Counterparties: The CBO rates the fiscal cliff

By Ben Walsh
May 23, 2012

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The Congressional Budget Office released its analysis of the economic effects of the so-called fiscal cliff, and it’s not pretty:

Growth in real (inflation-adjusted) GDP in calendar year 2013 will be just 0.5 percent … with the economy projected to contract at an annual rate of 1.3 percent in the first half of the year and expand at an annual rate of 2.3 percent in the second half … such a contraction in output in the first half of 2013 would probably be judged to be a recession.

These dangers aren’t new, but ever since John Boehner threatened to add another debt-ceiling fight to the mix, they’ve been amplified.

Looking at Boehner’s comments, Ezra Klein thinks the US Government is being set up for its very own Lehman moment: “We’re either likely to solve our fiscal problems early in the year in [a] way that defuses Boehner’s debt-ceiling threat or we’re likely to spend 2013 in a state of permanent crisis in which Congress lights the economy on fire”. Monetary policymakers are already attuned to the dangers. The most recent Fed minutes called the impacts of fiscal policy uncertainty a “sizable risk” to the economy. If Congress and the president do get it right, that risk could give way to 4.4% growth.

Or for a truly terrifying scenario, Joe Weisenthal imagines the stratospheric levels of Republican intransigence that a Romney triumph in the popular vote paired with an Obama victory in the electoral college would bring. – Ben Walsh

On to today’s links:

New home sales have bottomed, but 2012 is still likely to be the housing market’s third-worst year ever – Calculated Risk

EU Mess
Euro zone members agree to draw up individual contingency plans for Grexit – Reuters
US money market funds’ search for yield through exposure to European banks – Sober Look
Despite Hollande’s support, Merkel continues to oppose euro bonds ahead of EU summit – NYT
European banks remain unprepared for the fallout of a Greek exit from the euro – Bloomberg
A roundup of economists’ estimations of the fallout from Greece leaving the euro – WSJ

Source: Banks cut estimates just before the Facebook IPO because company executives told them to – Business Insider
The Facebook forecast scandal could lead to an insider-trading case – John Carney
Facebook: The list of incompetents – Felix

A glowing profile puts Ina Drew’s replacement in the running to succeed Jamie Dimon – FT
JPMorgan brings an exec back as senior vice-chairman after more than a decade in retirement – DealBook

Vintage Bess
What if Mark Zuckerberg wore a three-piece suit with a monocle to the Facebook roadshow? – Dealbreaker

Everest’s congested summit – Outside

Good Questions
Where do all the dead pigeons go? – The Atlantic Cities

All of the sudden executives want to go to trial against the SEC – Bloomberg

Large Numbers
The RIAA claims Limewire owes it $72 trillion – AV Club


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If the “facts” recited in the Business Insider piece are accurate, then this thing is just rotten to its core. Believe it or not, the law is not structured in a way that allows insiders to whisper info to each other that they are prohibited from putting in writing. Yes, we know the practice is not uncommon – that doesn’t make it legal. Ethics? – they were never on the table at all.

More fundamentally, Z’berg’s track record demonstrates an MO that involves double-crossing everyone who gives him the opportunity to do so. That’s how it played-out with the other guys who formed the original concept with him back in school, isn’t it? He did the same thing here, but was smart enough to confine the damage to muppets, and let the big-time guys who are cut from the same cloth he is avoid the worst of it. Prudent.

Hope the newly minted Mrs. Z had/has a good lawyer.

Posted by MrRFox | Report as abusive

Because the CBO is regarded to produce the most impartial figures in DC, it is clear that America needs the Republicans to lose the presidential election and their plurality in the House.

Posted by breezinthru | Report as abusive

Not to defend Pachter, but I believe the hoodie comment is similar to what you posted a day back “[Zuckerberg] clearly viewed Wall Street and its investors with thinly-disguised contempt, slouching into IPO meetings — when he bothered to turn up at all — in his hoodie, and signally failing to provide the outward-facing leadership that investors crave. Zuckerberg’s refusal to play the Wall Street game is admirable, in some respects — but at the same time is completely inconsistent with a desire to sell $16 billion of shares at a $104 billion valuation.”

Posted by thispaceforsale | Report as abusive