Band-Aids, Zebras and the Fiscal Cliff

Posted on December 1st, 2012

One month to the fiscal cliff. Main stream media is having big time with this. Almost every article sounds like the end of the world is upon us. CNBC fills their entire day with fiscal cliff reports. They have created a special ‘Rise Above’ logo and display the hours, minutes, and seconds until the deadline. This is made for TV drama.

I am not writing a political op-ed piece and I am not going to pick sides. That said, the current administration has made it very clear that they intend to tax and spend. Based on this fundamental philosophy, there are no immediate solutions. The debt problem is not entirely the current administration’s fault, but it is their responsibility (Obama contributed $6 of the $16 trillion). This administration did create the fiscal cliff and they have demonstrated that they don’t know how to correct it. This is not a 30 day problem, it is here to stay.

This government loves to spend and they are addicted to debt. It’s common for an addict to avoid facing their demons. Self-imposed deadlines don’t work. “I will stop using heroine tomorrow, if I can just get a little more today. I promise.” Not buying it. You can’t change the stripes of a zebra.

We know exactly how the politicians behave: in the media they hold the party lines and talk tough, behind closed doors they comprise. If they can’t find a permanent solution, a temporary solution is the next best thing. Temporary solutions are leadership with leading. This is how our political zebras behave.

The substantive question is why the Dow has not dropped. We are supposed to be facing the worst fiscal Armageddon of all time. The government has an unsolvable dilemma. The potential implications include severe economic contractions, collapse of the Dollar, loss of the Dollar standard, hyperinflation and credit down-grade. The Dow should be down dramatically. The answer is that this is politics and the public is not taking it serious. The end of the world is not upon us. It is politics as usual

All of the brainpower in the world won’t solve these problems within 30 days. If there was a reasonable solution, it would have happened by now. The answer will likely include more compromise and temporary solutions. Permanent solutions to debt problems are too difficult and painful. Band-Aids are easier and safer.

We might go over the cliff, but it won’t be the end of world. Its politics as usual and that means temporary solutions and compromise.

Copyright © 2012 Dean


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