• Tag Archives Deficit Spending
  • Doug Noland: Must Stop Digging

    This is a syndicated repost courtesy of Credit Bubble Bulletin . To view original, click here. Reposted with permission.
    Amazon, Google, Microsoft, Intel and Draghi all handily beat expectations. Booming technology earnings confirm the degree to which Bubble Dynamics have become entrenched within the real economy. Draghi confirms that central bankers remain petrified by the thought of piercing Bubbles.
    There is a prevailing view that Bubbles reflect asset price gains beyond what is justified by fundamental factors. I counter with the argument that the inflation of underlying fundamentals – revenues, earnings, cash-flow, margins, etc. – is a paramount facet of Bubble Dynamics (How abruptly did the trajectory of earnings reverse course in 2001 and 2009?).
    With extremely low rates, loose corporate Credit Availability, large deficit spending, inflating asset prices and a glut of ‘money’ sloshing about, there is bountiful fodder for spending and corporate profits. And with technology one of the more beguiling avenues to employ the cash-flow bonanza – and tech start-ups, the cloud, AI, Internet of Things, robotic, cybersecurity, etc. white-hot right now – the Gargantuan Technology Oligopoly today luxuriates at the Bubble Core.

    This post was published at Wall Street Examiner by Doug Noland ‘ October 28, 2017.


  • What Selloff: Futures Rebound, Nikkei Extends Record Winning Streak

    European shares are modestly lower as investors monitor tense events in Spain and as focus turns to Thursday’s ECB meeting; US equity futures have rebounded from yesterday’s sharp but shallow selloff and are in the green amid rising odds of U. S. tax reform and the imminent unveiling of the next Fed chair while Asian shares rise and Japan extends its winning streak to a record 16 days. The euro edged higher after data showed Europe’s economy is maintaining momentum, while the USDJPY managed to recover all of yesterday’s sharp losses.
    The MSCI’s 47-country world share index stayed near all-time highs after a drop in General Electric shares on Wall Street had seen the ViX volatility index spike up, however that move has been largely faded since.
    Overnight currency moves were mostly contained, but the greenback strengthened against most peers and U. S. equity futures edged higher amid continued speculation over who will lead the Federal Reserve, and as optimism over tax reform proved resilient. “There is some support building for Donald Trump’s tax reforms,’ Ipek Ozkardeskaya, an analyst at London Capital Group, told Bloomberg by email. News reports suggest ‘that fiscal hawks may be willing to disregard deficit spending to allow Trump to go ahead with his tax cut plans to boost growth. If approved, the fiscal reforms will cost an arm to the government, but on the other hand, it is important for the congress to achieve some progress before the end of the year in order to restore confidence.”

    This post was published at Zero Hedge on Oct 24, 2017.


  • The Global “Bubble Arms Race” Has Ushered In The Age Of Government Strongmen

    Authored by Doug Noland via Credit Bubble Bulletin blog,
    The week left me with an uneasy feeling. There were a number of articles noting the 30-year anniversary of the 1987 stock market crash. I spent ‘Black Monday’ staring at a Telerate monitor as a treasury analyst at Toyota’s US headquarters in Southern California. If I wasn’t completely in love with the markets and macro analysis by that morning, there was no doubt about it by bedtime. Enthralling.
    As writers noted this week, there were post-’87 crash economic depression worries. In hindsight, those fears were misplaced. Excesses had not progressed over years to the point of causing deep financial and economic structural maladjustment. Looking back today, 1987 was much more the beginning of a secular financial boom rather than the end. The crash offered a signal – a warning that went unheeded. Disregarding warnings has been in a stable trend now for three decades.
    Alan Greenspan’s assurances of ample liquidity – and the Fed and global central bankers’ crisis-prevention efforts for some time following the crash – ensured fledgling financial excesses bounced right back and various Bubbles hardly missed a beat. Importantly, financial innovation and speculation accelerated momentously. Wall Street had been emboldened – and would be repeatedly.
    The crash also marked the genesis of government intervention in the markets that would evolve into the previously unimaginable: negative short-term rates, manipulated bond yields, central bank support throughout the securities markets, Trillions upon Trillions of central bank monetization and the perception of open-ended securities market liquidity backstops around the globe. Greenspan was the forefather of the powerful trifecta: Team Bernanke, Kuroda and Draghi. Ask the bond market back in 1987 to contemplate massive government deficit spending concurrent with near zero global sovereign yields – the response would have been ‘inconceivable.’

