This post was published at ReasonTV
As we’ve reported, the US government is spending money like a drunken sailor. But nobody really seems to care.
Since Nov. 8, the US national debt has risen $1 trillion. Meanwhile, the Russell 2000 (a small-cap stock market index) has risen by 30%. Former Reagan budget director David Stockman said this makes no sense in a rational world, and he thinks the FY 2019 is going to sink the casino.
In a rational world operating with honest financial markets those two results would not be found in even remotely the same zip code; and especially not in month #102 of a tired economic expansion and at the inception of an epochal pivot by the Fed to QT (quantitative tightening) on a scale never before imagined.’
Stockman is referring to economic tightening recently launched by the Federal Reserve. It’s not only the increasing interest rates. By next April the Fed will be shrinking its balance sheet at an annual rate of $360 billion and by $600 billion per year as of next October. By the end of 2020, the Fed will have dumped $2 trillion of bonds from its books. Stockman puts this into perspective.
This post was published at Schiffgold on DECEMBER 26, 2017.
With the passage of the Tax Cut And Jobs Act on Wednesday, I wanted to address a few of the questions and misinformation currently circulating about the impact of tax cuts on the U. S. economy.
Over the last couple of months, I have been repeatedly asked why I am not ‘enthusiastic’ about the ‘greatest tax reform’ since the Reagan era.
First, let me be clear, I like getting a ‘tax cut.’ Under the new plan, and because I own several small businesses structured as limited liability corporations (LLC’s), I will potentially see a reduction in the amount of taxes I will pay next year.
What I am opposed to, as a ‘fiscal conservative,’ is the ongoing expansion of our debts and deficits which are an inherent drag on the future prosperity of the country.
For the last 8-years, Republicans have repeatedly blamed the previous Administration for doubling the national debt and further expanding dependency on the welfare and entitlement system. When the Republican-controlled Senate and House had the opportunity to live up to their promise of reducing spending and being more fiscally responsible, their first piece of major legislative action will add another $10 Trillion in debt over the next 10-years, increase the deficit to more than $1 Trillion, and double the size of an existing welfare program through increasing child tax credits.
As the Committee for a Responsible Federal Budget just wrote:
This post was published at Zero Hedge on Dec 21, 2017.
Senator Rand Paul said Tuesday that he cannot vote to add more to the national debt. The lawmaker wrote in a post on Twitter that ‘I promised Kentucky to vote against reckless, deficit spending and I will do just that.’
Rand Paul may be one of the few fiscally conservative Republicans in politics today. Paul’s tweet didn’t suggest he would oppose the GOP tax bill due to deficit concerns.
I cannot in good conscience vote to add more to the already massive $20 trillion debt. I promised Kentucky to vote against reckless, deficit spending and I will do just that. pic.twitter.com/BUYqm91mli
– Senator Rand Paul (@RandPaul) December 12, 2017
The lawmaker clarified in a follow-up tweet that tax cuts ‘are never the problem.’
This post was published at The Daily Sheeple on DECEMBER 12, 2017.
The US national debt stands at over $21 trillion and neither political party in Washington D. C. seems inclined to do anything about it. In fact, the GOP tax planwinding its way through the political process will add an estimated $1.5 trillion more to the debt over the next decade. And that doesn’t even account for the increases in spending that Congress will certainly approve over that timespan.
Of course, all of this government debt has serious ramifications. Corporations are also piling on credit. Last month, Mint Capital strategist Bill Blain predicted that ‘the great crash of 2018 is going to start in the deeper, darker depths of the credit market.’
Now consider this. China has an even bigger debt problem than the US, and analysts say it could threaten global financial security.
Jim Rickards recently listed a Chinese debt crisis as one of the possible snowflakes that could set off the next financial avalanche. As if on cue, the mainstream has picked up this narrative. As Business Insider reports it:
China’s ballooning levels of debt and dependency on credit to fuel growth continues to pose a major financial stability threat to the global economy, and could be the catalyst for the next crisis, according to the International Monetary Fund.’
