That’s the single word that has raced my mind after the Super Comical decision to… do nothing… My heart skipped a pause and added a beat in sheer lack of surprise. Heard a joke that a pro- prefix indicates the opposite of a con- prefix. “Progress indeed.” As more analysts than we can shake sticks at are commenting on this indicates a pretty horribly gridlocked political process, and does not bode well for the election year 2012.
Most importantly in everyone’s mind is the expiration of the Bush tax cuts, presumably coming at the worst possible time for the US economy, and then again we have the entire confidence issue. This wasn’t even a fractional deal which with a little bit of token compromise would have averted a proportional amount of indiscretionary cuts; it was the equivalent of all-out sword-swinging with occasional stops to stab the economy for added lubrication. Of course, now we have each side blaming the other for not voluntarily taking a hit, and for spending too much of the time running away to take stabs at the economy. In other “your heart will skip a pause too” news, apparently there are already efforts to save those most helpless, needy and defenseless to prevent themselves from being gouged in a grim economic reality. OWS or the 99% you think? I’m talking the Defense forces, stupid! They defend nothing better than their own free cash flows!
So, where does this leave us, and more importantly, the US? First of all, we effectively get fiscal tightening, which would be at the wrong time in the cycle on the assumption that the European problems will persist. To balance an equation where we have already subtracted fiscal easing I guess we must provide monetary easing once the flames of cataclysm start licking. The “external headwinds and troubling employment situation” pitch and all of that from Mr. Bernanke. I can almost hear the printing press running.
Reactions seem muted so far. Why anyone in their right mind would sell gold and yen in this environment is beyond me (ratings agency estimates? really? Take a look at where worldwide bonds trade and tell me anyone in the bond markets that even care at this moment who is AAA.) but I’m not complaining. People that are willing to sell their stuff cheap and then turn coat a year later and buy more expensively is the closest we get to being served free lunches.