far higher numbers of protesters on the street.
#1 The Big Recession
Yes, a Second Recession is the biggest the most feared consequence of the coming Fiscal Cliff. And here’s why:
Our current economy is still on life support. FED’s QEternity, which is just an unlimited mortgage securities buying plan to fuel fake “growth” and a play pretend economic confidence is a horrendous practices of governments which have no idea how to fix the economic woes of our time.
We can have unlimited Quantitative Easing because of the fiat system and the way we can make up as much money as we want. Because the US dollar and the United states itself, the backer of the dollar and its debt is still a widely trusted, strong superpower, we can print and buy as many mortgage securities and sell as many bonds as we please.
Yet if the Fiscal Cliff does happen, which would blow the trust in our economy and political system all over the world, coupled with tax increases and government cuts, a second recession is imminent.
Another Recession is far worse than the rogues, Lehman Brothers started collapse of 08’. A second recession is like a proof that we didn’t get our head out of our ass in the four years we’ve been struggling, that we haven’t implemented laws or changed the system to heal the economy, that nothing has changed.
A second recession would send a wave throughout the whole world, making a blow to the European Union, which is a subject of another article in itself, it will hurt Chinese exports as it did back in 08’. It will make a mess, a far greater mess than in 08’ because everyone’s thinking about it, everyone’s knows it and everyone fears the worst.