“The Fed, Having Used Its Bazookas, Is Now Down To Firecrackers”
by Tyler Durden
Austerity is coming our way, it’s just a matter in what manner and by how much, and whether it becomes an orderly or disorderly process. The fiscal cliff is really a bit of a ruse in that respect, but the key here is that years of fiscal profligacy is coming to an end and the Fed at this point, having used its bazookas, is now down to firecrackers. The economic outlook as such is completely muddled and along with that the prospect for any turnaround in corporate earnings… Once we get past the Fiscal Cliff we will confront the inherent inability of the Democrats and the GOP to embark on any grand bargain to blaze the trail for true fiscal reforms. The U.S. has not had a rewrite of its tax code since 1986, which was the year Microsoft went public and a decade prior to Al Gore’s invention of the Internet. The tax system is massively inefficient and leads to a gross misallocation of resources that impedes economic progress — rewarding conspicuous consumption at the expense of savings and investment. It is the lingering uncertainty over the road to meaningful fiscal reform that is really the mot cause of the angst — the fiscal cliff is really a side show because who doesn’t know that we are going to have a Khrushchev moment?