Tag Archives: Deficits

Putting Monetization Into Perspective. Or “When It Becomes Serious, You Have To Lie”, by Chris Hamilton

Posted on November 23, 2019 | Leave a comment

The government borrows more money than the actual growth of the economy. In other words, a dollar’s worth of debt no longer buys a dollar’s worth of growth, even by the government’s screwed-up definition of growth. From Chris Hamilton at economica.blogspot.com:

Since 2007, marketable federal debt has exploded by $12 trillion while Intragovernmental debt has risen a relatively gentle $2 trillion…all while the Federal Reserve directed Federal Funds Rate has been pushed to zero.  And after a short respite from ZIRP, another push to ZIRP is almost surely in process, or even a furtherance, moving into NIRP and the paying of lenders to undertake loans.  But why?

 

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Posted in Banking, Business, Debt, Economy, Financial markets, Government

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Capitalism Is The Worst, Except For All The Rest, by Lance Roberts

Posted on October 16, 2019 | Leave a comment

This is the third of a series on capitalism, the first two parts are linked below. From Lance Roberts at realinvestmentadvice.com:

n Part 1, we discussed how “Capitalism” was distorted by Wall Street. In Part 2, we reviewed some of the “myths” of capitalism, which are used to garner “votes” by politicians but are not really true. Most importantly, we discussed the fallacy that “more Government” is the answer in creating equality as it impairs economic opportunity.

I want to conclude this series with a discussion on the fallacy of socialism and equality, and provide a some thoughts on how you can capitalize on capitalism.

Socialism Requires Money

The “entire premise” of the socialist agendas assumes money is unlimited. Since there is only a finite amount of money created through taxation of citizens each year the remainder must come from the issuance of debt.

Therefore, to promote an agenda which requires unlimited capital commitments to fulfill, the basic premise has to be “debt doesn’t matter.” 

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Posted in Business, Capitalism, Economics, Economy, Financial markets, Governments, Money, Morality, Philosophy, Politics, Technology

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The $6 Trillion Pension Bailout Is Coming, by Lance Roberts

Posted on July 26, 2019 | Leave a comment

Pension funds are one bear market away from Armageddon. From Lance Roberts at realinvestmentadvice.com:

Fiscal responsibility is dead.

This past week, Trump announced he had reached an agreement with Congress to pass a continuing resolution which will suspend the debt ceiling until July 2021.

The good news is that it will ONLY increase spending by just $320 billion. 

What a bargain, right?

It’s a lie.

That is just the “starting point” of proposed spending. Without a “debt ceiling” to constrain spending, the actual spending will be substantially higher.

However, the $320 billion is also deceiving because that is on top of the spending we have already committed. As I noted just recently:

“In 2018, the Federal Government spent $4.48 Trillion, which was equivalent to 22% of the nation’s entire nominal GDP. Of that total spending, ONLY $3.5 Trillion was financed by Federal revenues, and $986 billion was financed through debt.

In other words, if 75% of all expenditures is social welfare and interest on the debt, those payments required $3.36 Trillion of the $3.5 Trillion (or 96%) of revenue coming in.” 

Do some math here.

The U.S. spent $986 billion more than it received in revenue in 2018, which is the overall “deficit.” If you just add the $320 billion to that number you are now running a $1.3 Trillion deficit.

Sure enough, this is precisely where I forecast we would be in December of 2017.

“Of course, the real question is how are you going to ‘pay for it?’ On the ‘fiscal’ side of the tax reform bill, without achieving accelerated rates of economic growth – ‘the debt will balloon.’

The reality, of course, is that is what will happen because there is absolutely NO historical evidence that cutting taxes, without offsetting cuts to spending, leads to stronger economic growth.”

