Tag Archives: Deficits

The US Is Spending $1.5 Billion On Debt Interest Every Day, by Tyler Durden

That $1.5 billion a day figure, already exorbitant, is only going to go up. From Tyler Durden at zerohedge.com:

Several weeks ago, when looking at the US budget data for the recently concluded (Sept 30) Fiscal 2018, we noted that the most troubling observation in the latest data (besides the growing deficit, rising spending and shrinking tax revenues) was that the government paid $523 billion in total interest in fiscal 2018, the highest on record.

Alas, this is just the start, because to fund the fiscal stimulus that has already been enacted, US deficit spending is only set to soar higher, with the resulting interest expense rising above $600 billion in 2019.

But the truly scary nature of this number is in the context of all other G-7 nations: as the following chart from Deutsche Bank’s Torsten Slok reveals, spending on interest expense in the US is now just about $1.5 billion per day, which at current interest rates is orders of magnitude higher than what all other G-7 developed nations spend on interest.

That too is just the start: as Slok notes, “US government last year on average paid $1.5bn each day in interest payments, and this is rising toward $2bn per day over the coming years.

And that’s with rates still relatively low due to the maturity schedule of US debt, which however is only set to rise as existing debt issued over the past decade during record low rates matures and is replaced with debt yielding far more.

How long before this becomes the most politically sensitive economic topic, and how long before the president threatens to fire Powell unless he, too, starts monetizing the debt?

 

 

 

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The Nation’s Fiscal Doomsday Machine is Now Unstoppable, by David Stockman

The inexorable forces of mathematics and compound interest are creating their own ugly budgetary realities. From David Stockman at economic policy journal.com:

Earlier this year the Donald provoked a bleep-hole moment per the Fox “family channel” or what was otherwise known as the shit-hole moment across the rest of the MSM.

But whatever you called the contretemps spurred by the president’s crude utterance with regard to certain countries domiciled on the African continent, the claim this was evidence that he’s an incorrigible racist was risible. Actually, we already knew that the Donald is a semi-literate bully, who never got (read) the memo on racial comity—to say nothing of political correctness.

Still, there is a not inconsiderable share of Washington’s preening, self-important ruling class that indulges in that very same kind of gutter talk on a regular basis when puffing their chests and marking the objects of their displeasure. That’s why the shaming chorus which sprung up from all corners of the Swamp was enough to give hypocrisy a bad name.

But if we have to have a shaming of politicians, there is a far better reason for it than that unfortunate presidential slur.

To wit, Trump and the GOP deserve everlasting ignominy for literally shit-canning fiscal rectitude. So doing, they have completely abandoned the GOP’s fundamental reason for being— watch-dogging the US Treasury—in favor of immigrant-bashing, border hysteria and what boils down to crude nativism by any other name.

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The US Spent A Record $523 Billion On Debt Interest In Fiscal 2018, by Tyler

Here’s a new record that will be broken next year if interest rates stay the same or move higher. From Tyler Durden at zerohedge.com:

Earlier this week, when the US closed fiscal 2018 on September 30, we reported that US gross national debt jumped by $84 billion on September 28, the last business day of fiscal year 2018; with this last push higher, total gross national debt in fiscal 2018 rose by $1.271 trillion to an all time record of $21.52 trillion.

What is more stunning, is that only six months ago, on March 16, it had for the first time risen above the $21-trillion mark, while a year ago, at the end of September 2017, it was just $20.2 trillion.

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Debts & Deficits: A Slow Motion Train Wreck, by Lance Roberts

We’re borrowing from the future and sooner or later the future will present the bill. From Lance Roberts at realinvestmentadvice.com:

Last Friday, I discussed that without much fanfare or public discussion, Congress decided to push the U.S. into deeper fiscal irresponsibility with the passage of another Continuing Resolution (CR). To wit:

“The House on Wednesday passed an $854 billion spending bill to avert an October shutdown, funding large swaths of the government while pushing the funding deadline for others until Dec. 7.

The bill passed by 361-61, a week after the Senate passed an identical measure by a vote of 93-7.”

Without the passage of the C.R. the government was facing a “shut-down” just prior to the mid-term elections. So, rather than doing what is fiscally responsible for the long-term solvency and financial health of the country, not to mention the generations to come, they decided it was far more important to get re-elected into office.

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New Age Fiscal Stimulus Is Unprecedented — And Ominous, by John Rubino

Governments are running recession-style deficits when their economies are supposedly healthy. What happens when they run into actual recessions? From John Rubino at dollarcollapse.com:

In a normal business cycle, the economy expands for a while and businesses hire lots of new people at somewhat higher wages, generating enough tax revenue to shrink the government’s budget deficit – and in rare cases produce a surplus. So, for a while, the government borrows less money.

Not this time. The current recovery is nearly ten years old and the labor market is so tight that desperate companies are trying all kinds of new tricks to attract workers – including higher wages.

Yet the US just announced its intention to borrow $1.3 trillion in this fiscal year, the most since the depths of the Great Recession.

