If U.S. Falls Off 'Fiscal Cliff', What Will Happen to the Economy?

[Meathead]

This "cliff" is essentially an acknowledgement of the obvious. We pay for it now or we pass the (literal) buck to future generations. The primary difference is one of solvency and irresponsibility.

 

[Freemason9]

I'm expecting a big increase in inflation.

Why?

 

[SniperFire]

The middle class needs to start paying for what it consumes.

Perhaps then they won't vote for a trillion in overspending each year.

 

[boedicca]

I'm expecting a big increase in inflation.

Why?

Why? Because the Fed has held interest rates artificially low with ZIRP and the holder's of Treasuries aren't going to tolerate low rates forever. If we go off the cliff, the government is not going to be able to continue the monumental increase in the size of government orchestrated by Obama. The economy is barely growing with government spending at nearly 25% of GDP (a 25%+ increase over four years ago). Contracting government spending when there are no monetary policy alternatives left will send the country into a stagflation. The increased tax expenses will be added to product and service prices (which combined with interest rate increses will cause more inflation) and we will see no economic growth.

This is what happens when economically illiterate ideologues seek to transform our economy for the benefit of their imaginary friend, Fairness.

 

[Toro]

The stock market will react badly if we go over the cliff.

We will probably also receive a downgrade in our credit rating.

As for Defense spending, it has more than doubled since 9/11. There is no excuse to continue this kind of war level spending. It should be reduced back to pre-war levels.

The cuts in Defense spending that would occur as a result of going over the cliff would barely even be a good start.

The real pain that would cause us to go into a recession would be the expiration of the Bush tax cuts for every taxpayer.

.

The stock market is blithely assuming a deal gets done.

As a reminder, the market thought the same thing around the debt ceiling debacle, assuming there was no chance the politicians would let us hit the ceiling. Stocks fell 15% in 7 sessions once it became apparent they would.

lol

The market is really stupid sometimes.

 

[Freemason9]

I'm expecting a big increase in inflation.

Why?

Why? Because the Fed has held interest rates artificially low with ZIRP and the holder's of Treasuries aren't going to tolerate low rates forever. If we go off the cliff, the government is not going to be able to continue the monumental increase in the size of government orchestrated by Obama. The economy is barely growing with government spending at nearly 25% of GDP (a 25%+ increase over four years ago). Contracting government spending when there are no monetary policy alternatives left will send the country into a stagflation. The increased tax expenses will be added to product and service prices (which combined with interest rate increses will cause more inflation) and we will see no economic growth.

This is what happens when economically illiterate ideologues seek to transform our economy for the benefit of their imaginary friend, Fairness.

I would think that fiscal austerity would bring about monetary deflation, rather than inflation; few dollars of disposable consumer income should significantly reduce demand for goods, driving down prices. I could be wrong, though . . . it's happened before . . . LOL

 

[Freemason9]

I'm expecting a big increase in inflation.

Why?

Why? Because the Fed has held interest rates artificially low with ZIRP and the holder's of Treasuries aren't going to tolerate low rates forever. If we go off the cliff, the government is not going to be able to continue the monumental increase in the size of government orchestrated by Obama. The economy is barely growing with government spending at nearly 25% of GDP (a 25%+ increase over four years ago). Contracting government spending when there are no monetary policy alternatives left will send the country into a stagflation. The increased tax expenses will be added to product and service prices (which combined with interest rate increses will cause more inflation) and we will see no economic growth.

This is what happens when economically illiterate ideologues seek to transform our economy for the benefit of their imaginary friend, Fairness.

I know, let's enact legislation that assures that people only earn incomes relative to their actual productive efforts. I'm good with that, and it would surely be "fair."

 

[saveliberty]

S&P indicated they would downgrade US credit if tax revenues and spending cuts were not addressed.

 

[B. Kidd]

Going over the cliff is exactly what Obama wants. Higher taxes for everybody, huge defense cuts, and an opportunity to make more people dependent on government. Plus he and his ass-kissing minions in the media can spend the next 2 years blaming the Republicans for it.

Ditto THAT!!!
Well put, to the point, and in a nutshell...............pos' rep comin' yer way bud.

 

[boedicca]

Why?

Why? Because the Fed has held interest rates artificially low with ZIRP and the holder's of Treasuries aren't going to tolerate low rates forever. If we go off the cliff, the government is not going to be able to continue the monumental increase in the size of government orchestrated by Obama. The economy is barely growing with government spending at nearly 25% of GDP (a 25%+ increase over four years ago). Contracting government spending when there are no monetary policy alternatives left will send the country into a stagflation. The increased tax expenses will be added to product and service prices (which combined with interest rate increses will cause more inflation) and we will see no economic growth.

This is what happens when economically illiterate ideologues seek to transform our economy for the benefit of their imaginary friend, Fairness.

