Sunday , 24 November 2024

Impact of U.S. Fiscal Cliff on Canada, Mexico and Much of the Developed World Would be Major

The (relative) impact on economies around the world would be major but particularly on Canada, Mexico and to a lesser extent on some other economies in a precarious state –- the UK, Germany, China, and Japan. [The details are illustrated, country by country, in a map below. Take a look.]

So say edited excerpts from an article* posted on www.econobrowser.com under the title The Fiscal Cliff: International Implications, which Lorimer Wilson, editor of www.munKNEE.com (Your Key to Making Money!) and www.FinancialArticleSummariesToday.com (A site for sore eyes and inquisitive minds) presents below, in part. (This paragraph must be included in any article re-posting to avoid copyright infringement.)

The full effect of the fiscal cliff internationally is illustrated below:

fisccliff3.gif Exhibit 15 from IMF (2012).

Lower commodity prices – 6% to 12% for energy and 3% to 6% for non-energy, depending on confidence effects and policy responses –  would also adversely affects net exporters of these goods. Were the assumed confidence effects more negative, so would be the spillovers.

I would further note that expansionary monetary policy — such as implemented recently by the Fed in QE3 — cannot offset completely the contractionary impact of contractionary fiscal policy. In addition to the zero interest rate constraint, looser Fed policy tends to re-allocate economic activity toward the U.S..

Sign up HERE to receive munKNEE.com’s unique newsletter, Your Daily Intelligence Report
  • It’s FREE
  • It contains the “best of the best” financial, economic and investment articles to be found on the internet
  • It’s presented in an “edited excerpts” format to provide brevity & clarity of content to ensure a fast & easy read
  • Don’t waste time searching for articles worth reading. We do it for you and bring them to you each day!
  • Sign up HERE and begin receiving your newsletter starting tomorrow

Conclusion

Hence, the stakes for a successful resolution of the fiscal cliff are high, not just for the U.S., but for the world economy.

* Source: http://www.econbrowser.com/archives/2012/11/the_fiscal_clif_2.html

Editor’s Note: The above post may have been edited ([ ]), abridged (…), and reformatted (including the title, some sub-titles and bold/italics emphases) for the sake of clarity and brevity to ensure a fast and easy read. The article’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article.

Related Articles:

1. The Fiscal Cliff: What Is It? What Are Its Ramifications? What’s the Best Way to Invest for Such an Eventuality?

fiscal cliff

What is the “Fiscal Cliff”? What would its ramifications be? Will it tip the U.S. into a recession? What are the critical economic building blocks that would be adversely affected? How best should you position your portfolio for such an eventuality.

2. This Is What “Falling Off The Fiscal Cliff”  Really Means – and It is DIRE!

financial cliff

We all know that high debt is a growth killer and, at the moment, the U.S. has a budget deficit of about $1 trillion. That’s a very big number…The question is, at what point do countries have to deal with high debt levels? How high do debt levels have to be before one has to deal with the problem by lowering budget deficits? Also, what are the consequences of such debt and budget reductions? Words: 500

3. Goldman Sachs: The Fiscal Cliff Is a Real & Present Danger to Future Level of S&P 500 – Here’s Why

fiscal cliff

“Portfolio managers have been swayed by hope over experience” when it comes to anticipating the effects the fiscal cliff will have on markets. Investors aren’t giving as much attention to the fiscal cliff as they should be, and that may be helping to set the markets up for a repeat of last year, when the debt ceiling negotiations sent stocks plummeting.

4. Regardless of Who Wins in November the U.S. Is Going Over the Financial Cliff! It’s Just a Matter of Time – Here’s Why

financial cliff

The outcome of the election of 2012 will [only] determine the rate of speed at which we approach the [financial] cliff [because] neither political alternative is willing to change course, to steer away from the cliff. The cliff is so high that whether we go over it at 200 mph (Obama) or whether we merely slip over the edge (Romney), the end result is the same — fatal for the economy and perhaps our entire political system. It is the fall that will kill us. [This article explains why that is going to be the case.] Words: 1135

5. Fiscal Tightening in 2013 and Its Economic Consequences

financial cliff

Under current law, a sharp reduction in the federal budget deficit between 2012 and 2013 will cause the economy to contract but, the Congressional Budget Office projects, will also put federal debt on a path more likely to be sustainable over time. To illustrate the effects of fiscal tightening, CBO compared its projections under current law (the “baseline” projections) with projections under an alternative set of policies — two scenarios in a broad spectrum of choices – in the infographic below.

6. The Fiscal Cliff: Everything You Need To Know About It & Its Implications

financial cliff

The U.S. federal government is scheduled to implement a fiscal tightening of unprecedented severity (approx. 5% of GDP) at the start of 2013. The last time a tightening of such proportions occurred (3% of GDP in 1969) it presaged a recession. Thus, unless mitigated by an act of Congress, we expect the fiscal cliff would lead the U.S. into a recession in 2013. Below, in 26 charts, we examine all aspects of the impending crisis to gauge its potential impact on the credit markets and, by extension, our strategic investment recommendations.

7. Fiscal Cliff Scenario Analysis of the 4 Possible Election Alternatives & Their Financial Implications

financial cliff

This post shows JPMorgan’s estimated probabilities on four different fiscal cliff outcomes, conditional on who wins the presidential election in November.

8. The Fiscal Cliff: What We Think Will Happen and What Investors Should Do

fiscal cliff

Unless the government acts quickly, it is probable that the term “fiscal cliff” will become a household phrase over the next few months. Unfortunately, this is reminiscent of the budget ceiling crisis about a year ago. In this report we will explain what the cliff is, discuss the worst case scenario, and determine what, if anything, you should do about it. Words: 1436

9. Fiscal Cliff Re-Run

The fiscal cliff returns and the economic and fiscal situation are no better today than they were a year and a half ago.

10. What’s Coming: A “Fiscal Meat Grinder,” A “Fiscal Cliff” and a Potential “Major Market Meltdown”!

fiscal cliff

The International Monetary Fund, the U.S. Congressional Budget Office, the National Association of Manufacturers and many other authorities are now warning that with the largest tax increase in U.S. history — plus the largest government spending cuts our nation has ever seen – one of the deadliest financial crises in U.S. history is set to strike the U.S. economy beginning this coming New Year’s Day. Barring a miracle in Washington….. Words: 1028