Let us now segue from the political elections to the developments we can expect over the next four years and how they are likely to be responded to.
Any one or combination of these events I would not be surprised to see derail affairs in this country, making our new old-president’s life hell.
EU Debt Crisis
This remains the first and foremost issue with regards to global economic activity. Europe is the largest single contributor to economic activity on the planet. And they are in trouble. Still.
Most recent acknowledgements from the ECB put expectations for recession increasing and any hope of lowering unemployment years away.
In the interim, expect another trillion euro easing from the ECB to pave the way to 2014. Coupled with price pressures and economic contraction, we’ll feel the ripples of these developments here at home.
Obamacare was here to stay the moment Roberts pulled a Benedict Arnold. But for mostly political reasons, the costs of the program were delayed until after these elections and into Obama’s second turn. Only a handful of the taxes to pay for this program have gone into effect. The majority are yet to come.
And Obamacare is disruptive. Very disruptive. Most businesses, I’m convinced, remain uninformed about the impact the law has on their operation and have been keeping their head in the sand, hoping it would go away.
Complex penalties, mandates, a mountain of required paperwork, loopholes, a bungle of disperse agencies with various territory to enforce, and any thousands of contradictive issues that could pop up mean that, by 2014 when the final provisions are supposed to be in action, American business will likely be pulling its hair out.
Pension Funding Gap Expiration
Private pension funds are required by law to maintain a minimum funding, actuarially determined, in order to meet obligations.
In the event that these funds do not meet their funding criteria, provided they are at minimum funded greater than 60%, they have 7 years to get things back in order.
Let’s say, 2008. Now start counting.
Hey 2014, nice to see you again.
At the moment, US debt still remains popular, largely for its liquid characteristics and large volumes making it accessible anywhere. But, with the Fed buying as much paper as they are, eventually you’ve got to start asking, “how is this stuff valuable?”
For the moment, deflationary pressures should help keep the US dollar strong. But when the recovery (or specter of recovery) starts to infatuate the US markets again, that leaves us with our monetary supply almost triple from before the housing bust.
Should credit begin to expand again in this country, that leaves treasuries being pretty much worthless.
And thanks to the long term rollover and the Fed purchasing up assets like distressed mortgages at what have to be overpriced levels to keep the banking sector solvent, there is almost no recourse to getting that extra money back out of the system.
Some states, like Illinois or California (usual suspects), are pretty fucked from being stupid. No more need be said.
The Baby Boomer generation (sometimes referred to by their proper name, The Worst Generation Of Assholes To Have Every Been Birthed On This Piece Of Shit Rock) are getting old. I mean really old.
And this generation, thanks to taking a triple leveraged position in housing they never had a viable exit strategy for, are also sitting on underfunded retirement accounts and in chronic need of cash. Plus those retirement accounts will begin to force liquidation in pre-specified amounts starting at retirement.
Couple that with these old codgers needing to buy down in housing to accommodate those knee replacements, and the Baby Boomers’ retirement looks to be as bleak for markets as it will be for their children having to listen to them bitch about how smart they think they are.