Even though the U.S. economy hasn't quite fallen off the fiscal cliff....yet, Ben Bernanke, Chairman of the Federal Reserve, has recently been speaking out about the fiscal cliff and how even the potential fall into the abyss is already affecting the U.S. economy. Of course, there is the worry about the stock market. How will the stock market react if we do, indeed, fall of the fiscal cliff? Some say, that at this point on December 14, 2012, the politicians have run out of time and the disaster can't be averted. Will the market crash? Or has this event already been factored into stock prices?
Bernanke discusses how the potential fall off the fiscal cliff is already hurting businesses and consumers alike. Consumers fear higher tax rates, so even here at the holidays, their spending has been curtailed. Businesses are putting off hiring new workers and investing in capital equipment for fear they won't be able to take on new or bigger projects due to high taxes and government spending cuts. He argues that even a short-term fall off the fiscal cliff will do exceptional damage to the economy. Business firms don't even know what the corporate tax rates will be in 2013 nor the capital gains tax.
While the politicians play one-upsmanship with our lives, the American consumer and business person are left twisting in the wind. It does not matter which political party you are affiliated with, the result is the same. Nothing is getting done in Washington, our nation's capitol.
Bernanke warns that if the country does fall off the fiscal cliff that there is little to nothing the Federal Reserve can do to help. Interest rates are already near zero. The Fed is already pumping money into the economy. We'll see what happens in the next few days.