The Mayans supposedly said that 2012 is the year that the earth will explode, but the hot buzz is that the end times (or at least a rough economic slowdown) will come in 2013.
At a conference yesterday, Peter Orszag cited the combo of expiring tax cuts, mandatory spending cuts, and another debt ceiling fight early in 2013 as something of a perfect storm that could slam the US economy.
Speaking at the World Economic Forum yesterday, WPP Chief Martin Sorrell also said he was worried about 2013, when US austerity kicks in.
And if you’re still curious what all the worry is about, check out this chart from Macroeconomic Advisors, which has also warned about the fiscal brick wall we’re going to hit in 2013.
[credit provider=”Macroeconomic Advisors” url=”http://macroadvisers.blogspot.com/2011/08/debt-ceiling-deal-little-fiscal-drag-in.html”]
Obviously, future expectations are supposed to influence current market valuations, and so even 2013 is an issue now, but somehow, we’ve come accustomed to deals always getting done to avoid the pain. There’s a good chance the market will price in a rosy deus ex machina up until the very end.