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I don’t know about you. But for me, Thanksgiving is one of my all time favorite holidays. I love getting together with family and friends, eating my fill of turkey, watching football, and just enjoying the time off. I hope your holiday was as great as mine!
Meanwhile, the fiscal cliff negotiations are really coming down to the wire in Washington. We got a bout of happy talk from Republicans and Democrats in Congress, not to mention the President, a few days ago. That spurred a short-term market rally.
But the reality is that we are careening toward this deadline just as we have toward every other deadline over the past few years. And I’m skeptical Washington can come to a comprehensive, effective deal in time!
We Lived beyond Our Means for Too Long —
Now We Have to Pay the Bill!
Lost in all the talk about the fiscal cliff is why we’re facing one in the first place. Yes, the cliff is technically the result of the debt ceiling negotiations in 2011. The idea was to come up with such widespread tax hikes and spending cuts that Congress would be FORCED to come up with some kind of plan to tackle our budget deficit and debt problems.
But the underlying problem is much bigger: We’ve lived beyond our means as a country for far too long! We’ve run up four years of $1 trillion-plus budget deficits, and racked up almost $16.3 trillion in debt.
We’ve made Social Security and Medicare promises that we simply can’t afford to keep. And we have consistently avoided tackling those thorny issues — under both Democratic and Republican administrations.
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| The President and Congressional leaders are running out of time to come up with a solution to the fiscal cliff. |
The few times serious people actually did try to come up with solutions, policymakers basically ignored them! The National Commission on Fiscal Responsibility and Reform released its landmark report, The Moment of Truth, almost TWO YEARS AGO to the day. But since then, it’s been sitting on a shelf gathering dust.
So if you’re wondering why I’m so skeptical about the ability of Washington to get something done in time to avert the cliff, it’s not because I’m a pessimist by nature. It’s because politicians have been failing to confront our debt and deficit challenges in a serious, bipartisan, effective manner for YEARS now.
Long story short?
I believe we could be in for an increasingly bumpy ride as investors in the weeks ahead. So if you haven’t yet taken the protective steps I’ve outlined in my Money and Markets columns over the past few months, I recommend you do so very soon. And for even more specifc, actionable advice, give my Safe Money Report a look. You can do so now at a price of just 13 cents per day — something to be thankful for for sure!
Until next time,
Mike
Mike Larson graduated from Boston University with a B.S. degree in Journalism and a B.A. degree in English in 1998, and went to work for Bankrate.com. There, he learned the mortgage and interest rates markets inside and out. Mike then joined Weiss Research in 2001. He is the editor of Safe Money Report. He is often quoted by the Washington Post, Reuters, Dow Jones Newswires, Orlando Sentinel, Palm Beach Post and Sun-Sentinel, and he has appeared on CNN, Bloomberg Television and CNBC.
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Not only coming down to the wire, but probably going over the wire. That’s actually good as the fatcats get their comeuppance AND the right gets blamed for raising taxes on the middle class. WIN-WIN for the people who won the election, mostly Democrats with brains, heart and equity.
Hi Mike
For some time now many have believed that Market Forces should be able to decide the course and direction of investment decisions and strategies. Many believed that this was a good idea while the good news kept on coming. What has changed for me is how the policy makers have tried to handle and manipulate the bad news. Many things come to mind, but unless they let this thing find a natural bottom I will not have trust or confidence in anything they decide. With trust and confidence comes the hope of rebuilding a brighter future for us all. This country needs to find courage and not rely on false hope and unfundable promises. The policy makers are promising stuff we can not afford to continue to provide for free. We all know they are gutless and just want to get re-elected in a popular vote. As a country we need to take our medicine and not become dependent on Uncle Sam. We want Uncle Sam to survive this as well.
Regards
Howard
Howard said: “Market Forces should be able to decide the course and direction of investment decisions and strategies.”
I don’t know a single person who actually believes that. In reality, they like the stabilizing effect of the SEC, FDIC, CFTC, et. al. The resulting transparency and predictability which *wouldn’t* result from willing buyers and sellers. Or, the dramatic market swings which would (and did) arise more frequently absent margin requirements. (I’m thinking of the 1907 crash which was largely attributed to “side bets,” persons trading stock they didn’t even own, making huge insurance-like bets without actually owning either side of the bet, nor being required to possess enough “reserve” to make good on those bets.).
Heck, if you think about it, trading stock as we known it today would be *completely* impossible were it not for the legislative fiat of the corporate entity. A legal “person” purchased for about $400 from a state’s Corporation Commission. A legal fiction designed to stand in the place of owners for the losses of the business.
In other words: Absent the corporate charter (created by public law, not willing buyers and sellers), investors would be legally considered joint owners of a private business. Not only entitled to the profits of the business, but also liable for losses! If a business suffered a legal judgement (for polluting a river, or harming a worker due to unsafe conditions), your assets (as an investor) could be jointly and severely attached. If the business made a bad decision (building gas guzzlers at a time of declining availability of gasoline), your personal assets could be taken to satisfy creditors of the now closed business.
The only thing which protects you from that *normal* business responsibility (of co-ownership of both the gains and losses) is the socially-contrived corporate charter. Legislative fiat by society, creating a fictional yet legal “person” to serve as the fall guy *for you*.
I know how good (and goose bumply) it is to talk about how self-made we all are, and how we’re really Randian libertarians if only for the “socialists” who keep forcing government on us. But, it’s really a lie. Nobody wants to go back to the “good old days” of truly “free markets.” They like the predictability/stability of things like restaurant inspections, building codes, zoning laws, air and water quality and a thousand other things which give us “socialized capitalism,” not pure capitalism.
Hi Mark
You have selectively quoted part of something I wrote and then run off in your own direction. What I’m referring to is the manipulation of interest rates, which adversely affects eg retirees. I,m talking about the manipulation in the debt markets affecting natural defaults, and the manipulation in the currency exchange rate markets by central banks. Also the unnatural increase in currency liquidity. The natural market forces have not been able to give us a bottom in the world financial crisis. One of the side effects of “socialised capitalism” is central government debt which is also unhealthy.