Investors are now focused on the upcoming fiscal cliff, one of the most important issues facing the economy. This week we have several articles on the subject, beginning with a look at the present negotiations between Congress and the White House. We follow this with a discussion of the possible scenarios for the resolution of the problem. We close with an article delving into the history of sovereign debt crises. It is interesting to note how quickly interest rates rise when investor confidence collapses.
Fiscal Cliff Negotiations Will Not Be Easy – To solve the issue of the fiscal cliff and budget deficits, our politicians must compromise. According to the Washington Post, the negotiations are going to be difficult. http://www.washingtonpost.com/business/economy/obama-to-open-fiscal-talks-with-plan-to-raise-taxes-on-wealthy/2012/11/13/9984cd78-2dc1-11e2-89d4-040c9330702a_story.html
Possible Outcomes To The Fiscal Cliff To Date – Liz Ann Sonders of Charles Schwab & Co. outlines three possible scenarios for fiscal policy under the current lame-duck session of Congress. She also shows an interesting chart of the S&P 500 Index performance before and after capital gain tax increases in prior years. http://advisorperspectives.com/commentaries/schwab_111412.php
What Happens When Investor Confidence Collapses – Reinhart & Rogoff wrote a book about all of the sovereign debt crises over the last 100 years. This article summarizes some of their work and shows how quickly interest rates can rise when confidence in a government collapses. http://advisorperspectives.com/dshort/guest/Chris-Puplava-121113-You-Know-Your-Government.php
We hope you enjoy reading these articles along with us and that you find them informative. Please forward this to your friends and family.
John R. Day and Bill W. Ennis