This post was published at Schiffgold on DECEMBER 8, 2017.
On April 20 of this year, U. S. Treasury Secretary Steven Mnuchin spoke about the Trump administration’s tax plan at the Institute of International Finance. (Watch the video here.) Mnuchin described how the plan would pay for itself without adding to the national debt. He stated:
‘The deal will pay for itself. Now, having said that, we fundamentally believe in dynamic scoring. So, as you know, static scoring – you change the tax code, you plug it in, you see what the cost is. So, you are correct, fundamentally you’re lowering taxes under a static score, it’s gonna cost money. Now, having said that, some of the lowering in rates is going to be offset by less deductions, in simpler taxes. So, some of it will be made up on that but the majority of it will be made up on in what we believe is fundamentally growth and dynamic scoring.
‘And, you know, these are huge numbers. I mean you could have as high as $2 trillion difference in revenues over a 10-year period, depending on what you think is going to be the growth function. So the plan will pay for itself with growth.’
The United States Congress has already sentenced the next generation to a lower standard of living by virtue of its current $20.5 trillion in national debt. Just in the past fiscal year, the U. S. ran up a deficit of $666 billion. That follows deficits of $585 billion in 2016, $438 billion in 2015, $485 billion in 2014, $679 billion in 2013 and more than $1 trillion in deficits in each year from 2009 through 2012 despite extraordinary efforts to stimulate the economy following the 2008 Wall Street financial collapse.
This post was published at Wall Street On Parade By Pam Martens and Russ Marte.
But only a few lost souls in Congress care. Even as lawmakers are trying to cobble together a tax-cut bill that would cut revenues by $1.5 trillion over ten years, the gross national debt has spiked $723 billion over the past 12 weeks since Congress suspended the ‘debt ceiling.’ It just hit $20.57 trillion, or 105% of GDP.
Over the past six years, since November 2011, the gross national debt has surged nearly 40%, or by $5.8 trillion. Back in 2011, gross national debt amounted to 95% of GDP. Before the Financial Crisis, it was at 63% of GDP. There are no signs that the relentless rise in the debt is slowing down. On the contrary – the tax cuts are going to steepen the curve:
In the chart above, note the last three debt-ceiling fights – the flat lines in 2013, 2015, and 2017, followed each time by an enormous spike when the debt ceiling was lifted or suspended, and when the ‘extraordinary measures’ with which the Treasury keeps the government afloat were reversed.
This post was published at Wolf Street on Nov 30, 2017.
Canadians, fasten your seat-belt. Here are the charts. The Financial Crisis in the US was a consequence of too much debt and too much risk, among numerous other factors, and the whole house of cards came down. Now, after eight years of experimental monetary policies and huge amounts of deficit spending by governments around the globe, public debt has ballooned. Gross national debt in the US just hit $20.5 trillion, or 105% of GDP. But that can’t hold a candle to Japan’s national debt, now at 250% of GDP.
And private-sector debt, which includes household and business debts – how has it fared in the era of easy money?
In the US, total debt to the private non-financial sector has ballooned to $28.5 trillion. That’s up 14% from the $25 trillion at the crazy peak of the Financial Crisis and up 63% from 2004.
In relationship to the economy, private sector debt soared from 147% of GDP in 2004 to 170% of GDP in the first quarter of 2008. Then it all fell apart. Some of this debt blew up and was written off. For a little while consumers and businesses deleveraged just a tiny little bit, before starting to borrow once again.
This post was published at Wolf Street on Nov 22, 2017.
Every once in a while, a mainstream news outlet publishes a piece about the national debt. Here and there, politicians trot out the surging debt as a talking point to make some political hay. Now and then, an economist will wave the red flag. But by-and-large, the national debt just kind of looms over us.
We’ve gotten used to the shadow it casts, and we generally don’t give it much thought. It’s kind of like people living at the foot of a volcano. They know it’s there. It might cause some low-level anxiety. But they really don’t pay much attention to it – until it erupts.
