There will be no industries spared from the possible global downturn caused by “fiscal cliff” and the Euro Zone debt crisis. When businesses and consumers are pessimistic about the future, they tighten their belts and restrict spending. Without spending, the economic engine slows down. Businesses will hold back on expansion and employment, and there will be fewer jobs and less pay. People will be paid less for the same amount of work, and many will struggle to find a regular job. With smaller wages or many people without jobs, there will be less spending.
Governments try to revive the economy by injecting stimulus into the market. However, all the money goes to banks that took too much risk in the past and are now drowning in debt. These banks, in turn, do not lend money to businesses and consumers since they use the stimulus to better their own accounting. Like I mentioned above, businesses and consumers are wary of future economic prospects; they are not borrowing more to spend more.
Our modern economy is built on debt. With debt levels mounting for many major economies, the situation will only worsen as they attempt to print their way out through monetary stimulus.
You may also refer to my answer to “Question from Yurryse_29: How will the market react if President Obama succeeds in dealing with “fiscal cliff”? Will the market adopt a “risk on” sentiment?” dated 12 November 2012.
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