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Tag Archives: Deficits

Some Perspective

In our March 7th post,  Stages Of A Pandemic: Denial, Panic, Fear, and Rationality, we suspected the country was about to move from denial to panic over the coronavirus pandemic.   It sure did and infected the global markets in a big way leading to today’s massive monetary package from the Fed. Clearly, Jay Powell has more information than most of us as they saw the markets seizing up and had to act.  Hopefully, they won’t be bailing out the bad actors and will allow the necessary debt...

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#MacroView: Japan, The Fed, & The Limits Of QE

This past week saw a couple of interesting developments. On Wednesday, the Fed released the minutes from their January meeting with comments which largely bypassed overly bullish investors. “… several participants observed that equity, corporate debt, and CRE valuations were elevated and drew attention to  high levels of corporate indebtedness and weak underwriting standards in leveraged loan markets. Some participants expressed the concern that financial imbalances-including overvaluation...

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#MacroView: Debt, Deficits & The Path To MMT.

In September 2017, when the Trump Administration began promoting the idea of tax cut legislation, I wrote a series of articles discussing the fallacy that tax cuts would lead to higher tax collections, and a reduction in the deficit. To wit: “Given today’s record-high levels of 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...

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SOTM 2020: State Of The Markets

“I am thrilled to report to you tonight that our economy is the best it has ever been.” – President Trump, SOTU In the President’s “State of the Union Address” on Tuesday, he used the podium to talk up the achievements in the economy and the markets. Low unemployment rates Tax cuts Job creation Economic growth, and, of course, Record high stock markets. While it certainly is a laundry list of items he can claim credit for, it is the claim of record-high stock prices that undermines the rest...

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Strongest Economy Ever? Americans Receive More In Benefits Than Pay In Taxes

At the beginning of August, I discussed the following tweet from the President: What the Market wanted to hear from Jay Powell and the Federal Reserve was that this was the beginning of a lengthy and aggressive rate-cutting cycle which would keep pace with China, The European Union and other countries around the world…. — Donald J. Trump (@realDonaldTrump) July 31, 2019 “But if it is the ‘strongest economy ever,’ then why the need for aggressive rate cuts which are ’emergency measures’ to...

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Economic Theories & Debt Driven Realities

One of the most highly debated topics over the past few months has been the rise of Modern Monetary Theory (MMT). The economic theory has been around for quite some time but was shoved into prominence recently by Congressional Representative Alexandria Ocasio-Cortez’s “New Green Deal” which is heavily dependent on massive levels of Government funding. There is much debate on both sides of the argument but, as is the case with all economic theories, supporters tend to latch onto the ideas...

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Let’s Be Like Japan

There has been a lot of angst lately over the rise in interest rates and the question of whether the government will be able to continue to fund itself given the massive surge in the fiscal deficit since the beginning of the year. While “spending like drunken sailors” is not a long-term solution to creating economic stability, unbridled fiscal stimulus does support growth in the short-term. Spending on natural disaster recovery last year (3-major hurricanes and two wildfires) led to a pop...

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Debts & Deficits: A Slow Motion Train Wreck

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...

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15 Bullish Assumptions

If all goes well for nine more months, the post-financial crisis economic expansion will become the longest economic expansion in recent U.S. history. The U.S. stock markets are also on a tear, having just become the longest bull market since World War II. Regardless of your views about these trends continuing, the fact of the matter is that they are both much closer to ending than a beginning. Ray Dalio recently quantified this continuum, declaring that the economy is in the 7th inning,...

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Who Is Funding The U.S. Budget Deficit?

Here is a little teaser for our coming post on the Treasury market, which should be out tomorrow.  The latest data is from the Flow of Funds just posted by the Federal Reserve Board (FRB). Note,  less gold (Fed) and red (primarily foreign central banks) in financing the budget deficit.  These are flows into Treasury securities measured over each quarter and then annualized. Less central bank purchase of Treasury securities, which are not price sensitive, spells trouble for the...

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