    This post was published at Zero Hedge on Oct 22, 2017.


  • Weekend Reading: Tax Cut Wish List

    Authored by Lance Roberts via RealInvestmentAdvice.com,
    On Wednesday, the President announced his plan to cut taxes for Americans, return jobs to America and return the country to economic prosperity.
    It’s a tall order to fill, and the proposed tax reform is a ‘Christmas Wish List’ that will have to checked twice to determine which parts are ‘naughty’ and ‘nice.’
    As I pointed out yesterday, ‘The belief that tax cuts will eventually become revenue neutral due to expanded economic growth is a fallacy. As the CRFB noted:
    ‘Given today’s record-high levels of national debt, the country cannot afford a deficit-financed tax cut. Tax reform that adds to the debt is likely to slow, rather than improve, long-term economic growth.’
    The problem with the claims that tax cuts reduce the deficit is that there is NO evidence to support the claim. The increases in deficit spending to supplant weaker economic growth has been apparent with larger deficits leading to further weakness in economic growth. In fact, ever since Reagan first lowered taxes in the ’80’s both GDP growth and the deficit have only headed in one direction – lower.’

    This post was published at Zero Hedge on Sep 29, 2017.


  • Hurricanes Harvey and Irma May Lend Helping Hand to Economy, but Hurricane Iniki and Katrina Tell More Complex Longterm Tales

    It is widely believed that World War II gave us the end of the Great Depression. As a result, people have said for decades there is nothing like a wartime economy to bring recovery from economic recession. War blows apart a lot of things, so you have to make a lot of things, which puts a lot of people to work building a lot of things, which puts a lot of other people to work digging a lot of things from the ground in order to build those things. Hurricanes blow apart a lot of things, too.
    If that logic held completely true, however, the best thing we could do whenever we are trying to come out of economic collapse would be to blow up every city in the nation so we could build it all over again. While WWII did end the Great Depression, logic tells us there is a more complex tale to tell.
    There is a difference between an increase in economic activity, which improves economic statistics and puts people to work, and wealth accumulation. Wars (and hurricanes) create a flurry of economic activity, which may juice the economy as WWII did, but you eventually have to pay for all of that so it doesn’t build wealth for a nation overall because of the debit side of the accounting sheet … unless, of course, one nation takes spoils of war from the nations it defeats, which then bear the burden of doing worse for decades to follow while the victorious nation is better off; but we didn’t do that in WWII. We built up the nations we ravaged. So, how did we wind up better after WWII?
    What gets left out of the wartime economic recovery equation is debt. WWII proved stimulus spending works, but what is not considered it that the US had very little debt before that and enormous debt at the end. What a wartime economy or a hurricane reconstruction economy really do is move spending forward. They force infrastructure spending now, accelerating deficit spending and total debt.

    This post was published at GoldSeek on Wednesday, 13 September 2017.


  • Hillary Almost Proposed ‘A Universal Basic Income’ In 2016, And The Idea Is Catching Fire Among Grassroots Democrats

    Should you get free money from the U. S. government every month simply for being alive? That may sound like a crazy idea to many of us, but the truth is that this will likely be one of the biggest political issues in the 2020 presidential election. At this point, 40 percent of all Americans already ‘prefer socialism to capitalism’, and the concept of a ‘universal basic income’ is starting to catch fire among grassroots Democrats. Many liberals are convinced that the time has come to fight for the right to ‘a minimum standard of living’, and one study by a ‘left-leaning’ group found that giving every adult in the country $1,000 each month would increase the size of the U. S. economy by more than 2 trillion dollars…
    Giving every adult in the United States a $1,000 cash handout per month would grow the economy by $2.5 trillion by 2025, according to a new study on universal basic income.
    The report was released in August by the left-leaning Roosevelt Institute. Roosevelt research director Marshall Steinbaum, Michalis Nikiforos at Bard College’s Levy Institute, and Gennaro Zezza at the University of Cassino and Southern Lazio in Italy co-authored the study.
    What an incredible idea, eh?
    All we have to do is give out free stuff and the economy grows like magic. And the study also discovered that the larger the universal basic income is, the more the economy would grow.
    So why not make it $10,000 a month for everyone?
    Well, it turns out that there is a catch. According to the study, the economy only grows if the universal basic income is funded by deficit spending. If we have to raise taxes to pay for it, there is no positive benefit to the economy at all…

    This post was published at The Economic Collapse Blog on September 12th, 2017.


