us fiscal cliff: what is it?

[Gatorhex]

It's best explained in pictures,

what happened when USA couldn't pay it's bills last time?

1971 Nixon closed the gold window and the Bretton Woods (gold backed) dollar was dead and replaced with a new fiat debt backed dollar...



Now imagine paying your mortgage at 10-19% interest rate in the new $Amero



Backed with the hard assets of Canada's (lumber/tar oil), Mexico's (silver/gold) and USA's (corn/wheat)

[BitCoiner2012]

The term "fiscal cliff" is PR for "eventual result of the massive failures that have been fiscal and foreign policy for the past decades".

The hosts are trying very hard to keep the party going, as someone said earlier, it takes a lot stronger of a kick to get that can just a little further each time. We are getting there, the evidence exists clearly. Consider just the past five years and the massive acceleration of cash influx out of thin air, the bailouts, the stimulus, the tarp, . . . .These are indications that "it" is coming. There will be a massive devaluation, a "new dollar", or an "international dollar" would be my speculation. The dollar is spent, it lives as a shadow that lingers on only due to former trust and value.

[bonker]

It's best explained in pictures,

what happened when USA couldn't pay it's bills last time?

1971 Nixon closed the gold window and the Bretton Woods (gold backed) dollar was dead and replaced with a new fiat debt backed dollar...



Now imagine paying your mortgage at 10-19% interest rate in the new $Amero



Backed with the hard assets of Canada's (lumber/tar oil), Mexico's (silver/gold) and USA's (corn/wheat)

I remember people talking about the Amero back in '09. All my friends thought I was bonkers.

As to the "Fiscal Cliff", here's the real deal. I picked up this information from some guy in a pub:
The 21-12-12 Mayan apocalypse date signified the start of the Biblical 7 year Tribulation period. The gun control
business and the fiscal cliff are the heralding events. Bitcoins are a nice hedge in this scenario

[Crypt_Current]

Bitcoins are a nice hedge in this scenario

i.e. "mark of the beast"

[thefiniteidea]

can someone explain it in simple terms, holding back on the paranoia a little.

what is it?
what is it going to accomplish for the united states?
why?

It's when the US government sh*ts out a titanium coin they deem is "worth" 1 trillion dollars so that we can pay our debts and spend more money...

[DannyHamilton]

can someone explain it in simple terms, holding back on the paranoia a little.

what is it?
what is it going to accomplish for the united states?
why?

It's when the US government sh*ts out a titanium coin they deem is "worth" 1 trillion dollars so that we can pay our debts and spend more money...

Nah, that is a proposed reaction to the debt limit crisis.  It has nothing to do with "the Fiscal Cliff".  Two separate political issues.  "The Fiscal Cliff" was a specific name chosen for a specific event.  Trying to apply it as a name to every fiscal event you disagree with doesn't make it so.

[kjj]

The hilarious thing is that for years, tons of blogs and commentators have been using terms very much like "fiscal cliff" to mean the whole stupid debt/entitlement situation that we've gotten ourselves into over the last 20/50/100 years.  I don't feel like digging through archives tonight, but I'd be totally amazed if there weren't thousands of uses of that exact phrase to be found in old posts from the last 5-10 years.

When I started hearing the term from ordinary folks, I nearly cried with joy, thinking that the idea had finally crept into mainstream consciousness.

Nope.  Just like "tea party", the media took a term in common internet usage and made it into something totally different overnight.  Fuck you, media!

[DannyHamilton]

. . . the media took a term in common internet usage and made it into something totally different overnight.  Fuck you, media!

Yep.  But that is what we are stuck with now.  If someone is asking about "The Fiscal Cliff", and they don't clarify what they mean, you can either get clarification, or assume that they are talking about the particular fiscal cliff that the media hyped up towards the end of 2012.

[thefiniteidea]

can someone explain it in simple terms, holding back on the paranoia a little.

what is it?
what is it going to accomplish for the united states?
why?

It's when the US government sh*ts out a titanium coin they deem is "worth" 1 trillion dollars so that we can pay our debts and spend more money...

Nah, that is a proposed reaction to the debt limit crisis.  It has nothing to do with "the Fiscal Cliff".  Two separate political issues.  "The Fiscal Cliff" was a specific name chosen for a specific event.  Trying to apply it as a name to every fiscal event you disagree with doesn't make it so.

Yeah I know but this was the closest related thread I could find without being annoying and starting a new one. I can't give it THAT much importance :-P

[Seth Otterstad]

So what happened?

[CurbsideProphet]

So what happened?