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Posted in Debt, Economy, Financial markets, Government, Investing, Pensions

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The Blind Leading the Deaf and Dumb, by James Howard Kunstler

Posted on March 15, 2019 | Leave a comment

Are the tables about to be turned on both the Russia collusion story and financial markets? From James Howard Kunstler at kunstler.com:

You had to wonder why it took Nancy Pelosi so long to figure out that maybe impeachment was not the big rock-candy mountain that, for “the resistance,” marked the gateway to a Trump-free nirvana. It became obvious this week, through the release of the Bruce Ohr and Lisa Page transcripts, that RussiaGate was birthed entirely by persons in the employ of Hillary Clintion, with then CIA Director John Brennan as midwife, and the DOJ / FBI avidly assisting — all of them fully aware that the predicate was false. What’s more, the evidence timeline makes it clear that Democratic Party leadership, including Nancy Pelosi, knew it was false. Hence, the pained smile she’s been wearing these many months.

In the event of an impeachment proceeding in the House, all that would be revealed, especially if it got as far as a trial in the US Senate, where the defense is allowed to mount a case under rules of evidence. Imagine the howls of embarrassment on late-night TV when even ex-comedian Stephen Colbert would have to admit that he was gulled into acting as a shill for a seditious con.

I suppose Ms. Pelosi also made the calculation that any impeachment ginned up by the likes of Jerrold Nadler and Maxine Waters would be superseded by a slew of actual indictments among the above-mentioned former law enforcement officialdom, including perhaps former Attorney General Loretta Lynch and persons in the Obama White House. You might even include the enigmatic Robert Mueller, who appears to be liable for the destruction of evidence in his own inquiry, as well as malicious prosecution.

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Posted in Crime, Debt, Economy, Financial markets, Government, Investigations

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Pity the Nation: War Spending Is Bankrupting America, by John W. Whitehead

Posted on March 14, 2019 | Leave a comment

The warfare state is certainly helping to bankrupt America, but John Whitehead goes too easy on the welfare state. From Whitehead at rutherford.org:

“Pity the nation whose people are sheep
And whose shepherds mislead them
Pity the nation whose leaders are liars
Whose sages are silenced
And whose bigots haunt the airwaves
Pity the nation that raises not its voice
Except to praise conquerors
And acclaim the bully as hero
And aims to rule the world
By force and by torture…
Pity the nation oh pity the people
who allow their rights to erode
and their freedoms to be washed away…”
~ Lawrence Ferlinghetti, poet

War spending is bankrupting America.

Our nation is being preyed upon by a military industrial complex that is propped up by war profiteers, corrupt politicians and foreign governments.

America has so much to offer – creativity, ingenuity, vast natural resources, a rich heritage, a beautifully diverse populace, a freedom foundation unrivaled anywhere in the world, and opportunities galore – and yet our birthright is being sold out from under us so that power-hungry politicians, greedy military contractors, and bloodthirsty war hawks can make a hefty profit at our expense.

Don’t be fooled into thinking that your hard-earned tax dollars are being used for national security and urgent military needs.

It’s all a ruse.

You know what happens to tax dollars that are left over at the end of the government’s fiscal year? Government agencies – including the Department of Defense – go on a “use it or lose it” spending spree so they can justify asking for money in the next fiscal year.

We’re not talking chump change, either.

We’re talking $97 billion worth of wasteful spending.

According to an investigative report by Open the Government, among the items purchased during the last month of the fiscal year when government agencies go all out to get rid of these “use it or lose it” funds: Wexford Leather club chair ($9,241), china tableware ($53,004), alcohol ($308,994), golf carts ($673,471), musical equipment including pianos, tubas, and trombones ($1.7 million), lobster tail and crab ($4.6 million), iPhones and iPads ($7.7 million), and workout and recreation equipment ($9.8 million).

So much for draining the swamp.

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Posted in Collapse, Debt, Economy, Military, Politics

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As budget deficit balloons, few in Washington seem to care, by Andrew Taylor

Posted on March 12, 2019 | Leave a comment

Everybody has a plan to eliminate the budget deficit in ten to fifteen years, but the debt and interest payments are ballooning now, and the economy is supposedly doing well. From Andrew  Taylor at apnews.com:

The federal budget deficit is ballooning on President Donald Trump’s watch and few in Washington seem to care.

And even if they did, the political dynamics that enabled bipartisan deficit-cutting deals decades ago has disappeared, replaced by bitter partisanship and chronic dysfunction.

