The U.S. Budget Deficit
The U.S. Treasury findly released their monthly statement on Friday, which closed the books on the government’s 2021 fiscal year (October to September). The deficit came in at $2.8 trillion (12.0 percent of GDP, based on our Q3 GDP estimate) , a bit lower than FY 2020’s $3.1 trillion (14.8 percent of GDP). Those are some massive deficits, folks.
U.S. Deficit Larger Than 95 Percent Of Global Economies
In fact, the FY 2021 deficit was larger than Italy and Canada’s economy, bigger than 185 of the 192 country economies in the lastest IMF database. Take a look at the peak 12-month deficit of $4.1 trillion in March. The March deficit would have made the G5.
Financing The COVID Deficit
How can the U.S. Treasury finance $5 trillion in borrowing over the past 18-months without spiking global interest rates, crowding out investment and other asset markets, and tanking asset prices? They can’t.
The table below breaks down the financing in several different measures. Check it out.
The bottom line is that 23 percent of the COVID deficit borrowing has been financed by an increase in Treasury bill issuance, easy given the mass excess liquidty on the short-end where the Fed is soaking up over a trillion with overnight reverse repos in order to keep short-term rates postives. Most of that liquidity, by the way, was created from QE.
Of the remaining $4.1 trillion of non T-Bill debt issuance, 75 percent was taken down by the Fed, albeit indirectly.
There you have have it, folks, T-Bills and the Fed have financed the bulk of the COVID deficit and debt buildup. No judgment, but policymakers are now going to have engineer a soft landing in the economy and asset markets as we approach a fiscal cliff to normalize the budget deficit and tighten up monetary policy.
We are not throwing stones as they saved the world from a global economic castasophe.
We do criticize their continued irresponsible policies as inflation rages and stagflation sets in. It’s not wise, in our experience, to try and monetize supply shocks. We learned that hard and painful lesson by doing so with the OPEC oil shocks.
Narrow window for a soft landing. Stay tuned.
Email us or comment if you have questions.
Anyone can join.
Anyone can contribute.
Anyone can become informed about their world.
"United We Stand" Click Here To Create Your Personal Citizen Journalist Account Today, Be Sure To Invite Your Friends.
Please Help Support BeforeitsNews by trying our Natural Health Products below!
Order by Phone at 888-809-8385 or online at https://mitocopper.com M - F 9am to 5pm EST
Order by Phone at 866-388-7003 or online at https://www.herbanomic.com M - F 9am to 5pm EST
Order by Phone at 866-388-7003 or online at https://www.herbanomics.com M - F 9am to 5pm EST
Humic & Fulvic Trace Minerals Complex - Nature's most important supplement! Vivid Dreams again!
HNEX HydroNano EXtracellular Water - Improve immune system health and reduce inflammation.
Ultimate Clinical Potency Curcumin - Natural pain relief, reduce inflammation and so much more.
MitoCopper - Bioavailable Copper destroys pathogens and gives you more energy. (See Blood Video)
Oxy Powder - Natural Colon Cleanser! Cleans out toxic buildup with oxygen!
Nascent Iodine - Promotes detoxification, mental focus and thyroid health.
Smart Meter Cover - Reduces Smart Meter radiation by 96%! (See Video).