Fourth quarter 2011: New Turmoil Set to Rock Economic Foundation
The congressional super-committee is charged with coming up with $1.5 trillion of cuts eight weeks from now will almost certainly take a big whack at a category of the federal budget called “non-defense discretionary” spending. It’s the easiest to cut and comprises those federal programs that help children and lower-income families. These are the programs that depend on yearly appropriations.
Should the super-committee not agree on where to slash, an automatic trigger will make huge cuts in domestic discretionary spending. Please note that this is already baked into the cake!
And, according to Robert Reich, it gets even worse. Drastic cuts are already underway at the state and local levels. Since the fiscal year began in July, states no longer receive about $150 billion in federal stimulus money. That’s the money that was used to fill gaps in state budgets over the last two years. Reich sees a downward cascade of budget cuts — from the federal government to state governments and then to local governments — that will hurt most Americans but kids and lower-income families in particular. — A Major Crisis Looms
Reich Link: http://www.csmonitor.com/Business/Robert-Reich-s-Blog/2011/0930/Morally-indefensible-
budget-cuts
Enter GEAB, the Global Europe Anticipation Bulletin
GEAB is the confidential letter of the think-tank LEAP/Europe 2020, published in partnership with the Dutch foundation GEFIRA. Its aim is to provide readers with state-of-the-art analyses of global trends, featuring the analysis of various advisors, consultants, researchers, and policy experts.
In their June bulletin, LEAP/Europe 2020 confirmed that the next stage of the crisis will really be the “Very Serious Breakdown of the world economic, financial and monetary system” and that this historic failure will occur in autumn 2011. This is where we are now. The monetary, financial, economic and geopolitical consequences of this “Very Serious Breakdown” will be of historic proportions and will show the crisis of autumn 2008 for what it really was: a simple detonator.
“As anticipated, the second half of 2011 has started with a sudden and major relapse of the crisis. Nearly $10 trillion of the $15 trillion in ghost assets (assets carried on books that have no real or tangible value) have already gone up in smoke. The rest (and probably much more) will vanish in the fourth quarter of 2011, which will be marked by what LEAP calls the implosive fusion of global financial assets.”
“So, in November 2011 the United States will brace itself for a politico-financial “perfect storm” that will make the summer problems look like a slight sea breeze.”
The six elements of the future crisis have already come together:
> the “super committee” responsible for deciding budget cuts on which there was no agreement this summer will prove incapable of resolving the tensions between the two parties
> the automatic budget cuts required to be made in the absence of agreement will result in a major political crisis in Washington and increasing tensions, especially with the military and the recipients of social benefits. At the same time, this “automatic function” will generate major disturbances in the functioning of the state system.
> the other major rating agencies will join S&P in downgrading the US credit rating and diversification out of US Treasury Bonds will accelerate, in the knowledge that the United States now depends primarily on short-term financing.
> the inability of the Fed to do anything but talk and manipulate stock markets or gasoline prices in the United States now makes any last-minute “rescue” impossible.
> over the next three months the US public deficit will increase dramatically as tax revenues are now already in the process of collapsing under the impact of the relapse into recession. In other words the increased debt ceiling voted in a few weeks ago will be reached well before the November 2012 elections… and this is information that will spread like wildfire in the fourth quarter of 2011, reinforcing all investors’ fears to see the United States follow Euroland’s example over Greece and force its creditors to take heavy losses.
> Barack Obama’s new plan in the fight against unemployment will have no significant effect. On the one hand, it’s not up to the challenge and, for this reason, can’t rally the country’s energies; and on the other, it will be cut to pieces by the Republicans who will only keep the tax cuts… The only result of which will be to increase the country’s debt even more.
I believe we have entered into the vise…What the subject bulletin really focuses on is the attempt to use the euroland crisis as a ruse to deflect attention away from the crisis is England and the United States
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