The Fiscal Cliff Saga Continues

For lack of time, I have been pushing back writing this post, and as I have been doing it, I have been consternated to note that the fiscal cliff saga has also continued to draw out. Here we are, a few days before Christmas, Congress has officially gone home, and Obama and Boehner haven't talked since Sunday. Do we need anything more to prove that the political system driving our economy is broken? That leads to many questions. How did the government become involved in economy? What is the fiscal cliff? Are we going to go over it? To begin, it is common to hear people complain about "the Fed" lately. They are talking about the Federal Reserve. That is actually a situation that dates back to Alexander Hamilton. Remember Alexander Hamilton and his famous duel with Aaron Burr? Neither does anyone else. Well, that same Hamilton was involved in the creation of a federal bank. Then there was a confusing mess of people, papers, and more banks, and we get to the Great Depression. The countries of the world had difficulty maintaining their economies based on the gold standard. Some of them stopped using it temporarily. Later, the United States completely dropped it in 1973. From that time on, we started printing money for the sake of it. Is that the source of our problems? I don't know, but I do know that the central bank debate has a long history in the United States, as old as the country. The fiscal cliff is a series of financial measures involving discontinuing certain tax cuts and breaks and cutting government spending in various areas. It was meant to be so arbitrary and terrible that Congress would be forced to solve their quibbles before we hit that point. What happened? They have been unable to get any closer to an agreement. As of today, they come back on Dec. 27 and have five days before the Bush-era tax cuts expire. Some of these economic plans would not take effect until February or March. However, if lawmakers are unable to come to any sort of compromise, it is likely we will go over the fiscal cliff. That entails a recession, as several things will happen. The market will drop as investors will be afraid to make investments due to the (circular) coming recession. Everyone will be hit with a tax hike, although it is likely Obama will negotiate for it not to hit the lower and middle classes. To be continued...