Definition of 'Fiscal Cliff'
A combination of expiring tax cuts and across-the-board government spending cuts. The idea behind the fiscal cliff was that if the federal government allowed these two events to proceed as planned, they would have a detrimental effect on an already shaky economy, perhaps sending it back into an official recession as it cut household incomes, increased unemployment rates and undermined consumer and investor confidence. At the same time, it was predicted that going over the fiscal cliff would significantly reduce the federal budget deficit.
http://www.investopedia.com/terms/f/fisc...
http://en.wikipedia.org/wiki/United_Stat...
When the Fiscal Cliff issue arose, the Fed was still (and still is) in crisis management mode from the 2008 housing bubble/debt crisis. The Fed was and still is trying to inject liquidity into the market (still injecting $65 billion per month into the system). If the Fiscal Cliff were allowed to happen, it would mean a tax increase the size of which has not been seen by Americans in 60 years. A tax increase would take money "out" of the system and maybe cause another recession or crisis, exactly the opposite of what the Fed is trying to do and what they are trying to avoid.
I am trying to prepare my presentation slides, the last part is the conclusion and how fiscal cliff effect on stock market. I was googling it all night and have no idea what the effects will be, can anyone help me?
