Tag Archives: Federal Deficit

The Zero To Negative Multiplier Of Debt On Growth, by Lance Roberts

Posted on June 21, 2021 | Leave a comment

When a country becomes too heavily indebted, any additional debt, by adding to the debt service burden, retards rather than promotes growth. From Lance Roberts at realinvestmentadvice.com:

There is a zero to a negative multiplier of debt on economic growth. The recent spending spree of the Government to facilitate a transition to a socialistic economy is problematic.

“The scale and scope of government spending expansion in the last year are unprecedented. Because Uncle Sam doesn’t have the money, lots of it went on the government’s credit card. The deficit and debt skyrocketed. But this is only the beginning. The Biden administration recently proposed a $6 trillion budget for fiscal 2022, two-thirds of which would be borrowed.” – Reason

The CBO (Congressional Budget Office) recently produced its long-term debt projection through 2050, ensuring poor economic returns. I reconstructed a chart from Deutsche Bank showing the US Federal Debt and Federal Reserve balance sheet. The chart uses the CBO projections through 2050.

Multiplier Debt Growth, The Zero To Negative Multiplier Of Debt On Growth

At the current growth rate, the Federal debt load will climb from $28 trillion to roughly $140 trillion by 2050. Concurrently, assuming the Fed continues monetizing 30% of debt issuance, its balance sheet will swell to more than $40 trillion.

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The Fed Enabling Biden and Congress’ Destructive Agenda, by Ron Paul

Posted on March 8, 2021 | Leave a comment

Once upon a time central bankers warned of the dangers of debt. Now they enthusiastically endorse it. From Ron Paul at ronpaulinstitute.org:

According to the Congressional Budget Office (CBO), 2021 will be the second year in a row in which the federal debt exceeds Gross Domestic Product (GDP). CBO also projected that this year’s federal deficit will be 2.3 trillion dollars, which is 900 billion dollars less than last year. However, CBO’s projections do not include the 1.9 trillion dollars “stimulus” bill Congress is likely to pass.

The CBO’s report was largely ignored by Congress and the media. One reason the report did not get the attention it deserves is Federal Reserve Chairman Jerome Powell’s continued commitment to making sure Fed policies enable Congress to spend as much as Congress deems necessary to address the economic fallout from the coronavirus panic.

As financial analyst Peter Schiff points out, the Fed’s commitment to ensuring the government can run up massive debt means the Fed will not allow interest rates to increase to anywhere near what they would be in a free market. This is because increasing interest rates would cause the federal government’s debt payments to rise to unsustainable levels. Yet, the Fed cannot admit it is going to keep rates near, or even below, zero indefinitely without unsettling the markets. So, the Fed continues to promise interest rate hikes in the future and the markets pretend to believe the Fed. When (or if) the lockdowns end, the Fed will find a new crisis justifying “temporarily” keeping interest rates low.

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Posted in Banking, Collapse, Cronyism, Currencies, Debt, Economics, Economy, Government

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With apologies to drunken sailors everywhere. . . by Simon Black

Posted on February 10, 2021 | Leave a comment

Spending other people’s money, or just money manufactured at the Fed, is even better than drunken sailors’ shore leave—there are no hangovers. From Simon Black at sovereignman.com:

The year was 1977.

Disco was in. Star Wars was the biggest movie of the year. The world’s first personal computer was announced– the Commodore PET, which came with 8 kilobytes of memory.

And the Gross Domestic Product of the United States reached $1.9 trillion– more than double what it had been just ten years prior.

As you probably know (or possibly remember), though, most of the GDP “growth” during the 1970s wasn’t because the US economy was strong. Quite the opposite, actually.

The 1970s was a period of economic stagnation and inflation. The economy was in such bad shape that, between January 1, 1970 and December 31, 1977, the S&P 500 grew exactly ZERO percent.

Yet food and fuel prices kept spiraling out of control. This is a big reason why GDP kept rising in the 1970s despite such a weak economy.

