PETER MORICI: ‘A SECOND GREAT DEPRESSION WOULD GRIP THE NATION’
The Obama administration’s plans to hike taxes on the wealthiest 2 percent of the population will do little to solve the country’s fiscal imbalances and do nothing to avoid economic depression that looms large for the economy, said Peter Morici, a professor at the Robert H. Smith School of Business at the University of Maryland.
One solution championed by congressional Democrats and the White House involves allowing tax cuts to expire for the wealthiest 2 percent of Americans to help narrow deficits.
“To avert calamity, President Obama and House Republicans likely will compromise to raise taxes on high-income Americans by $100 billion to $150 billion, curb spending an equal amount and renew the Bush tax cuts for families earning less than $250,000,” Morici wrote.
“This will hardly be enough to right the nation’s shaky finances.”
Failure to address deep-rooted fiscal imbalances could seriously damage the U.S. economy.
“A second Great Depression would grip the nation,” Morici wrote.
If the Fiscal Cliff negotiations are supposed to result in a bipartisan compromise, it is safe that the initial shots fired so far are about as extreme as can possibly be.
As per our previous assessment of the status quo, with the GOP firmly against any tax hike, many were expecting the first olive branch to come from the generous victor – Barack Obama.
Yet on the contrary, the WSJ reports, Obama’s gambit will be to ask for double what the preliminary negotiations from the “debt deficit” summer of 2011 indicated would be the Democrats’ demand for tax revenue increase.
To wit: “President Barack Obama will begin budget negotiations with congressional leaders Friday by calling for $1.6 trillion in additional tax revenue over the next decade, far more than Republicans are likely to accept and double the $800 billion discussed in talks with GOP leaders during the summer of 2011.
Mr. Obama, in a meeting Tuesday with union leaders and other liberal activists, also pledged to…
The Stock Doom Have made its arrival: Debt Limit Loom, market’s 200-day moving average has broken, Economic Surprise Index was hitting new highs, Obama is pushing for double the tax hikes he previously admitted
The U.S. government’s budget deficit widened in October, the first month of the new fiscal year, as President Barack Obama and Congress seek an agreement to lower future gaps and avoid the so-called fiscal cliff.
The deficit expanded 22 percent to $120 billion from a $98.5 billion shortfall in October 2011, the Treasury Department said late Tuesday in Washington. The gap exceeded the $113 billion median estimate in a Bloomberg survey of economists.
“The October miss from forecast was small relative to annual figures and the uncertainty with the fiscal cliff debate,” said Mike Englund, chief economist at Action Economics LLC in Boulder, Colorado. Outlays for defense were more than expected in October, which could be due to a “spend before the cliff effect,” he said.
US Bank Run Dead Ahead? FDIC Expanded Deposit Insurance Ends Dec 31st
by AGXIIK, Silver Doctors:
With the media fixated on the fiscal cliff, no one seems to be noticing the fact that the FDIC’s expanded 100% coverage for insured deposits ends January 1st, 2013.
As of January 2013 the FDIC stops offering 100% coverage for all insured deposits. That amounts to $1.6 trillion in deposits, 85-90% deposited with the TBTF mega banks. Once the insurance ramps back to $250,000 the FDIC risk amelioration offered to large depositors will cause them to flee from the insecurity of the much reduced FDIC coverage. This money will rotate immediately into short term Treasury securities. The treasury, in order to handle this flood of money, will immediately offer negative interest rates. This financing will resemble the .5% negative interest rate offered by the Swiss and Germans on the funds flooding to their banks from Spain, Greece and Italy.
This will be a bank run much larger than the Euro banks flight to safety.
A Divorce Between Stocks And Economic Surprises Happened In 2008 Is Happening Now Again!
We noted last night that the decline was happening, even as the Citi Economic Surprise Index was hitting new highs:
Bloomberg, Business Insider
In his latest note, SocGen’s famously bearish strategist Albert Edwards says there is no mystery going on here.
First he notes that a divorce between stocks and economic surprises is not unprecedented. It happened in… 2008.
But more specifically, Edwards says it’s all about the fade in corporate profits, and the declining change in analyst expectations about corporate profits.
From Kimble Charting Solutions:
CLICK ON CHART TO ENLARGE
An important “Dual Test of support” is at hand right now for the 500 index. Long investors best hope it holds, because the support line off the 2009 low is very important! FYI- Support is Support until broken!
‘Global markets will implode.’
Marc Faber on Squawk Box this morning.
“We will all be lucky to have 50% of the asset values that we have today.”
Watch at least the first minute of this clip for the swipe at CNBC permabulls.