If the Super Committee Fails to Act, Whither the Markets?

In a few days, if the legislative “Super Committee” does not reach a consensus on $1.2 trillion in cuts over the next ten years, then some rather unpalatable budget reductions will ensue. This episode of government chicanery has a similar feel to the budget debate earlier this year. Back then, when it appeared that Congress was not going to come to an agreement, financial markets experienced an elevated level of fear. Today, an agreement could calm things down a bit, despite the fact that the underlying set of circumstances have not changed in any material sense. After all, $1.2 trillion over 10 years is a small drop in the budgetary bucket. In fact, $1.2 trillion is less than our current year’s projected fiscal deficit. More window dressing? What do you think? 

I mentioned something about underlying circumstances. Even though American corporations are well positioned for a bull run (except perhaps financials), there are plenty of financial viruses about which, if you choose to ignore them, may be to your own peril. I have mentioned this many times in the recent past, but perhaps a refresher is in order.

European debt and potential U.S. contagion top the list. Then there’s the unsustainable path of U.S. fiscal policy. Why, you ask, does Congress and the President continue to spend as they do, despite the objection of a majority of Americans? I recently re-read an article from the September 27, 2010 issue of Forbes entitled “How Obama Thinks.” It was written by Dinesh D’Souza and it does a credible job of explaining President Obama’s belief system. If you think our President is a Socialist in the common usage of the term, think again. In fact, as Mr. D’Souza explains, our president is actually an anti-colonialist, a belief he received from his father. In fact, this is the only view which explains his policy decisions.