John Hussman is Still Not Optimistic

From John Hussman’s weekly commentary we find (surprise!) this rather grim assessment of the near-term:

Getting past the “fiscal cliff” is the comparatively easy part. What it requires is for both aisles of the U.S. political system to agree on a mutually acceptable (but likely still intolerably large) federal deficit. Whether this happens before December 31 or after is not terribly meaningful because there is not an irreversible outcome on that date. So whatever might happen automatically would be meaningless shortly thereafter anyway.There will likely be a combination of modest spending cuts, modest high-income tax increases, and limits on deductions for second homes. None of these will have a material impact on the size of the deficit. Despite the bluster, few in Congress really appear to see deficit reduction as important as their core interests, which for Democrats is to preserve spending and for Republicans is to maintain tax cuts. Some inadequate compromise seems probable, there will be a brief episode of joy and celebration by investors that they have been released from their chains, and shortly thereafter the data will remind us that the global economy is in recession, and that the U.S. economy entered a recession during the third quarter – well before Sandy was even on the weather map.

Of course, at some point, he’ll be correct - we will have entered a new recession and few will have realized it until many months later - but, it’s taking an awfully long time to get there.


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