Now that the election is behind us, we can look forward to the zombies on Facebook focusing once again on inane bullshit. They won't wake up until spring 2014. Whatever themes that will be campaigned and pushed in 2014 are not yet formulated. Consider the 2010 midterms. The anti-bailout attitudes hadn't started, people expected Obama to concentrate on the economy and not health care, and people expected Obama to go after the Wall St. bankers. Obama double downed on Wall St. bailouts, didn't prosecute any Wall St. cronies, pushed through a stimulus that didn't stimulate the economy, and chased after HCR for over a year rather than any tax reform. Once that was the set up, the Tea Party went from ripple to tsunami, and the battle pieces and argument were in place for the midterms. What can we expect to be driving the discussion in 2014? Fiscal and economic problems that linger. Here are my predictions, and guess which side will take which with each item.
1. Economists will admit we entered recession in late 2012, and it will be well established in 2013.
2. The fiscal cliff negotiations will have two potential outcomes:
A) Most likely - There is a "grand bargain" that doesn't really do much about annual budget work but does attack Social Security and even Medicare. Only Nixon can go to China and only a Democrat can knife SS + Medicare. Obama said in an interview in October that he will make a deal within 6 months. Plenty of pundits have been calling for this, including the main man in charge, Robert Rubin.
B) They do not reach an agreement and the fiscal cliff hits. Some pundits have been writing that this should happen (Paul Krugman). Don't sleep on this one as if this happens both Obama and the GOP can blame each other and say their hands were tied by the 2011 budget deal.
3. Wall St. will keep making money with not a soul going to trial. Keep in mind that they have to run out the clock 7 years. 2008 and prior years + 7 gets them to 2015. The TBTF banks will all still be in place by December 2013.
4. A mortgage GSE write down mechanism will be shoved down the throats of US taxpayers. This will forgive some principal on specific mortgages, not the ones held by Wall St, but the FHA loans so we, the US taxpayers, will see a $100-$300 billion loss (Bruce Krasting's theory). This will NOT help the housing market, and will just be another payoff to buy voters. This will be paid for with more FED printing.
5. Europe's financial crisis will result in Greece's exit from the euro. This will have plenty of negative consequences, but more for countries not named Greece. This will cause financial disruptions as well as be the cause for the US to start bailing out the other Euro problem countries. The US Treasury will find away to do this without Congressional approval. This will be paid for with more FED printing.
6. One state will appeal to the Federal government for a direct bailout.
7. Firings pick up as consumer end demand is just not there due to the debt overhang. There will be no student debt forgiveness because it screws over the big banks and the universities, which are both important parts of the Dem support structure.
8. Stocks take a tumble early (to give the FED cover to buy Treasuries in QEternity), gold continues its rise, oil + raw material costs go up, everyone but the elite lose. The key is oil will go up despite the economy contracting, and few of your friends will notice it has to due to the FED money printing.
9. The fools won't notice that their EBT card buys 1/2 the groceries it used to since they use it at McDonald's more often than Kroger's.
10. Colorado + Washington will see a slight tourism uptick due to the marijuana ballot referendums. Amsterdam will see a slight decrease in the total number of US tourists.
It's too early for the currency/bond crisis, but remember that candidate Romney did mention the idea of a failed bond auction explicitly in that famous 47% video because the FED is just giving us the money out of thin air. A failed auction is coming. A dollar crisis is coming. Moves in 2013 will add to the strain on the dollar. The FED bailing out more and more entities will spur the GOP on to hammer away at the FED, which Gov. Perry, Rep. Paul Ryan and Rep. Ron Paul did on the campaign trail throughout this season. More bailouts, little change and a new recession will be the 2013 events that start the train for the 2014 midterms. More people will catch on that this method is not working, and whomever wants to win as an individual POTUS candidate in 2016 from either party would be wise to pay attention to the anti-elite, anti-Wall St. mood of the nation.