So, just how bad is the national debt? We all know it’s pretty bad. But would you believe it’s actually worse than you probably think?
The headline number is operating debt. It currently stands at $20.5 trillion. It spiked $608 billion in just eight short weeks after Pres. Trump signed a bill raising the debt ceiling limit for the next three months in September. And Trump wants to do away with the debt ceiling altogether.
The national debt is currently over 105% of total GDP. That’s the highest level in history except for a two-year spike at the end of World War II.
This post was published at Schiffgold on NOVEMBER 14, 2017.
US is the ‘most indebted AAA-country’ and runs ‘the loosest fiscal stance,’ but the dollar as Reserve Currency still props it up: Fitch
It’s uncertain what if anything in the mix of tax cuts and tax increases being kicked around in Congress will become law. But Fitch Ratings believes that some combination will make it, and that it will sap US government revenues. ‘Under a realistic scenario of tax cuts and macro conditions,’ the US deficit would rise to 4% of GDP next year, and balloon the US debt to 120% of GDP by 2027.
And that might be the best-case scenario.
That debt-to-GDP ratio just shot up to 105% – based on annualized Q3 GDP of $19.5 trillion and the US gross national debt of $20.5 trillion that had spiked by $640 billion in eight Weeks, following the suspension of the debt ceiling in September. The debt-to-GDP ratio was 103% earlier this year.
Fitch said in the report that it expects some version of the package to pass the US Congress, and that it ‘will be revenue negative, even under generous assumptions about its growth impact.’
The tax package, which includes cutting the corporate tax rate from 35% to 20%, ‘would deliver a modest and temporary spur to growth,’ Fitch said. Even with these tax cuts, Fitch expects US economic growth to peak at 2.5% next year and then fall back to 2.2% in 2019 – the same kind of economic growth the US has seen since the Financial Crisis. So any boost to output from the tax cuts would be ‘short-lived.’
This post was published at Wolf Street on Nov 7, 2017.
But the debt-ceiling charade is back.
The debt ceiling charade being played out every few years in Congress makes the entire world shake its collective head and pray that Congress will for the umpteenth time raise the dang thing or at least ‘suspend’ it. The other option is a US default, the global consequences of which are too ugly to imagine, even for Congress.
In its infinite wisdom, Congress didn’t raise the debt ceiling in September; it only suspended it through December 8, after which the horse-trading will start all over again. But Congress is busy listening to lobbyists about the tax cuts – who gets them and who pays for them – and the debt ceiling isn’t even on the back burner. So here we go again.
But this charade has some peculiar effects, beyond its entertainment value: For months on end, it covers up the true extent of US government debt, and its continued surge. Then suddenly, the floodgates open.
Over just these six years, the debt has ballooned by $5.7 trillion, or by 39%, from $14.8 trillion to $20.5 trillion. In the chart below, note the last three debt-ceiling fights, the long flat lines in 2013, 2015, and 2017, followed each time by an enormous spike when the debt ceiling was lifted or suspended, and when the ‘extraordinary measures’ with which the Treasury keeps the government afloat were reversed.
This post was published at Wolf Street by Wolf Richter ‘ Nov 4, 2017.
‘President Trump, in complete contradiction to candidate Trump, has praised Yellen for being a ‘low-interest-rate-person.’ One reason Trump may have changed his position is that, like most first-term presidents, he thinks low interest rates will help him win reelection. Trump may also realize that his welfare and warfare spending plans require an accommodative Fed to monetize the federal debt. The truth is President Trump’s embrace of status quo monetary policy could prove fatal to both his presidency and the American economy.’ – Ron Paul, Institute for Peace and Prosperity
Editor’s note: This issue of our newsletter features several interactive, live charts offered in conjunction with the St. Louis Federal Reserve and the ICE Benchmark Administration/LBMA. You can access statistical details by moving your cursor over the charts. If the chart does not automatically update, please move the toggle button on the year bar all the way to the right. We invite you to bookmark this edition for future reference.
