1. The “hecho en chine” cliff
2. The bond cliff
3. The fiscal cliff
We will deal with them is reverse order which happens to also be their order of consequence.
The fiscal cliff. A Hollywood media creation starring Washington DC politicians and bureaucrats. The recent episode brought us the cameo appearance of little Timmy Geithner. We learned why little Timmy seldom gets released to the public. We did enjoy the contrast – little Timmy regurgitating up to three or four of the six talking points he was forced to memorize late last week, regardless of the question posed (e.g. question: where are you spending the holidays? Little Timmy: making investments in America – building infrastructure – stimulating job growth.) Hmmnn. On the other hand, George Hamilton, er, we mean John Boehner showed up in the role of acting like an adult to little Timmy’s juvenile performance. Three year old treasury secretary v. a fed up Midwestern congressman who just wants to go home and be around people who still work for a living and pay taxes. Challenge for viewers – is this a real cliff or just a Hollywood set? How do find out? Simple – go over it and see what happens. There is little downside and it will help our fiscal situation as well as help Mr. Obama with his coalition.
The bond cliff. We doubt that you will hear much about this one – tad too “wall street” for the new Obama coalition – blacks, Latinos and white gals. This one does require some education; some analysis; some basics or fundamentals. Right now the Federal Reserve is buying up most of the bonds issued by the United States? Why? Several reasons but we think the number one reason is to avoid a bond vigilante attack in the middle of the night. Nothing spells cliff catastrophe quite like a sudden spike in interest rates. So if the fed buys the bonds the vigilantes can’t get at the interest rates. What could still happen? Attack the dollar. It is happening as we write and it is called inflation but the vigilantes may have more in mind one of these days – as other currencies strengthen or, heaven forbid, a viable replacement arrives. One sure thing about falling off this cliff – the number one cliff dweller in America, Ben Bernanke, will be getting his pension just before the tumble occurs. How do we test this cliff? Simple, we let the market buy up all the treasury bonds, bills and notes and all the securitized mortgage debt. Just like we use to do, in the old era – five or six years ago.
The “hecho en chine” cliff. This is the one no one wants to talk about. This is the humpty – dumpty of cliff dwelling. You see, we don’t make much of anything here anymore. We don’t because we have made it so costly in so many different ways that anyone with the motivation to make something chooses “hecho en chine.” En chine they tend to not have Lily Ledbetter laws – heck, they tend to not have any employment laws – come to think of it being an attorney “en chine” has about the same status as being a Penn State assistant coach. What else is missing “en chine?” Beside lawyers? Unions. Health care laws. Environmental laws. Volumes of rules, regulations and bureaucracies (presented bi-lingual of course) telling you what you cannot do; where you cannot do it and when you cannot do it. How do we test this cliff? After all this is the big cliff – the high cliff – the one that we all are living on. How do we test it? We suggest you ask the new era coalition for their answer – the white gals, blacks and Latinos. See what they have to say about getting rid of “hecho en chine” and replacing it with “Made in US of A.” Maybe they can get little Timmy to perform again.