  • America’s Fertility Rate Falls To Record Low

    The US isn’t yet grappling with the economic disaster that is a shrinking popuation – unlike Japan. Though it’s starting to look like a not-too-distant possibility. US birthrates fell to yet another historic low in 2016 as a whirlwind of economic and cultural factors inspire more women to delay, or forgo, having children. According to provisional data for the fourth quarter provided by the CDC, the US birthrate has declined to 62 births per 1000 women – its lowest level on record, and down from 62.5 in 2015.
    This is especially troubling because demographers worry that a dwindling birth rate will hurt economic growth and tax revenues needed to fund transfer payments to a growing elderly population, as more members of the baby boomer generation age into retire.
    The CDC did not say why the birth rate is declining. But according to Axios, research and surveys have shown several reasons, including wider availability of birth control, personal economic instability from student loans or other debt, women focused on launching a career before starting a family, and a growing acceptance that not everyone wants to have children.
    If the Trump administration achieves higher economic growth, it’s unlikely to do so fast enough to support the mandated 9% increase in entitlement spending for older Americans without more deficit spending. Trump says he intends to preserve Social Security and Medicare spending levels. The highest birthrates are now seen among women aged 30-34. Previously, the highest rate had been for women aged 25-29, which fell to 101.9 in 2016.

    This post was published at Zero Hedge on Jun 30, 2017.


  • 100 Million Dead In US

    Go ahead folks, read this one.
    Accordingly, I must communicate to you at this time the full extent of our dire fiscal straits and the potential disruptions that we face in addressing even our most critical core responsibilities going forward into the new fiscal year. My Office has very serious concerns that, in the coming weeks, the State of Illinois will no longer be able to guarantee timely and predictable payments in a number of areas that we have to date managed (albeit with extreme difficulty) despite an unpaid bill backlog in excess of $15 billion and growing rapidly.
    We are effectively hemorrhaging money as the state’s spending obligations have exceeded receipts by an average of over $600 million per month over the past year. (ed: That’s $7.2 billion/year)
    My cause for alarm is rooted in the increasing deficit spending combined with new and ongoing cash management demands stemming from decisions from state and federal courts, the latest being the class action lawsuit filed by advocates representing the Medicaid service population served by the state’s Managed Care Organizations (MCOs). As of June 15, the MCOs, and their provider networks, are owed a total of more than $2.8 billion in overdue bills at the Comptroller’s Office. There is no question that these obligations should be paid in a more timely manner and that the payment delays caused by the state’s financial condition negatively impact the state’s healthcare infrastructure. We are currently in court directed discussions to reach a workable and responsive payment schedule going forward, but any acceleration of the timing of those payments under the current circumstances will almost certainly affect the scheduling of other payments, regardless of other competing court orders and Illinois statutory mandates.

    This post was published at Market-Ticker on 2017-06-21.


  • Joseph and the US Stock Market

    Joseph (as in Abraham, Isaac, and Jacob) was the first (maybe) successful economist mentioned in the Bible. Why do we say that? Answer: he was data driven.
    Think of it this way. He interpreted Pharaoh’s dreams. He developed a model (forecast). He presented it to the decision maker and persuaded him to agree. He raised the capital (easy to do in those days if one worked for the deified ruler). He developed and implemented an infrastructure capital expenditure program (warehouses and food storage). He planned ahead and had a rainy day fund. He balanced a 14-year budget that featured seven rich and seven lean years. He avoided deficit spending.
    He was promoted for his efforts and given prestigious governmental power. He used it to rescue his family and friends.
    Joseph didn’t have to deal with tweets. Let’s fast-forward a few thousand years.
    Washington chaos is now reducing the odds of the Trump tax/economic agenda ever coming to fruition. We do not know what is going to happen with tax reform or tax cuts, with repatriation, with deficit spending, with the debt limit, with the budget, with infrastructure, with healthcare, with the climate-change agenda (if any), with foreign policy, with the Voice of America (Bannon is going to run it), or with Cuba.

