A Perfect Shit Storm

Bernanke is panicking. The latest QE “3” he released today, is an attempt to suppress the interest rates on longer term bonds. That will in turn suppress rates all over in order to spur borrowing. I don't think can last long. To be fair though, he has few tools left in his magic bag that work now and I believe that was his last. The real tools reside in Congress. But they cannot come together to implement any of them due to ideological differences. Bernanke is out of bullets and now he'll have to hand this albatross to Congress...during an election cycle.

See where this will lead? Nowhere.

The GOP will never allow a tax hike on the rich and the Dems will never allow Social Security or Medicare to be axed. Both sides have their electorate ready to scream Holy Murder if the opposing team even tries it.

And fast approaching is the Fiscal Cliff come January.

Remember the Super Committee? The one that was supposed to come to some sort of agreement on how to deal with the deficit? Well, if you recall, it failed wonderfully for the same reasons I stated above. In order to make some “success” out of it they put a sunset clause in it stipulating that if by Jan 2013, if nothing was done, then the tax hikes on the rich will go up and budget cuts to the ENTIRE US budget would automatically ensue. If this were to happen say hello to Recession #2.

In finance circles they're calling this the “Perfect Storm.”

1	If Congress fails to act on the Sunset Clause or comes down too heavily in favor of one side vs. the other. It's Recession Time once again.
2	China and the Emerging Markets are slowing down and might be headed for a hard landing.
3	Iran and the Middle East may flare. This is a Wild Card. Say hello to high oil prices and that drags on your wallet.
4	The Euro Union has GDP larger than the entire United States.  Right now across the pond they are throwing up as we speak.

Finance jokingly called the past few years, “kicking the can down the road.” That is to say, all these policy interventions just are putting off the inevitable.  They did hold out hope that it could work. The can may have become too heavy and big to kick any longer. Now what do you think of our rich elite, our best and brightest?

Advice? Get the hell out of all debt if you can. If not, pay down what you can. If it's too large, blow it off then, forget it. Why worry now?