Federal Reserve Chairman Ben Bernanke delivered a speech at the Economic Club in New York Tuesday afternoon.
Bernanke stated that the economic recovery is “disappointingly slow”. If we take a few steps back, and then look at the United Sates Economic outlook, I wouldn’t say it’s moving slow. It appears it is moving very fast. The problem is, it is moving fast in reverse, not drive. It is moving dangerously fast in the wrong direction and there is a “fiscal cliff” in sight.
The Chairman called out the Congress for leading the nation to the edge of what he has deemed the “fiscal cliff”.
The Dow industrials went south as Bernanke spoke of the U.S. uncertainty.
What does Bernanke think?
“The realization of all of the automatic tax increases and spending cuts that make up the fiscal cliff, absent offsetting changes, would pose a substantial threat to the recovery–indeed, by the reckoning of the Congressional Budget Office (CBO) and that of many outside observers, a fiscal shock of that size would send the economy toppling back into recession.” Bernanke said Tuesday.
Woah, okay. The “economy toppling back into recession” sounds pretty serious to me. Economists and analysts, one after another, say we could be on our way to recession but when Bernanke clearly states it, that should really tell us that things are not looking good.
Taxing the Rich will not solve the problem, it will spawn additional problems leading to only more and more economic turmoil in the United States. If you haven’t read the article on why Taxing the Rich is Unconstitutional, please do. More Quantitative Easing will not solve the problem either. “What will solve the problem?” you may ask. I cover an idea on that in the Taxing the Rich article, if you are curious.
When the fiscal cliff is a thing of the past and no longer a dreaded phenomenon on the future, it is likely that Risk Aversion will be the first manifestation in the Forex Market. The United States Dollar, Japanese Yen, and maybe the Australian Dollar could gain ground as investors take money out of risky investments. Eventually, unless the White House establishes a suitable solution, Risk Aversion will wear off and the value of the Dollar could start reflecting the insanity of the U.S. economy.
Be wise with your investing decisions, budget your money, take seriously the coming events, and stay informed.
This is an article that explains in detail what the Fiscal Cliff is.
Read more about Bernanke’s speech here.
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