Tuesday, November 27, 2012

Fiscal Cliff?

I've been watching with amusement the ranting of all the MSM reporters, congressman and the White House about the fiscal cliff. I've come to the conclusion that A. they don't no what they are talking about. B. they are either complicate or stupid. The reality is if all the tax cuts disappear then 120 billion or so is raised, automatic spending cuts in 2013 another 100 billion dollars. The spending cuts are 50 billion from last years 700 billion plus DOD budget and 50 billion from 2.5 trillion is other spending nothing but a drop in the bucket. So a whopping 220 billion or so is raised against a CBO estimate of another 1 trillion dollar deficit in 2013. Octobers numbers have already been reported and we are  220 billion further in the whole.

What a lot of people  don't understand and the media fails to report is that there are two types of spending, mandatory and discretionary. Mandatory is social security, medicare, interest on the debt, Discretionary is everything else. You could cut 100% of all government discretionary spending and still not balance the budget.

Our worthless politicians know this but will do nothing to address spending cuts. In fact Obama doubled down yesterday and claimed since Obama care will save over 100 billion dollars then it is off the table in any negotiation.

Here are a few absolutes. the USA is broke and there is no way we will ever pay down the debt. There will be no cuts in spending, mostly I feel because if the EBT and SNAP cards and other welfare was reduced there would be civil unrest. So when you have 47% of the country getting some kind of aid from Uncle Sugar no politician has the stones to make a cut. 

Bernanke and the Fed will keep printing money out of thin air which will cause more inflation. I believe their hope is to usher in enough inflation to reduce the debt but not cause any hyperinflation. This of course is a continuing failed policy and will end in currency collapse.. The end game, well it depends who you listen to, in all likelihood we will see a steady decline in the dollar and inflation kick in at an increased rate. The feds will then go after the last batch of cash in peoples 401K and nationalize it just like Argentina did back in 2002.

If the Republicans are smart they will give Obama everything he wants, including all tax raises. The only way people will be cured of thinking that leftist policy like European socialism works is to suffer some real pain because of it. I just hope the civil unrest does not go terminal and all the big cities burn as we go further into a new recession. You simply can't keep spending other peoples money and borrowing 40cents of every dollar. The election does have consequences, neither candidate spoke about any real spending cuts but Obama was out there promising more to the sheep.

This will not end well, usually the only way out is another war, god forbid. The capital goods index already shows that we are in recession, educate yourself at Zero hedge and Market ticker   and be ready for a wild ride in 2013



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