    This post was published at FinancialSense on 06/13/2017.


  • Soaring Debt = Slow Growth = Even More Debt = Systemic Crisis

    It’s just common sense: Borrow too much money and the weight of this debt makes it hard to do things that used to be easy. This truism is now (finally!) hitting home, and blame is being apportioned. A couple of recent examples:
    Over The Last 10 Years The U. S. Economy Has Grown At EXACTLY The Same Rate As It Did During The 1930s
    (Economic Collapse Blog) – Even though I write about our ongoing long-term economic collapse every day, I didn’t realize that things were this bad. In this article, I am going to show you that the average rate of growth for the U. S. economy over the past 10 years is exactly equal to the average rate that the U. S. economy grew during the 1930s.
    The hard fact is that the past decade’s $10 trillion in deficit spending has produced the worst economic growth as measured by Gross Domestic Product in our nation’s history. You read that right, in the past decade our nation’s economy grew slower than even during the Great Depression. This stagnant, new normal, low-growth economy is leaving millions of working age people behind who have given up even trying to participate, and has led to a malaise where many doubt that the American dream is attainable.

    This post was published at DollarCollapse on JUNE 4, 2017.


  • The Keynesian Cult Has Failed: “Emergency” Stimulus Is Now Permanent

    Can we finally admit that eight years of following the Keynesian coloring-book have not just failed, but failed spectacularly?
    What do we call a status quo in which “emergency measures” have become permanent props? A failure. The “emergency” responses to the Global Financial Meltdown of 2008-09 are, eight years on, permanent fixtures. Everyone knows what would happen if the deficit spending, money-printing, zero interest rates, shadow banking, asset purchases by central banks and all the rest of the Keynesian Cult’s program stopped: the status quo falls apart. Keynesianism Vs The Real World Let’s start by reviewing the core contexts of the economy. 1. The dominant socio-economic structures since around 1500 AD are profit-maximizing capital (‘the market’) and nation-states (‘the government’). 2. The dominant economic theory for the past 80 years is Keynesianism, i.e. the notion that the state and central bank must aggressively manage private-sector consumption (demand) and lending via centrally planned and funded fiscal and monetary stimulus during downturns (recessions/depressions).

    This post was published at Charles Hugh Smith on TUESDAY, MAY 23, 2017.


  • Three Ways Trump’s Tax “Cuts” Will Raise Taxes

    Tax cuts are great when they are actually tax cuts. In a system with a central bank, though, tax cuts are never tax cuts if there are no spending cuts to accompany them. This is because tax cuts without spending cuts simply mean more deficit spending.
    Unfortunately, it is clear that under Trump the federal government has every intention of spending as it always has. Indeed, the Trump administration plans to spend even more than its predecessors by raising military spending without making any sizable cuts to any other program.
    So what does it mean if the government plans to spend more but says it will cut its revenue via tax cuts? It means there will be more deficit spending. And, contrary to what Dick Cheney may think, deficits do matter, and they mean higher costs for many millions of Americans.

    This post was published at Ludwig von Mises Institute on May 11, 2017.


  • The Trump Is A Fraud On Taxes

    You cannot deficit spend your way to prosperity, nor can you print growth.
    You can print money. Deficit spending is printing money.
    You cannot print value.
    The premise that you will get 3% growth if you deficit spend is the same premise that Obama ran after 2008. He and his advisers believed that if the government spent trillions that it did not have that we would see higher economic growth and over the space of a decade or so this would pay for the deficit through increased tax revenues.
    It didn’t happen.
    It didn’t happen because it can’t happen; it was nothing more than a scheme to “print value”, which is always and forever a fraud.

    This post was published at Market-Ticker on 2017-04-26.


