Monthly Archives: December 2012

27th December 2012 – A fiscal sleight of hand

In what must be one of his last acts as Treasury Secretary, Timothy Geithner has published an open letter saying that the US Treasury has put in place “extraordinary accounting measures”, which have freed $200billion from the government’s official borrowing figures.

Irrespective of what happens in the Senate and Congress at the end of the year the Fiscal Cliff is now postponed until March.  At this point US borrowing will cross the $16.4trillion deficit ceiling.

This probably doesn’t mean much other than it is now certain the automatic spending cuts and tax increases will come into force.  These apparently could have a dramatically negative impact on US GDP in 2013.

24th December 2012 – How we got here, what might happen and an interesting take on the Libor scandal

I’m on my way to Christmas with the family.  On the train I’ve caught up on some reading.  It’s cheerful stuff for the festive period!

The Wall Street Journal blog has given an excellent behind the scenes view of how the Fiscal Cliff talks failed.  I’ve seen a follow up piece in Bloomberg asking “will 2013 mark the beginning of American decline”.

Finally this piece caught my attention stating that “UBS Libor manipulation deserves the death penalty”.  This may sound an extreme reaction, but consider how pervasive the effects of this manipulation are.   Billions of dollars have been stolen as a result of the cartel’s actions. 

I am against the death penalty, but there are many people who must be called to account for this and thrown in prison.  Life sentences seem a just punishment for the harm that has been done.  However it won’t happen.  At best huge fines will be levied, but I will be amazed if anyone is personally held to account.

On that note have a very Happy Christmas! J

20th December 2012 – Fiscal cliff looms, Greece gets upgraded!

We are now eleven days away from going over the Fiscal Cliff in America.  Sadly it is all too believable that we are at this point and the implications are horrendous.

What this will do to markets and sentiment is anyone’s guess.  If the reaction of August 2011 is anything to go by we are in for a torrid time.  That is certainly what most commentators seem to believe.  Perhaps the contrarian view that so many people expect a meltdown that one will not happen.

If I’m really honest I have no clue what is going to happen in the short term and nor do many other people.  My perspective on the long term is different though.

This perpetual political gridlock (not just in America, but in the other overly indebted OECD-nations) is a troubling portent of bad things to come.  The scale of the fiscal, monetary, economic, demographic and ecological problems facing society are so great that we need strong leadership.  The last thing we need is petty squabbling and point scoring. Continue reading

11th December 2012 – Surely they aren’t going to get rid of the deficit ceiling

I saw this interview over the weekend with Alice Rivlin.

I’ll admit I had never heard of Alice Rivlin before, but reading up on her background, she is clearly a very impressive woman. And misguided.

Now to call someone as fearsomely intelligent Dr. Rivlin “misguided” is probably not my smartest move. However I disagree with her wholeheartedly. In her interview she says “get rid of the debt ceiling. It’s a totally artificial thing…. the debt ceiling has nothing to do with the rising debt.”

Yes it is artificial and has nothing to do with the rising debt, but it is also the only thing that is making the people overseeing the rising debt actually do something about the rising debt. If the debt ceiling were removed, then so to would the urgency be removed to resolve this major structural imbalance in the economy.

I wondered, watching this video, whether or not Dr. Rivlin is being used by the White House to float the idea of removing the deficit ceiling.

I hope I am wrong.

The Debt Crisis urgently needs to be tackled and the political system seems incapable of internal reform. It only seems to respond to external crises, albeit in this case this is a self-inflicted crisis. Continue reading