This borrowing comes as the economy is supposedly booming. Where does it go during a recession? From Tyler Durden at zerohedge.com:
For months, analysts have been warning that the US is set to borrow an unprecedented – for a non-recessionary period – amount of money…
and on Monday afternoon this was confirmed, when the US Treasury announced that in the quarter ended March 31 (the fiscal year’s second), the US borrowed $47BN more than its had anticipated three months ago, or $488BN to be precise.
This was the single biggest quarterly amount of debt sold by the US Treasury since the record $569BN in debt borrowed in Q4 2008 when the financial system nearly collapsed, and Treasury had no choice but to raise a gargantuan amount of money during the biggest financial crisis in modern US history.
What makes the just passed quarter different, however, is that there was no crisis, not even a recession. In fact, in the first quarter US GDP rose by 2.3% according to the BEA amid what, until recently, the “experts” said was a global coordinated recovery.
In retrospect, it appears the “recovery” was only around long enough for the US and/or China to raise near record amounts of debt.
As a result of the near-record borrowing spree, the US ended the quarter with $290BN in cash, more than the $210BN budgeted.
What is scary is how fast the US is raking up the debt: as a reminder, just a few weeks ago we reported that in the first six months of the fiscal year, the US budget deficit rose to $600 billion as spending increased at three times the pace of revenue growth in the October-to-March period. At that run-rate, the US deficit will soar to $1.2 trillion for fiscal 2018, far above the $804BN projected budget gap and resulting in an even greater amount of debt borrowed.
Commenting on the debt splurge, the Treasury said tax changes are “poised to underpin near-term consumption and investment” and “the stage is set for a pick-up in growth over the near term.”
They better, because if all we have to show for nearly a half a trillion in debt in one quarter is 2.3% GDP, then the US is in very serious trouble.