11–20 of 79 posts
The big risk from my point of view is that currency weakness tends to spook international investment capital who is exposed to the local currency, triggering selloffs as capital flees, exacerbating the problem.
Earlier quoted context omitted.
The US government as a whole, if you combine Local, State, and Federal spending, is not running a huge deficit. It is, in fact, paying its debts down. You can quip about how sustainable this state of affairs is, but of the three, only federal debt is growing... And, if you look at inflation-adjusted metrics, that growth is very minor.
Local and State in the US can't run deficits. They can put out bonds to fund projects but thats it. Its only the US federal government that can run deficits.
Isn't that what the federal govt does too? The US sells treasury bonds and China buys them.
https://www.investopedia.com/articles/investing/040115/reaso...
Earlier quoted context omitted.
Local and State in the US can't run deficits. They can put out bonds to fund projects but thats it. Its only the US federal government that can run deficits.
>> They can put out bonds Isn't that what the federal govt does too? The US sells treasury bonds and China buys them. https://www.investopedia.com/articles/investing/040115/reaso...
Earlier quoted context omitted.
The US government as a whole, if you combine Local, State, and Federal spending, is not running a huge deficit. It is, in fact, paying its debts down. You can quip about how sustainable this state of affairs is, but of the three, only federal debt is growing... And, if you look at inflation-adjusted metrics, that growth is very minor.
When people refer to US government they mean Federal. And the concern is that the Federal government has structurally degraded its budget such that it is running larger and larger deficits. And unfortunately when you give away money as tax cuts it's often politically impossible to reverse it.
And if there are recession fears, the last thing you want to do is raise taxes. The problem is where the tax cuts are, not that they are tax cuts; you want to cut taxes on people who spend a high proportion of their income on consumption, not wealthy people who will sit on it.
As for the political impossibility of reversing tax cuts, in the case of cuts for the rich, this is not at all due to public pressure, but private pressure, and in that the impossibility of reversing tax cuts is no different from the impossibility of not enacting them. When politicians are more obligated to voters than donors, taxes on wealthy people will rise. There is zero pressure from voters to maintain tax cuts on wealthy people, other than general support for an entire package of tax cuts if very visible middle class subsidy is mixed in with them.
The US is running up a huge deficit and lowering rates yet the dollar is getting stronger. It is kind of strange.
BoJ is buying 90%+ of their own bond market.
Emerging markets are blowing up routinely, most recently Argentina.
Australia and Canada have their own issues.
The U.S. isn't perfect but it's comparatively safe with a large military and reserve currency status with positive interest rates giving them room to react short term.
(Edit: To be crystal clear, this relative safety on the world stage means the USD is in demand as a "flight to safety". Same can be said about Treasuries, which is why domestic economic analysis doesn't necessarily align with the recession indicator of an inverted yield curve. The world could be going into recession. It's also worth noting that Gold has been rallying in USD terms, which tells us it's even safer.)
The US is running up a huge deficit and lowering rates yet the dollar is getting stronger. It is kind of strange.
The US government as a whole, if you combine Local, State, and Federal spending, is not running a huge deficit. It is, in fact, paying its debts down. You can quip about how sustainable this state of affairs is, but of the three, only federal debt is growing... And, if you look at inflation-adjusted metrics, that growth is very minor.
Mandatory spending items will at some point soon crowd out all other spending. This comes at a time when, over the last 4 or 5 years, foreign creditors have stopped financing our deficit by buying ever growing quantities of US treasuries. So, for the first time in decades, US domestic private sector will be tasked with financing their own spending.
It is about to matter very soon, as baby boomers retire en masse. The endless talk of government spending leading to inflation didn't manifest (except in asset prices) because foreigners recycled their surpluses into treasuries. That this has mostly stopped will change the dynamic. The Fed will need to monetize the debt (resume QE) because there is simply too much treasury issuance, and growing, to be funded by US domestic sector alone, either in taxes or buying bonds.
If you look up last couple years US debt issuance has been bought up mostly by private sector, while central banks are buying gold. Recipe for it being the bond bull market peak and that debt being paid back in nominal but lower real terms = inflation. The only way to retire the massive and growing federal debt. Call it MMT or whatever you want, but it's coming. The loser will be the $.
[0] https://nationalinterest.org/blog/buzz/2025-us-interest-paym...
The US is running up a huge deficit and lowering rates yet the dollar is getting stronger. It is kind of strange.
The US government as a whole, if you combine Local, State, and Federal spending, is not running a huge deficit. It is, in fact, paying its debts down. You can quip about how sustainable this state of affairs is, but of the three, only federal debt is growing... And, if you look at inflation-adjusted metrics, that growth is very minor.
Baloney. Take a look at a graph of US federal deficit as a percentage of GDP. In 2018 the deficit was 3.8% of GDP, in 2019 it's expected to be 5.1%. If those were the values during a recession, that would be understandable, but during what is supposed to be a "great, amazing" economy, those structurally high values is what scares people.
Real Vision has some great commentary on the Yuan and its implications. Most recently: https://www.youtube.com/watch?v=1ssFICVFH40 The big risk from my point of view is that currency weakness tends to spook international investment capital who is exposed to the local currency, triggering selloffs as capital flees, exacerbating the problem.
The US is running up a huge deficit and lowering rates yet the dollar is getting stronger. It is kind of strange.
Earlier quoted context omitted.
The US government as a whole, if you combine Local, State, and Federal spending, is not running a huge deficit. It is, in fact, paying its debts down. You can quip about how sustainable this state of affairs is, but of the three, only federal debt is growing... And, if you look at inflation-adjusted metrics, that growth is very minor.
With near record low interest rates, after a decade long economic growth cycle, we are back to running $ trillion and growing deficits each year, at the peak of the cycle. In a few years, assuming current rates and no recession, interest on the debt will exceed military spending [0]. Imagine what happens when we do have a recession and much bigger deficits. Mandatory spending items will at some point soon crowd out a…