Bernanke Cliff Analogy Overstates Immediate Economic Harm – Bloomberg 12-07-12

Salient to Investors:

Chad Stone at Center on Budget and Policy Priorities said the fiscal cliff conjures up Wile E. Coyote, but said “fiscal slope” is more acurate as the  effects would accumulate gradually during 2013.

Neil Dutta at Renaissance Macro Research said those who argue that it’s a fiscal slope are ignoring the psychological impact on business and understates the potential for business investment to decline and for financial markets to react negatively.

The Economic Policy Institute prefers the term “fiscal obstacle course.” Stephen Carter at Yale said the image of a fiscal cliff goes back a long way. Martin Medhurst at Baylor University said if we do go past the deadline, we could always recalibrate and adopt a different metaphor.

Alec Phillips at Goldman Sachs said financial markets assume that Congress will reach a deal by the end of the year or early January, with little indication the market is expecting an adverse outcome. Phillips said the world doesn’t end on Jan. 1 if people assume the issue will be fixed very soon.

Joe LaVorgna at Deutsche Bank said residential investment could add as much as 0.6 percent to GDP in 2013.

Read the full article at http://www.bloomberg.com/news/2012-12-07/bernanke-cliff-analogy-overstates-immediate-economic-harm.html