USA After the Elections: Has the Risk of a “Fiscal Cliff” Increased? What are the Consequences to be Feared?

The USA has gone to the polls and re-elected its President-in-office Barack Obama. However, according to Josef Braml, Deutsche Gesellschaft für Auswärtige Politik (DGAP), Berlin, the US Federal Reserve remains the only institution that can lead the country out of economic crisis in view of the foreseeable political forces that will block the path of Barack Obama during his second term and the fiscal and trade policy constraints that he will encounter as a result. However, with its financial management the Fed is compromising the “exorbitant privilege” of the US dollar, and thus of the US economic model, which is financed on credit. If a non-partisan solution cannot be found in Congress by the end of the year, the USA faces a presumably short, but severe recession in the opinion of Rudolf Besch, DekaBank. In the first quarter of 2013 in particular, this would lead to a drop of over 10% in gross domestic product extrapolated for the year as a whole. For Bernd Weidensteiner, Commerzbank AG, while it is a very plausible scenario that the USA may fall over the “fiscal cliff” at the beginning of the year, Congress should agree to retroactively extend tax relief in January. The USA would then fall off the cliff, but this would be like a “Bungee” jump. The real economic consequences would be limited as a result, and the USA would be spared a recession.