We should expect at least a Fiscal Clifflet for the US
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In my view, that puts the US and the global economy in serious danger of recession. So, the politics of austerity and fiscal deficits are very much on display here. The conventional view is that deficits are bad and so large fiscal deficits will be fought. In Europe, because of the euro, this is necessary. Elsewhere where there is more leeway, the cutting has only just begun, but it will happen – and that is negative for growth and earnings. President Obama could actually have the more ‘austere’ policy view because of Republican aversion to tax hikes. As a hedge fund friend told me, “corporate profitability is the flip side of the deficit, and will get crushed if there’s any serious attempt to rein in government spending.”
About Edward Harrison
Edward Harrison is the founder of Credit Writedowns and a former career diplomat, investment banker and technology executive with over twenty years of business experience. He is also a regular economic and financial commentator on BBC World News, CNBC Television, Business News Network, CBC, Fox Television and RT Television. He speaks six languages and reads another five, skills he uses to provide a more global perspective. Edward holds an MBA in Finance from Columbia University and a BA in Economics from Dartmouth College. Edward also writes a premium financial newsletter. Sign up here for a free trial.
