Daily Lessons from Life 02 January 2013 - US Congress agrees last-minute fiscal-cliff deal

"US Congress agrees last-minute fiscal-cliff deal - AFP 2 January 2013

WASHINGTON: The US Congress pulled back from the brink of "fiscal cliff" disaster and sparked a New Year stock rally with a last-minute deal averting tax hikes and massive spending cuts which threatened to unleash economic calamity.

Relief rippled out through European and Asian stock markets, with stocks in Spain and Italy surging by more than 3.0 percent, before the all-important opening on Wall Street.

The House of Representatives passed a deal between the White House and Republicans late Tuesday to raise taxes on the rich and put off automatic $109 billion budget cuts for two months, lifting the clouds of immediate crisis.

But more hard haggling is due in two months' time over further specific budget measures.

President Barack Obama, who campaigned for re-election on a platform of building a more equitable economic system, declared the deal was a promise kept, despite falling short of earlier hopes for a grand deficit bargain.

Had the deal fallen apart, all Americans would have been hit by tax increases and the spending cuts would have kicked in across the government, in a combined $500 billion shock that could have rocked the fragile recovery.

Relief was felt internationally.

European stock markets soared Wednesday, making a bright start on the first trading day of 2013, as investors welcomed news that the United States has clinched the deal.

Asian shares also rose sharply. Hong Kong shares, for example, ended 2.89 percent higher on Wednesday.

But not all observers found the development encouraging. China's official news agency warned Wednesday that the United States was heading towards an "abyss" -- fiscal deal or no deal.

"As the world's sole superpower, the United States is clearly not Greece," the Xinhua news agency said. "But economics and common sense do not lie.

"People, or governments, can overspend for some time, but they simply cannot live on borrowed prosperity forever."

China, which has the world's biggest foreign exchange reserves, is a major buyer of US Treasury 'debt."

The 'cliff' was avoided. Americans did not fall over the 'cliff'! So everyone should rejoice and celebrate as the Americans are STILL the world largest debtors' nation with NO DESIRE whatsoever to try to pay it down!!

Lessons for me are:

1. this world's economic model is BROKEN. You CAN borrow your way to a happy ever after life!! REALLY!! Stop worrying about having to pay the loans amount when they are due. We just get 'permission' to print more money and move on happily!!;

2. while China WARNED the USA to be careful NOT to 'live on borrowed prosperity forever', I wonder IF it has the guts to ask the USA to SIMPLY defaults and declare itself 'bankrupt'! In this case, ALL the treasury bonds that China hold will BECOME worthless or take a deep discount. Everyone with some properties or assets or money WILL become A LOT poorer!! Or even bankrupt! Some banks will for sure!! There will NOT be any 'normal commercial and economic' activities or transactions. Not to mention financial deals, etc. Is this GOOD? Not for these 'interested parties', and there are billions of them. BUT GOOD for a 'new economic model' to emerge. One that is BACK to basic, the ones who have control of foods and drinks will be the MOST powerful! Not the one with the Harvard or Stanford or MIT's mathematics geniuses that create ALL those 'future products'!!;

3. the scenario I painted simply FREAK everyone OUT. So, it WON'T be allowed to happen. Well, it ONLY delays the inevitable IF the USA does not find a way to start earning to pay for these 'financial costs' of the deficits!! Just a matter of when and NOT if it will happen!!

While I have the doomsday theory, I STILL have not gone out to buy a piece of irrigable land to plant my vegetables and collect the rain water for purification yet!

It will come. Just when is my dilemma!