Jump or Evade - the Fiscal Cliff Deal

Four weeks back, there were the elections to talk about, then the Middle East crisis. Of course, there was the scandal around Gen Petraeus’ resignation occupying air waves between the two. While there is definitely a debt ceiling debate to look forward to in the near future, for now there is just the ‘Ughh I could have totally got’em’ black Friday videos to get to and the looming fiscal cliff to speculate on.

If you are like me, just minding your own business only to be jolted awake by all the implications of the Congress not reaching an agreement on the fiscal cliff before the new year, here’s another warning from the Fed Chairman Ben Bernanke during the talk given at the New York Economic Club earlier this week. Quoting him,

The realization of all of the automatic tax increases and spending cuts that make up the fiscal cliff, absent offsetting changes, would pose a substantial threat to the recovery--indeed, by the reckoning of the Congressional Budget Office (CBO) and that of many outside observers, a fiscal shock of that size would send the economy toppling back into recession.

So yes, the fiscal cliff is getting more real everyday and we all want the congress to hunker down and make the tough decisions to move the country forward. If we do suffer the perilous fall over the cliff, there is a real danger of the GDP shrinking by 1 to 4% over the next year according to Economists which may not only lead to another recession in the US but also worsen the slowing economies in Europe and Asia. Here’s an insightful comment on the topic of International repercussions by Prof Menzie Chinn of the University of Wisconsin-Madison.

In the meantime, I intend to keep a close eye on the Tweets from House and Senate Speakers @JohnBoehner, @NancyPelosi. For more opinionated Tweeters check out this tweets-to-watch list.

So, while the next month and half is going to be overflowing with conversations about the Fiscal Cliff, over dinners and cocktails, office meetings and after-work parties, on the trading desk and out in the office corridors, with everyone sharing their thoughts through blogs and Tweets, let’s push the legislators to stop kicking the can down the road and strike a deal before the day of reckoning arrives.

On a lighter note, here’s an amusing blog from the Washington Post about surviving the debt conversation through mysterious and metaphorical references. Way to have some fun with the Fiscal Cliff!