“Now that President Obama has won a second term in office, the attention of Wall Street has immediately turned onto the looming fiscal cliff. To underline the importance of the issue, asset manager Blackrock along with several other state pension boards took out full page advertisements on the eve of the election in the Wall Street Journal, New York Times and Washington Post to warn of the impending disaster.
Furthermore, on October 18, CEOs of major banks including JP Morgan, Goldman Sachs and Bank of America, signed an open letter pressing Congress and the President to “reach a bipartisan deal to avoid” the looming fiscal cliff. As it stands, should current laws stay exactly the same going into 2013, commentators are almost certain that the fiscal cliff will bring about another recession in the United States.
Just what is this fiscal cliff, and why is it so important for investors?
Essentially, the fiscal cliff represents a series of fiscal stimulus that will expire on the stroke of midnight on Dec 31, 2012. The four main drivers of the fiscal cliff are 1) the expiry of the Bush tax cuts, 2) expiry of the payroll tax cut, 3) ending of the emergency unemployment compensation passed in 2008 and 4) automatic budget cuts due to the Budget Control Act.
The expiry of the package of tax cuts, spending stimulus, and emergency benefits will all occur in 2013 and it is expected to contract the economy immediately by more than US$500 billion (>3% of GDP), almost guaranteeing the end of the economic recovery and ushering in a new recession.
AN : so the question in bold is a question which leads one to think. And questions demand answers. And answers take thoughts turned into words. But for the ” Ah Ha ! Eureka moment ” to strike …the picture settles the matter. Those little projections on top there…those are people….and people…that is a loooong way down from the cliff……