  • Luddy: The Fed’s Risky Uncharted Course

    The Federal Reserve Bank, also known as ‘The Fed,’ was created in 1913 to regulate the banks and to ensure a stable dollar.
    The Fed has strayed from its initial charter and is now the primary enabler of federal deficit spending and debt, which is now almost $20 trillion. The Fed’s primary tool is low interest rates, which distort financial decisions and expand the money supply, which leads to risky economic choices.
    The Fed has created an additional intervention – purchasing debt instruments. These purchases have expanded the Fed’s balance sheet to almost $4 trillion, a major market distortion. Some economists justify these interventions as necessary during times of crisis but, in the long run, Fed actions lead to inflation and massive federal debt, which will, if not corrected, lead to another financial crisis.
    Ultra-low interest rates allow the federal government to borrow at will without having to pay market interest rates. If rates begin to rise, interest cost for the government will dramatically increase the yearly deficit.

    This post was published at Ludwig von Mises Institute on April 17, 2017.


  • Gold and Monetary Freedom

    In 2011, when Dr. Ron Paul was running for President, he conducted an interview with Judge Andrew Napolitano. During this very short interview Dr. Paul explained how sound money, gold, is monetary freedom. We couldn’t agree more.
    ‘I would like to legalize gold money and allow us to use gold and silver as legal tender and we could work our way back.’ [to a gold standard]
    This very simple plan would transform our economy within 12-18 months. The problem this plan faces, as always, are the money-junkies in Washington DC and Wall Street. In order to return to a gold standard the federal government would have to reign in the spending of our tax dollars. The future spending, deficit spending, would have to stop. Is it possible for Congress to stop handing out ‘freebies’ to their corporate friends and stop bribing voters with entitlements? How would that work? Personally, I don’t see anyone who is currently on the government dole voting to have their ‘entitlements’ cut off; why would they?


    This post was published at GoldSeek on 24 February 2017.


  • FEB 22/GOLD AND SILVER REBOUND ON FOMC MINUTES RELEASED AT 2 PM/GLD AND SLV INVENTORY REMAIN CONSTANT/GOLD AND SILVER EQUITY SHARES WHACKED/BOTH CHINA AND IRAN ANGRY AT THE USA/TRUMP NOW WORRIED …

    Gold at (1:30 am est) $1232.00 DOWN $5.50
    silver was : $17.94: DOWN 5 CENTS
    Access market prices:
    Gold: $1237.90
    Silver: $18.03
    THE DAILY GOLD FIX REPORT FROM SHANGHAI AND LONDON
    The Shanghai fix is at 10:15 pm est last night and 2:15 am est early this morning
    The fix for London is at 5:30 am est (first fix) and 10 am est (second fix)
    Thus Shanghai’s second fix corresponds to 195 minutes before London’s first fix.
    And now the fix recordings:
    WEDNESDAY gold fix Shanghai
    Shanghai FIRST morning fix Feb 22/17 (10:15 pm est last night): $ 1245.45
    NY ACCESS PRICE: $1236.40 (AT THE EXACT SAME TIME)/premium $9.05
    XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
    Shanghai SECOND afternoon fix: 2: 15 am est (second fix/early morning):$ 1246.39
    NY ACCESS PRICE: $1235.00 (AT THE EXACT SAME TIME/2:15 am)
    SPREAD/ 2ND FIX TODAY!!: 11.39
    China rejects NY pricing of gold as a fraud/arbitrage will now commence fully
    XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
    London FIRST Fix: Feb 22/2017: 5:30 am est: $1237.50 (NY: same time: $1237.40 (5:30AM)
    XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
    London Second fix Feb 22.2017: 10 am est: $1236.65(NY same time: $1237.60 (10 am)
    It seems that Shanghai pricing is higher than the other two , (NY and London). The spread has been occurring on a regular basis and thus I expect to see arbitrage happening as investors buy the lower priced NY gold and sell to China at the higher price. This should drain the comex.
    Also why would mining companies hand in their gold to the comex and receive constantly lower prices. They would be open to lawsuits if they knowingly continue to supply the comex despite the fact that they could be receiving higher prices in Shanghai.

    This post was published at Harvey Organ Blog on February 22, 2017.


  • Alan Greenspan is Now a Gold Bug? Say What?

