“The wheels could come off the U.S. economy even before it has shifted out of second gear unless politicians reach a last-minute deal to avoid $600 billion in tax rises and spending cuts that kick in next month.
The rest of the world would be unable to avoid the pile-up if America does fly off the so-called fiscal cliff.
That is why, even in a holiday-shortened week, eyes will be peeled for signs that Democratic President Barack Obama and his divided Republican opponents can bury the hatchet.
The White House on Friday tried to rescue the stalled talks, but there was little headway to resolve what Alan Blinder, an economics professor at Princeton University, called the biggest near-term risk facing the global economy.
Seen from abroad, U.S. policymakers were looking “clownish,” the former vice-chairman of the Federal Reserve said: “This will do us a tremendous amount of damage.”
Until last Thursday, markets had assumed a compromise would be struck, averting the risk of a relapse into recession. The slow-motion car crash had been so well signaled that surely the drivers would swerve in time? …”