What About That Fiscal Cliff?

                                                 "Really Big Deal"

Federal Reserve chairman  Ben Bernanke is given the credit for coining the phrase, "fiscal cliff" during an address to congress.  I felt a need to get out and write something again because it is a "really big deal"!   Okay, if you hear the phrase "really big deal" over and over in the news and in front of congress you can come back to this post on 11/29/2012 and credit me...

Just the fact that everyone is picking up the term and running with it makes it a big deal.  You've heard all the debate so I'm gonna cut through through the spin and tell you what is happening.  The U.S. has been operating on credit for decades.  Now somebody took the time to look at our debt to income ratio and decided that it's time to do something about it.  Normally we would just raise our debt ceiling and go on spending but it's getting harder and harder to pay the interest on all those loans.  Here's the catch.  The Fiscal Cliff debate is an effort to bring this hard fact and it's consequences to congress, the people, and the world...

Many people have been warning us for years that the time would come and it has.  Now I have always said that the U.S. people and it's economy is strong and resilient.  We are always adapting to adversity and coming out stronger.  Our own greed has gotten us here and now we need to pay the piper.  There are just some things that have me concerned.  And that's why I call it a "Really Big Deal"!

Whenever the people with all the money feel like their money is going to disappear "phhht" they have a tendency to pull it out of wherever it is and stuff it under a pillow or buy something that they think will still be around after the fallout.  That is the core of investing.  You try to put your money somewhere that you think it's going to grow.  Well, this will most likely backfire on the U.S.  The rest of the world owns our debt.  If they think they're not gonna get paid back then they're gonna try to get rid of it in a hurry.  This will affect many things in our markets at once!  T-Bills, T-Notes, T-Bonds, Savings bonds in the first wave.  Then whole countries will be unloading our dollars causing it to fall.  Inflation will increase dramatically.  Interest rates will have to increase finally.   And if we manage to come out of it some good things will happen.  Who knows?  Maybe this is what the government wants to happen.

The rest of the world will buy our products because they will be lots cheaper.  Corporations will bring jobs back home because they are more affordable but we will all be paupers for a good long time!  With a cheaper dollar we will be able to pay back our debts more easily.  Let's just hope that it doesn't get so bad that it causes chaos and civil unrest.  That will give the powers that be a reason to force some new thing on us like curfews, martial law, a one-world currency or who knows what they have in mind.  I'm not privy to this information and I don't want to guess.  I just think it's a "Really Big Deal"!