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PETER SCHIFF: There’s Another Fiscal Cliff That Won’t Be So Easy To Avoid (Advisor Perspectives)
“It cannot, or should not, be denied that Washington’s latest fig leaf will have a major impact on the markets. The New Year’s “relief rally” is understandable given the clear implications that the government will simply print its way out of trouble for as long as it can. …Markets are now driven by stimulus, not fundamentals, and the stimulus is firmly at the wheel.
In the meantime, President Obama and Congressional leaders will take credit for a tax cut that is in reality a huge tax increase in disguise. Government spending is the real source of taxpayers’ pain and it is only a matter of time before the bill comes due in the form of inflation. See our Newsletter for fresh analysis as to why inflation may already be higher than you think. Because the deficits will grow even larger, more purchasing power will be lost in this manner than would have been lost had all the Bush tax cuts been allowed to expire. In addition, though entitlements cuts were taken off the table, the real value of benefits could be slashed, as cost of living adjustments fail to keep up with skyrocketing consumer prices. That’s a Fiscal Cliff that will not be so easy to avoid.”
A new report from Bloomberg says most of Wall Street got their 2012 market predictions wrong. Among them, John Paulson’s call that the euro would fall apart, Morgan Stanley’s prediction that the S&P 500 would lose 7 percent, and Goldman Sachs’ bullish call on Chinese equities.