That’s the reality that will greet Trump’s latest budget , which will promptly be shelved after landing with a thud on Monday. Like previous spending blueprints, Trump’s plan for the 2020 budget year will propose cuts to many domestic programs favored by lawmakers in both parties but leave alone politically popular retirement programs such as Medicare and Social Security.

Washington probably will devote months to wrestling over erasing the last remnants of a failed 2011 budget deal that would otherwise cut core Pentagon operations by $71 billion and domestic agencies and foreign aid by $55 billion. Top lawmakers are pushing for a reprise of three prior deals to use spending cuts or new revenues and prop up additional spending rather than defray deficits that are again approaching $1 trillion.

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Posted in Debt, Economy, Government, Politics

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US Budget Deficit Soars 77% As Federal Interest Expense Hits Record High, by Tyler Durden

Posted on March 6, 2019 | Leave a comment

The good news just keeps coming on the national debt. From Tyler Durden at zerohedge.com:

Another month, another frightening jump in the US budget deficit.

According to the latest Treasury data, the US budget surplus in January – traditionally one of the few surplus months of the year due to tax receipts vs refunds timing – was only $9 billion, badly missing the $25 billion surplus expected, and far below the $49 billion surplus recorded last January; it was the smallest January gain since 2015.

As a result, the budget deficit for the first four months of the fiscal year, widened to $310 billion, a whopping 77% higher than the $175.7 billion reported for the same period last year, largely the result of the revenue hit from Trump’s tax cuts and the increase in government spending. The deficit was the result of a 2% drop in fiscal YTD receipts to $1.1 trillion, while spending jumped 9% to $1.4 trillion.

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Posted in Debt, Economy, Government, Taxes

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Debt and Deficits: They’re Unsustainable, by Bob Luddy

Posted on January 22, 2019 | Leave a comment

There’s a certainty to increasing debt and compounding interest: eventually they must end. Either the debt is repaid or repudiated. From Bob Luddy at spectator.org:

Economic growth won’t save us, not without serious cuts in government spending.

The most important issue facing America today is the national debt and increasing federal deficits. Our national debt now exceeds yearly gross domestic product (GDP).

The U.S is the wealthiest country in the world, but our government has the largest spending deficits and national debt in recorded history.

The budget deficit in FY 2018 was $800 billion, but the debt increased by $1,300 trillion, and is now $21,500 trillion dollars. Government accounting (oxymoron) allows for spending and loans outside of the budget. The practice of underreporting deficits is fraud and is not legal in the private market.

Note the US Debt Clock (here).

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Posted in Collapse, Currencies, Debt, Economy, Government, Taxes

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This problem is 10,000 times bigger than the border wall, by Simon Black

Posted on January 18, 2019 | Leave a comment

The cost of the proposed border wall is a rounding error in terms of total government spending or the US national debt. From Simon Black at sovereignman.com:

We are in the midst of the longest government shutdown in history.

Don’t get me wrong, I like having the government shut down. As I’ve said before, I believe it is my moral duty to pay as little taxes as possible.

The government does some really stupid things with your tax dollars. I’d rather not pay for a $2 billion Obamacare website that doesn’t work, or to defend Congressmen against sexual assault allegations.

So, by starving the beast, I at least ensure they’re not squandering my money.

But I think it’s ridiculous that this government posturing is financially crippling the 800,000 government workers (and millions of contractors) who are now out of work – or being forced to work without pay.

To be fair, last night the president signed a law guaranteeing they would be paid for past work – a month into this fiasco. It’s a step in the right direction, as there’s a word for forcing people to work without pay – slavery.

That’s why I offered to pay the rent of any government workers hurt by the shutdown. I am using my tax savings to bail out some of these government workers the feds left high and dry.

But at its core, this whole shutdown comes down to a disagreement over $5 billion. That is how much money Trump wants to build the border wall between the US and Mexico. And Congress refuses to fund it.

Granted, that’s a lot of money to you and me. And it should be a lot of money to the government, too.

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Posted in Debt, Government, Immigration, Pensions, Politics

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

Posted on November 30, 2018 | Leave a comment

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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Posted in Debt, Government

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