    Is 2017 even real? What kind of weird, fantastical twilight zone have we entered into? The world has been turned upside down and I will continue to point out the bizarre and unusual things that continue to be said and acted upon as we go forward. If past results are any future indication, then things are going to get a whole lot weirder.
    Alan Greenspan , the “Maestro” of fiat money and one of the most prolific fiat money printers that the world has ever seen has entered into this bizarre alternative reality and is yes, now once again a gold bug!
    To those of you who know your history, you will remember the following, wrote by Alan Greenspan in 1966:
    “Under a gold standard, the amount of credit that an economy can support is determined by the economy’s tangible assets, since every credit instrument is ultimately a claim on some tangible asset. But government bonds are not backed by tangible wealth, only by the government’s promise to pay out of future tax revenues, and cannot easily be absorbed by the financial markets. A large volume of new government bonds can be sold to the public only at progressively higher interest rates. Thus, government deficit spending under a gold standard is severely limited. The abandonment of the gold standard made it possible for the welfare statists to use the banking system as a means to an unlimited expansion of credit.”
    This common sense statement, which was just a part of Alan Greenspan’s larger work titled “Gold and Economic Freedom “, would be brought up over and over again during his tenure as the head of the Federal Reserve.

    This post was published at GoldSeek on 22 February 2017.


  • Alan Greenspan: Ron Paul Was Right About The Gold Standard

    As John Rubino eloquently puts it, “when the history of these times is written, former Fed Chair Alan Greenspan will be one of the major villains, but also one of the greatest mysteries. This is so because he has, in effect, been three different people.” Greenspan started his public life brilliantly, as a libertarian thinker who said some compelling and accurate things about gold and its role in the world. An example from 1966: “This is the shabby secret of the welfare statists’ tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists’ antagonism toward the gold standard.”
    Yet everything changed a few decades later when Greenspan was put in charge of the Federal Reserve in the late 1980s, instead of applying the above wisdom, for example by limiting the bank’s interference in the private sector and letting market forces determine winners and losers, he did a full 180, intervening in every crisis, creating new currency with abandon, and generally behaving like his old ideological enemies, the Keynesians. Predictably, debt soared during his long tenure.
    Along the way he was also instrumental in preventing regulation of credit default swaps and other derivatives that nearly blew up the system in 2008. His view of those instruments:

    This post was published at Zero Hedge on Feb 20, 2017.


  • The Costs of Dragon Maintenance

    The next time you:
    Pay your mortgage, which is mostly interest; Pay your outrageously large auto or student loan; Pay an exorbitant amount for health insurance; Pay an even larger co-pay for a minor hospital procedure; Buy groceries for $100 and compare that purchase to what $100 bought in 1971; Realize that a four person family’s share of the U. S. national debt is nearly one-quarter million dollars … Consider the costs of fiat paper currencies, deficit spending, central banking and … dragon maintenance. ***
    A long time ago and far, far away outlaws raided a village and stole food, gold and women. The angry villagers could do little to protect their village except pray to their gods.
    A large and fearsome dragon descended into the village square answering their prayers. The dragon agreed to protect the village in return for food.

    This post was published at Deviant Investor on February 9, 2017.


  • Big US Budget Deficits and Low Inflation/Wage Growth (What’s Gov Got To Do With It?)

    This is a syndicated repost courtesy of Confounded Interest. To view original, click here. Reposted with permission.
    There is little doubt that the Federal government loves to spend money, usually more than it takes in as taxes. The difference in the Federal budget deficit. The deficit has gotten so large that some are calling for a Constitutional Convention to proposed a balanced budget amendment to the US Constitution. But has deficit spending done any good and generated wage growth in the US?
    The Federal government often runs in a deficit mode, except for the 1998-2001 period as a result of the The Balanced Budget Act of 1997, (Pub. L. 105 – 33, 111 Stat. 251, enacted August 5,1997). It was passed under Speaker Newt Gringrich (R-Ga) leadership. Unfortunately, two recessions (March-November 2001 and December 2007-March 2009) later and the US is in its worst budget deficit position since 1929.

    This post was published at Wall Street Examiner on January 30, 2017.