Greg Kadajski

“Non nobis solum nati sumus. (Not for ourselves alone are we born.)” — Marcus Tullius Cicero

——————————————————

Hallelujah! We’re saved! Praise [insert deity of choice here] for our merciful deliverance!

No longer will we be forced to endure the words “fiscal cliff” at every turn. No more will Fellow Reckoners be subjected to pointless speculation as to what might happen if we careen over said cliff. The phrase itself has been stricken from the English lexicon and, henceforth, anyone uttering the two words in tandem shall be banished from the intellectual landscape. Huzzah!

Well, not quite…

Despite an “11th hour” deal (which was quickly passed by both the Senate and then the House), it seems — at least for the immediate future — we are stuck with the term. Concerns over “what happens next” will no doubt encourage talking heads in the media to keep mentioning it and, though we’ll do our absolute best to avoid it, it’s possible the term will make an appearance in these pages as well, from time to time.

Of course, before this unfortunate collocation elbowed its way onto the nightly news, a different, decidedly more accurate phrase could be heard circling the airwaves. It describes the astoundingly offensive bipartisanship success that helped create the term “fiscal cliff” in the first place…long before the gasbagging politicos professed the audacity to try and disappear it. We are referring, of course, to the government’s longstanding policy of “kick the can.”

For the last decade, the US has played a dangerous game with its finances. To name but a few items on the government’s expense sheet: funding two (official) wars, bailing out its biggest banks and industries and continuing to “operate” an already bankrupt Social Security system. Its policies have created the largest debtor nation the world has ever seen…and have burdened an entire generation with an unbearable yoke of unfunded liabilities. Add to that the burden of student loan payments (to be repaid by a constituency that has a roughly 20% unemployment rate), and the solution seems almost unfathomable. Dan Amoss expressed as much in his essay “The Student Loan Time Bomb” back in November of last year.

“The default rate is horrendous,” Dan wrote, “and it’s only going to get worse. These are uncollateralized loans, so losses given default will be orders of magnitude higher than losses on subprime mortgages; in subprime, losses were mitigated by the value of housing collateral.”

It’s sad. And shameful. And it is, at least in part, owing to an overall sense that “more is better,” a misnomer that seems to resonate with the entire populace. Our reckoner-in-chief, Bill Bonner, began expanding on the concept late last year while compiling his thoughts for an upcoming book.

“The most-important single feature of modern economies is growth,” Bill observed. “Without it, neither businesses, households nor governments can pay their bills. Without it, pension funds…private and public…go broke.”

Bill expounded on this point in his essay  “Too Much of a Good Thing.” And so, as we continue our look back on 2012 — and how it was we that approached that now-infamous precipice — we’re proud to feature Bill’s essay, along with Dan’s “Student Loan Time Bomb”, in today’s Daily Reckoning Best of 2012 Series. Enjoy!

Greg Kadajski
for The Daily Reckoning

Greg Kadajski

Greg Kadajski is the Associate Editor of The Daily Reckoning. He holds a BS from Towson University where he studied both English and Filmmaking. Since joining Agora Financial in 2006, he's been very closely involved in the overall production of The Daily Reckoning - reading, editing and occasionally contributing to the wide variety of material that appears in its pages. He lives in Baltimore, Maryland.

  • Frank K

    The past decade saw the U.S.A., the global superpower, a source of great ideas and innovations. Examples:

    Enron accounting
    Credit default swap
    NINJA loan
    Collateralize Debt Obligation (say what?)
    To Big To Fail
    Debt Ceiling
    Subprime mortgage
    FICO Score

    $15 trillion debt and $1.5 trillion annual deficit don’t matter
    Fannie May & Freddie Mac (who invented these stupid names?)
    Quantitative Easing
    0.0% interest rate, forever
    Bailout (but where is bailin?)
    WMD (not, not in Iraq, but in Wall Street)
    Lehman Moment
    AAA rated mortgage back securities backed by AAA rates CDS
    Stimulus
    Socialism for the rich and capitalism for the poor
    Outsource and downsize

    TARP

    Fiscal cliff

    What will 2013 bring? How about:

    Failed State

  • CommonCents

    This country use to have producers and users. Producers took risk to make profit. Users, some worked for producers, consumed.

    As risk is now UN-assessable and our countries produced profits are nil,
    our countries producers have converted to users and production has
    shifted elsewhere. As a country of all users there will come a time when
    the producers will demand payment in something that they value. It
    won’t be Federal Reserve Notes.

    We can intimidate the world with our empire for only so long……….get prepared.

  • waffenss

    And don’t forget Derivitives

Recent Articles

It’s Time to Buy Microcaps for Double-digit Gains

Greg Guenthner

Yup, small-caps are setting up for a comeback year. In fact, I believe they'll retake a leadership role in the markets in 2015. So now's your chance to set yourself up for potentially massive gains before these stocks start grabbing headlines again. Or... you can simply wait until some ex-purt on CNBC or Fox recommends them - and miss out on half the party. Your choice...


Can Money Printing Cause Deflation?

Marc Faber

"There has been an issue that has preoccupied my mind for a long time," writes Dr. Marc Faber. "In economics, it is generally accepted that if the quantity of money and credit is increased, prices will rise… However, since economics is so complex… I question whether the expansion of central banks' balance sheets and policies of zero interest rates could have a deflationary impact…" The good doctor wrestles with the question, in today's essay...


How Low Will Oil Go – And What Can You Do?

Matt Insley

The oil market has been under siege for six months. From service providers to producers this downturn has been painful. Of course, we’ve known all along that oil prices were a little toppy over the summer. In fact, when asked just how low oil prices could go I usually answered with a simple “lower than you’d expect…”


Cuba’s Berlin Wall Moment

Peter Coyne

Our forecast that Cuba would be open and integrated within 5-10 years is on track after yesterday's big announcement. Ahead of schedule, even. Click here to see how some investors have profited and what the island's likely future is...


The $4 LED Trend You Don’t Want to Miss

Chris Mayer

The opportunity to sell and install LEDs is enormous. We’re talking about over a billion lighting fixtures. And the areas with the largest potential -- like parking lots -- have barely begun to change. Banker to the presidents Chris Mayer says you could triple your money in this new tech trend. Here's what you need to know.


Forget the Oil Crash – Crush the Market With Biotech Stocks

Greg Guenthner

The Biotech iShares ETF is up 23% since the Oct. 15th bottom. No, that is not a typo. Biotechs have torched the S&P over the past two months--more than doubling the returns of the big index. And biotechs as a group are up more than 38% year-to-date. In fact, since we first highlighted the June comeback, the Biotech iShares have gone nowhere but up.


How to Make the Casinos Pay You for a Change

Greg Guenthner

It's a theme we've shared with you since April. And it's only gotten worse. The gaming industry has come under all sorts of pressure--a situation I first noticed in the charts. The powerful, multi-year uptrends started showing cracks. And it wasn't long before those cracks turned into gaping holes you could drive a friggin' truck through. That's where things stand today.