US Fiscal Cliff Update

It was in August 2011 when the US Congress passed a law which raised the Treasury’s debt limit by $US 2.1 Trillion to $US 16,260,000,000,000, tying it to a number of provisions, which come into effect at the end of 2012, listed below (thanks to the Wall Street Journal):-

The proposed spending cuts are actually fairly modest, in the bigger picture, but politicians of all stripes hate spending cuts, far preferring to increase someone else’s tax liability IF something has to be done. The new Congress doesn’t after all have any liability to abide by any law introduced by the last Congress

The trouble is, however, that the Treasury needs to increase its credit card limit once more, likely before year end, and there is even talk of abolishing the debt ceiling altogether. This at a time when the markets are getting twitchy and re-focussing on the US problems after the useful deflection, to the US that is, towards Europe’s woes.

Perhaps there are limits after all to creating, “wealth” by the issue of “IOUs.”



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