Friday, December 28, 2012

Fiscal Cliff: Beginning of End Game

The Americans face a daunting dilemma as the year approaches end. At the end of year 2012, the spring that was holding uneasy equilibrium will snap, all the tax breaks in force will disappear coupled with spending cuts, will most certainly lead to another bout of depression. A depression will be bad for people, jobs will disappear therefore buyers will disappear kick starting a vicious cycle of surplus inventory leading to shutting down of part production therefore more jobs. But it will not be good for the debt laden country either; depression doesn't create wealth growth does therefore a lose lose situation much like situation in Europe  where unbridled borrowing saw collapse of several economies.  America is sitting on a mountain of debt and the exigency of a Democracy is such that leaders seek soft solutions, are partisan to their constituency having one focus that is to get reelected. Only a true leader with staggering confidence in his ability to convince the people can swim against the current and impose harsh policies.
We know what goes up will come down, America has been on top for a while the signs of fatigue are clearly visible. Predictably ‘Fiscal cliff’ will be dealt with in easy way out solution; the sense of well being would be extended for some more time but the doom will be brought so much nearer home. Whoever thought Soviet Union will collapse so dramatically, it wasn't the military weakness that led to its downfall, it was their bankrupt economy. I guess we have reached a state where all wars will be stalemates and we see it all around us, the Iraq, the Afghanistan. Even though these nations stood no chance at all against the might of the axis of coalition yet there has been no emphatic win, you can well imagine how the war would have played out if these nations had been more stubborn and endowed with, let us say, a perceived lethality of North Korea. It will be economy that will be the new paradigm of drift a nation takes. I don’t see any capable leader, least Obama, who will set in motion policies that will rectify flaws in its economy of living off borrowing. The economy will sink this Goliath. Unfortunately there is no reason for the enemy of US to celebrate, when Goliath falls it will shake the earth and with that the whole world will suffer.        

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