The can was kicked down the road. 

For the average person it means an increase in (Social Security) payroll tax of 2%.  It's technically not an increase since all that was done was the temporary decrease was not renewed for another year but either way, workers will be paying more taxes.

Long-term it might mean another downgrade for US debt if congress isn't able to come to a long-term agreement. 

[Lethn]

I wish I could see some actual math reasons on why politicians are so damn scared of paying off their debt but to me it seems like the only reasoning they have for not paying off their debts is ideological neo-keynesian bullshit where they want to keep inflation going as much as possible to keep the never ending lending up from what I know anyway.

[kjj]

I wish I could see some actual math reasons on why politicians are so damn scared of paying off their debt but to me it seems like the only reasoning they have for not paying off their debts is ideological neo-keynesian bullshit where they want to keep inflation going as much as possible to keep the never ending lending up from what I know anyway.

Well...  If you are interested in a serious understanding of how it works today, google Steve Keen and read a bunch of his blog posts, lectures and papers.  The important words to be looking for are "credit impulse".

Short version:

Investment causes production causes consumption.  It can be no other way, because eating an apple can never happen before the apple tree grows, and the tree can never grow before it is planted.  In the same way, a computer came from a factory, and the factory had to be built.  But, under keynesianism, we've shifted the way we do our accounting so that consumption is primary.  GDP, for example, is a measure of consumption (spending), rather than a measure of production or investment.  So, when spending slows, all of our accounting shows that the end of the world is coming.  When consumer spending slows, the government must step in to prevent the end of the world.  And governments don't have assets, they borrow.

[DannyHamilton]

. . . Investment causes production causes consumption.  It can be no other way, because eating an apple can never happen before the apple tree grows, and the tree can never grow before it is planted . . .

The other way to look at that is that nobody will bother planting an apple tree, and collecting the apples if other people aren't going to eat them.  The profit motive drives the land owner to plant an orchard, and without expected consumption he wouldn't bother.

. . . In the same way, a computer came from a factory, and the factory had to be built . . .

In the same way, the computer manufacturer builds additional factories only when the rate of consumption exceeds his current factories' rate of production.

So which is the driver, consumption or investment?

. . . When consumer spending slows, the government must step in to prevent the end of the world.  And governments don't have assets, they borrow.

If this is the reason behind borrowing, then why would they continue to borrow in times when consumer spending is growing?  Seem like there must be more to it than this.

[gabbergabe]

Great topic, seriously!

But you asked and you have recieved alot of answers and opinions which I think is good because different points of view and the fact are much easier to paint your on picture of whats really going on.

[kjj]

. . . When consumer spending slows, the government must step in to prevent the end of the world.  And governments don't have assets, they borrow.

If this is the reason behind borrowing, then why would they continue to borrow in times when consumer spending is growing?  Seem like there must be more to it than this.

Because spending free money is addictive.  If you could get fame, power and women by spending other people's money, would you stop doing it?

[gabbergabe]

. . . When consumer spending slows, the government must step in to prevent the end of the world.  And governments don't have assets, they borrow.

If this is the reason behind borrowing, then why would they continue to borrow in times when consumer spending is growing?  Seem like there must be more to it than this.

Because spending free money is addictive.  If you could get fame, power and women by spending other people's money, would you stop doing it?

Your referring to those who paid their  absurd salarys with the bailout money right?

[gabbergabe]

How Much U.S. Debt Does China Own?

http://bonds.about.com/od/bondinvestingstrategies/a/Chinadebt.htm

[cbeast]

How Much U.S. Debt Does China Own?

http://bonds.about.com/od/bondinvestingstrategies/a/Chinadebt.htm

about one and a half Obamacoins.

[DannyHamilton]

How Much U.S. Debt Does China Own?

http://bonds.about.com/od/bondinvestingstrategies/a/Chinadebt.htm

about one and a half Obamacoins.

You've got an odd way of rounding:

China, which owns an estimated $1.16 trillion in U.S. Treasuries, is the number-one investor among foreign governments, according to the September 2012 figures released by the U.S. Treasury. This amounts to over 21% of the U.S. debt held overseas and more than 7% of the United States’ total debt load.

If we assume that when you say Obamacoin, you mean $1 trillion, then I could see rounding the value to any of the following:
About one Obamacoin.
About one and a fifth Obamacoins.
About one and a quarter Obamacoins.

But certainly the number is closer to one than one and a half.

According to the article it's about 7% of the U.S. Debt, and most analysts expect Japan to surpass China in 2013.