I know, let's enact legislation that assures that people only earn incomes relative to their actual productive efforts. I'm good with that, and it would surely be "fair."

You must find North Korea to be a perfect paradise.

 

[g5000]

The stock market will react badly if we go over the cliff.

We will probably also receive a downgrade in our credit rating.

As for Defense spending, it has more than doubled since 9/11. There is no excuse to continue this kind of war level spending. It should be reduced back to pre-war levels.

The cuts in Defense spending that would occur as a result of going over the cliff would barely even be a good start.

The real pain that would cause us to go into a recession would be the expiration of the Bush tax cuts for every taxpayer.

.

The stock market is blithely assuming a deal gets done.

As a reminder, the market thought the same thing around the debt ceiling debacle, assuming there was no chance the politicians would let us hit the ceiling. Stocks fell 15% in 7 sessions once it became apparent they would.

lol

The market is really stupid sometimes.

Yes. I refer to them collectively as The Herd, with the attendant herd mentality. One has to trade based on the reality of the herd mindset, and not on laboratory condition market principles.

.

 

[g5000]

I'm expecting a big increase in inflation.

There are viable arguments both ways. Inflation vs. deflation.

One thing is certain; we are in the middle of an epic bond bubble, and this will not end well.

.

 

[boedicca]

I'm expecting a big increase in inflation.

There are viable arguments both ways. Inflation vs. deflation.

One thing is certain; we are in the middle of an epic bond bubble, and this will not end well.

.

I'm going with inflation due to the massive increase in the money supply and the enormous levels of government debt. Our political class has a huge incentive to inflate away the debt, and no moral compass to inhibit them from doing it.

 

[Vast LWC]

So.... let me see if I have this straight...

Obama and Boehner were trying to come to an agreement.

Obama gave some ground, and, in response, Boehner turns around and tries to pull a fast one by passing an entirely different plan without the Democrats.

Boehner doesn't have the votes to back his back-stab, because his party is too damn extreme (and stupid) to do so, so the Republicans take their ball and go home, intentionally doing all they can to sabotage the recovery.

But apparently, according to them, it's all "Obama's fault", and "Obama's being too confrontational"?

What a bunch of fucking ass-wipes.

This is what happens when you elect people that hate government to run the government.

 

[SniperFire]

So.... let me see if I have this straight...

Obama and Boehner were trying to come to an agreement.

Obama gave some ground, and, in response, Boehner turns around and tries to pull a fast one by passing an entirely different plan without the Democrats.

Boehner doesn't have the votes to back his back-stab, because his party is too damn extreme (and stupid) to do so, so the Republicans take their ball and go home, intentionally doing all they can to sabotage the recovery.

But apparently, according to them, it's all "Obama's fault", and "Obama's being too confrontational"?

What a bunch of fucking ass-wipes.

This is what happens when you elect people that hate government to run the government.

Yes. It seems that the Senate just ignores their Constitutional obligation to pass a budget (with Obama's blessing, of course) victimizing America with this closed-door 12th hour deathmatch crisis on an annual basis.

 

[Zander]

The longer we go past the Fiscal Cliff, the more likely we will go back into recession.

We need a recession. We need stop the insane spending.

 

[Vast LWC]

Yes. It seems that the Senate just ignores their Constitutional obligation to pass a budget (with Obama's blessing, of course) victimizing America with this closed-door 12th hour deathmatch crisis on an annual basis.

Did Obama not make opening offers on a compromise?

Was that my imagination?

Did Boehner not then turn around and try to stab him in the back?

And was it also my imagination when the jackasses in his own party wouldn't even accept that much?

And somehow it's the Senate and Obama's fault?

Do you really think that Americans are too blind to see what's happening in front of their own faces?

 

[Vast LWC]

We need a recession. We need stop the insane spending.

And there you go.

Well at least you admit that you and your buddies are intentionally trying to sabotage the economy.

Good work.

 

[Vast LWC]

Well, I keep saying that we need a serious third party that will play the middle and force these partisan nuts on both sides to actually govern.

Perhaps this bullshit is just the impetus that's needed to get it off the ground.

 

[SniperFire]

Yes. It seems that the Senate just ignores their Constitutional obligation to pass a budget (with Obama's blessing, of course) victimizing America with this closed-door 12th hour deathmatch crisis on an annual basis.

Did Obama not make opening offers on a compromise?

Was that my imagination?

Did Boehner not then turn around and try to stab him in the back?

And was it also my imagination when the jackasses in his own party wouldn't even accept that much?

And somehow it's the Senate and Obama's fault?

Do you really think that Americans are too blind to see what's happening in front of their own faces?

You seem to miss the point. Let me dumb it down for you.

America should not be held hostage awaiting our despotic leaders return from a romp in Wakiki before he gets around to his behind-the-door dealmaking that affect almost aspect of every American's way of life next year.

Obama and Reid have perhaps ruined the great American system of checks and balances - forever.