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Nomura’s top US economist Lewis Alexander has consistently been among the more bearish analysts when it comes to the Fiscal Cliff.Here are the key points from his latest assessments:
Given the president’s change in direction it now appears highly unlikely that a comprehensive agreement will be reached before the end of the year. Moreover the likelihood of a narrow agreement of the sort proposed by the president being put in place by year-end is probably no better than one in three. It now appears that the most likely outcome is that we will “go over the cliff,” – that is, there will be no substantive moderation of the fiscal cliff policies before year-end.
Ultimately, we believe the need to raise the debt limit early in 2013 will be the catalyst for an agreement. We expect the Treasury will have to move to its “extraordinary measures” by the end of this year and believe the debt limit will become binding sometime between mid-February and the end of March.