CHART 1: Sustained by both political parties, the national debt has taken on a life of its own
This post was published at GoldSeek on 1 November 2017.
There’s been something happening this month that very few people have noticed.
It’s been lost beneath all the other headline-dominating news, from the Las Vegas shooting to Harvey Weinstein to the Mueller investigation.
But very quietly behind the scenes there’s been an extremely rapid uptick in the US national debt.
In the month of October alone, the US national debt has soared by nearly a quarter of a trillion dollars.
This is pretty astonishing given that October is supposed to be a ‘good’ month for the US Treasury Department. The tax extension deadline means that October is usually quite strong for federal tax receipts.
And it has been – taxpayers have written checks totaling $190 billion to Uncle Sam so far this month.
This post was published at Sovereign Man on October 30, 2017.
While David Stockman stated early this year with resolute certainty that the debt ceiling debate would blow congress up and send the nation reeling over the financial precipice, I avoided jumping on the debt-ceiling bandwagon. While I was convinced major rifts in the economy would start to show up in the summer, I was not convinced they would have anything to do with the debt ceiling debate. If there is anything you can be certain of this in endless recovery-mode economy, it is that the US will just keep pushing its bags of bonds up a hill until it can finally push no more. So, I figured another punt down the road was more likely.
The Debt Ceiling Debate that Didn’t Happen The reason I didn’t think that debate would blow apart is that Republicans have more than once experienced the political reality that comes from taking the nation to the brink of default or of shutting down government. Each time that kind of thing has happened, it has hurt Republicans far more than it has hurt Democrats. I doubted establishment Repubs (the majority) had the stomach to take us through another credit downgrade, though I’ve noted such an event was possible.
Unsurprisingly to me, then, Congress did the only thing it seems to be capable of any more and just kicked that can a little further down the road with hardly a kerfuffle about it. Hurricane Harvey made things a lot easier for congress to kick the can again by providing a good excuse to dodge that unwanted debate on the basis of massive human suffering that truly did need tending to. Much-talked-about government shutdown put off for a better time
The debate was entirely avoided even as the national debt broke over the $20 trillion mark this summer, keeping US debt at more than 100% of GDP, which is the stratosphere we’ve been in since 2011.
A group of progressive economists affiliated with the University of Massachusetts predicted in 2013 that a debt burden [that reaches 90% of GDP for five years] would result in an annual growth rate of just 2.2 percent, which means economic stagnation. (Reason.com)
We’re already well past that five-year marker. Not surprisiing, then, that the Congressional Budgeting Office expects economic growth to stay at 1.8% through 2027.
This post was published at GoldSeek on 24 October 2017.
But the yield spread collapses to lowest since early in the Financial Crisis. Even the Fed is worried.
Prices of US government bonds fell across the board on Friday, and their yields rose and set a number of nine-year highs, in some cases nine years to the day.
Many people have pointed at the Senate where the prospects of the tax cut are said to have ‘brightened’ when the Senate approved a budget resolution. The tax cuts, if they make it, are said to lower government revenues by $1.5 trillion over 10 years. So maybe the bond market is starting to pay attention to government deficits and the national debt once again. But the bond market hasn’t paid attention in many, many years, and until the proof is in, I doubt it.
There are, however, other factors that predate Friday by many months. In fact, the moves in Treasury yields for maturities up to two years have been fairly consistent: yields have been surging.
On Friday, the three-month Treasury yield rose to 1.11%, the highest since the brief spike around July 25, when the debt ceiling issue hit a speed bump. At the time the thinking was that in late September – when these securities would mature and the government would have to come up with the money to redeem them – the government might not be able to come up with enough money due to the debt ceiling. But this scare passed, the debt ceiling was extended temporarily, and the trajectory of the three-month yield returned to normal. Except for this spike, the three-month yield, at 1.11%, is now at the highest level since October 20, 2008 (let’s remember that date, it keeps cropping up):
This post was published at Wolf Street on Oct 22, 2017.