Tsk Tsk Tsk…They Just Couldn’t Get It Done.

On the Eleventh and Twelfth Days of Christmas,
My True Love Gave to Me…

Eleven Pipers Piping, &

Twelve Drummers Drumming

The consequences won’t be felt right away. The instruction to change the withholding schedule information has been … ‘withheld’, so that gives false hope that after the market swoons this week and people rise up with pitchforks, a deal can be struck.

Now it’s soothsayer time again..12 drum rolls, please!

There will be a shudder in the market this week, but no great crash. Will people even notice the changes? I sincerely doubt anybody other than you, gentle reader, and I, ungentle author, even are aware of this happening.

So who’s the big loser here? Well, let’s start with $110 billion in cuts for both military and domestic spending. These cuts begin to take effect on January 2nd. So, isn’t that good? Haven’t the Republicans been telling us we need to cut spending?

Right now most of the rest of the world is in or on the brink of recession. The only stock markets doing anything are the Hang Seng and – interestingly enough, the Nikkei (China and Japan). Why? China is still likely in the midst of an investment bubble and Japan is just awakening from 20 years of deflation, with the new Prime Minister promising to break the back of this deflation by weakening the yen. This flies in the face of long-held dogma in Japan, so if he’s successful, and deflation becomes inflation, old folks will feel the pinch more than others not on fixed incomes. But hey, go for it, buddy!

Europe is likely to suffer the most if the US does go into recession. There is a clear expectation of one quarter of negative growth, probably the first quarter as a function of poor Christmas spending and the after effects of you and me lowering our spending because of the failure of Washington to agree.

So? Well, time will tell and all I can say is, Shame, Shame, Shame! (Thanks, Gomer…)