And this isn’t a one-shot deal. Trillion-dollar deficits are now projected for as far as the eye can see:

US projected budget deficts new age fiscal

What does this mean? The US has decided that since we’ve borrowed a lot of money in the past and are still here, debt must not matter. Voters don’t care, the markets don’t care, so why not spend money we don’t have on cool stuff in the here-and-now. A new generation of super-weapons? Sure. A wall across 3,000 miles of southern border, check. Tax cuts for people who already more than they’re able to spend? Why not?

But here’s the problem – or the short-term one, anyhow: Using debt to push an expansion beyond its natural lifetime (this one is approaching the longest ever) makes the imbalances that normally end expansions much, much worse. The aforementioned labor shortage, for instance, will only become more extreme if the economy keeps growing. Interest rates, already rising, will keep going up.

10-year Treasury note yield new age fiscal

To continue reading: New Age Fiscal Stimulus Is Unprecedented — And Ominous

Doug Casey on Trump’s Presidency So Far

President Trump pisses off all the right people, but Doug Casey doesn’t like the deficits. From Doug Casey at caseyresearch.com:

Justin: Doug, what do you think of Trump’s presidency so far? What’s he done well? Where’s he fallen short?

Doug: Let me start by saying that I’m very pleased that Trump was elected because, first and foremost, he’s not Hillary. In addition, he’s never been in political office. So he lacks some of the vices common to professional politicians. Even better, all members of the Deep State reflexively hate him.

That’s a good thing, because there’s some truth to the meme “the enemy of my enemy just might be my friend.”

I also like some of the things Trump’s done since he’s been in office—besides driving liberals and Deep Staters insane. He’s done some deregulating—not nearly enough, but he’s moved in the right direction. Of course, he did this not because he understands Austrian economics, but simply because he’s a businessman. He has some personal experience with the destructiveness of regulations.

Of course, he hasn’t done nearly enough yet. He’s just mowing the grass and trimming the hedges. He should be pulling these things out by their roots and sowing Agent Orange where they grew.

The same goes for taxes. His tax cut was helpful, but not drastic. And there hasn’t been a cut in spending. In fact he’s significantly increasing spending. So the tax cut is mainly cosmetic. The government will extract those resources from the economy, mainly by selling more debt.

Justin: And where has he fallen short or failed?

Doug: A number of ways, starting with running a trillion-dollar deficit. Where does he think that money’s going to come from? The Russians and the Chinese aren’t buying US debt anymore. Foreigners are looking to offload US paper.

Americans aren’t buying much, either. The only real alternative is to sell it to the Federal Reserve. Which is a real problem when the Federal Reserve is not only trying to deleverage, but has to refinance hundreds of billions of short-term paper coming due. Recall that almost all the $20 trillion of Treasury debt is very short term. Interest rates are going to rise, a lot. And so will the interest portion of the government deficit. Interest payments alone will be a trillion a year by the end of Trump’s second term—assuming he gets one.

To continue reading: Doug Casey on Trump’s Presidency So Far

Government’s already-dismal budget forecast just got 106% worse, by Simon Black

Washington plans to spend even more money it doesn’t have than recent forecasts indicated. From Simon Black at sovereignman.com:

Yesterday the Office of Management and Budget released a new report called the “Mid-Session Review” of the US federal budget.

It’s something they’re required by law to do– periodically review and update the government’s budget and track the changes.

The last government budget update was released in February. And according to the February budget, the government’s deficit for this fiscal year was going to be a whopping $873 billion.

Now they’re projecting to close this fiscal year (which ends on September 30th) with a deficit of $890 billion… which means they’re over-budget by just under 2%.

2% is actually pretty good. But here’s the problem: when they first unveiled the FY2018 budget in March of last year, they projected the annual deficit to be ‘only’ $440 billion.

So between their initial projections in March 2017, and their current projections in July 2018, this year’s budget deficit increased by more than 100%.

And that’s pretty pitiful.

But it gets worse.

Last March, they projected a total budget deficit of $526 billion for Fiscal Year 2019.

But according to the revised projections they published yesterday, the budget deficit for Fiscal Year 2019 will now be $1.085 TRILLION… 106% worse than projected.

And, whereas last year the government was forecasting DECLINING deficits in Fiscal Years 2020, 2021, etc., until miraculously reaching a positive budget SURPLUS of +16 billion in 2026, their updated projections now show TRILLION DOLLAR DEFICITS next year. And the year after that. And the year after that. Etc.

Bear in mind that even though this revised budget is a colossal train wreck, the projections still don’t factor in the possibility of a recession. War. Major emergency. Natural disaster. Financial crisis.

These forecasts assume that all big picture and macroeconomic trends are going to be fantastic for the next decade.

We’ve lately been talking about the concept of assets being ‘priced to perfection’.

‘Priced to perfection’ is a financial term meaning that assets are valued as if business conditions will be perfect forever.

Investors simply assume that the business plan will be successfully achieved without any difficulty, that sales will be strong, consumers will be happy, the economy will remain robust, etc.

And as a result of these pie-in-the-sky assumptions, investors pay record high prices for assets.

Well, these budget projections are priced for perfection.

To continue reading: Government’s already-dismal budget forecast just got 106% worse