We’ll come back to 1970s inflation in a moment; for now, I’ll point out the coincidence that the latest COVID stimulus bill which Congress seems ready to pass, is also $1.9 trillion.

In other words, the amount of money they want to spend in a SINGLE legislative package is the same as the size of the entire US economy in 1977. And 1977 is still fairly recent history.

Even today, $1.9 trillion is nearly 10% of the size of the US economy, and roughly 50% of expected federal tax revenue this fiscal year.

Before this COVID spending plan was announced, the Congressional Budget Office estimated in early January that the budget deficit this year in the Land of the Free would be $2.3 trillion (up from their $1.8 trillion estimate a few months before.)

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Posted in Banking, Currencies, Debt, Economics, Economy, Government, Investing

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1,015,736,491,184 reasons to have a Plan B, by Simon Black

Posted on October 2, 2019 | Leave a comment

The US economy and financial markets had a great fiscal year 2019 and still the government went over $1 trillion deeper in the hole. From Simon Black at sovereignman.com:

Precisely one year ago today, the US federal government opened Fiscal Year 2019 with a total debt level of $21.6 trillion:

Specifically, the US federal debt on October 1st last year was $21,606,948,183,180.23

Today is the start of the government’s 2020 Fiscal Year. And the total debt is now $22,622,684,674,364.43

That means they accumulated more than $1 TRILLION in new debt over the course of the 2019 Fiscal Year.

Think about that for a moment:

FY2019 was, literally, the BEST year EVER measured by short-term US financial performance. The stock market reached an all-time high. Real estate prices reached an all-time high.

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

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America’s True Deficit: US To Borrow Over $1.3 Trillion In 2018, by Tyler Durden

Posted on October 30, 2018 | Leave a comment

In fiscal 2018, the US borrowed $400 billion more than the officially reported deficit. From Tyler Durden at zerohedge.com:

Confirming recently reduced estimates of US debt borrowing needs – mostly as a result of new funds brought in via Trump’s trade tariffs – the Treasury Department today lowered its estimates of fourth-quarter borrowings to $425 billion from the $440 billion forecast it made in July, while assuming an end-of-December cash balance of $410 billion, up from $390 billion 4 months ago.

The revised Treasury numbers bring the total net borrowing needs for calendar 2018 at $1.338 trillion, while borrowings for fiscal year 2018 (which ended on Sept. 30) amounted to just under $1.2 trillion.

The Treasury also released its first estimate of borrowing needs for the January – March 2019 quarter, which it expects to hit $356 billion, well below the $488 billion borrowed in the same quarter of 2018, while assuming an end-of-March cash balance of $320 billion.

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Posted in Debt, Economy, Government, Money, Taxes

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Federal deficit soars 32 percent to $895B, by Niv Elis

Posted on September 12, 2018 | Leave a comment

That kind of deficit number used to mean the US was in a deep recession. Now we have humongous deficits in the midst of what President Trump has called “the best economy ever.” One can only imagine what the deficit will be during the next recession. From Niv Elis at thehil.com:

The federal deficit hit $895 billion in the first 11 months of fiscal 2018, an increase of $222 billion, or 32 percent, over the same period the previous year, according to the Congressional Budget Office (CBO).

The nonpartisan CBO reported that the central drivers of the increasing deficit were the Republican tax law and the bipartisan agreement to increase spending. As a result, revenue only rose 1 percent, failing to keep up with a 7 percent surge in spending, it added.

Revenue from individual and payroll taxes was up some $105 billion, or 4 percent, while corporate taxes fell $71 billion, or 30 percent.

The August statistics were somewhat inflated, however, due to a timing shift for certain payments, putting the deficit measure through August slightly out of sync with the previous year, the CBO noted. Had it not been for the timing shift, the deficit would have increased $154 billion instead of $222 billion.

Earlier analysis from CBO projected that deficits would near $1 trillion in 2019 and surpass that amount the following year.

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