The “fiscal cliff” is beneficial to President Obama. If the president allows the “fiscal cliff” to occur, panic would ripple across the US as equity markets plummet. Rather than raising taxes, he can claim he restored tax cuts for the majority of Americans. So, for political reasons, there is a very good argument that the president will allow the US to suffer from the fiscal cliff wrath. Some economists estimate will this stunt will cost the US 2 million jobs! CNBC’s Robert Frank indicates “The population of millionaires in the United States would fall by 315,000, or 6 percent, next year if the country goes over the fiscal cliff and the economy goes into recession as a result, according to a new study from WealthInsight.”
Barack Obama will not be the first president to allow an economic crisis to worsen with hopes of strengthening his political position. Documents were released a few years ago by the US government, which had been sealed for 80 years, proving that Franklin Delano Roosevelt allowed the Great Depression to worsen because he believed it would strengthen his position politically, even though it resulted in many more millions of Americans losing their jobs and solidified the Great Depression in the country’s history.
It is our belief that the political gains associated with the US going over the “fiscal cliff” in 2013 make it almost inevitable that it will occur, despite the harm to American voters! Therefore, we believe Congress and the president will create a deal sometime in early 2013 that will be retroactive to January 1, 2013 to remedy the situation. As you may know the fiscal cliff is the sequestration of funds, cut in services and the cessation of the Bush era tax cuts. The belief by many economists is that such an action will cause the US to enter a recession. Already, we are witnessing corporate profits in this quarter decline as companies slowdown spending and hiring plans. More and more companies announce they expect a slowdown in the first quarter of 2013. So, we are already feeling the effects of the “fiscal cliff”. As a result, we have been cautious about increasing equity positions and have taken tax losses to increase fixed income positions. As you can see, we believe our politicians plan to give the American people (and world economy) COAL for Christmas! We are prepared and have prepped your accounts for that situation too!
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