Treasury, We Have a Problem US Treasury Debt Issuance (see below) looks like a Mag7 Tech Company chart, breaking out to the upside. Since 2020, UST debt has soared +50%, up by $12T! When you compare the slope of total debt from 1990 through 2008 vs. the slope over the past decade-plus, one can only conclude that Congress and the White House has lost control of the spending reins, any semblance of discipline has vanished. We are inflating growth by inflating government spending. I wonder if the administration hadn’t gone on this unprecedented spending spree: 1) Would the Fed’s monetary policy have worked more effectively to bring down inflation more effectively? 2) How much did government spending actually stimulate inflation through direct and indirect means? 3) Would the Fed have been forced to raise rates as much as they did had the government spending spree not been so extreme? It’s Election Year, let’s hope our elected officials reflect, understand this basic chart and its short-term and long-term implications.
Marc Lewis
2mo
Where do they cut Bruce? Defense (Russia, Ukraine, China, Iran, Israel)? Social Security and Medicare, COVID emergency acts? Or, funding the high interest rate costs partially caused by the FED not lowering rates now, as they will be doing in the EU?
Lee Doyle
2mo
“Hope” is the scariest word here. If nothing changes, the CBO projects Total US Debt to reach $54.4T by 2034 with deficit spending surpassing $2T p.a. by 2031. So far, I’ve heard no proposed legislation that seriously addresses this issue….. Fingers crossed the situation changes quickly.
Luke Graham
2mo
When government spends more than its revenue, inflation is the result, pure and simple. Anyone who understands economics knows that It is the “printing of money” that is the root of inflation. When government has fiscal discipline, productivity gains usually offset wage driven inflation which results in stable real economic growth of -1%. Unfortunately interest on US government debt is now so high that we will likely be stuck with high inflation greater than 3% and a declining standard of living.
Paul Watson
2mo
Great post Bruce. How long can we rely on the statement that “We are NOT as bad as everyone else?”. Hardly a great investment thesis.
Michael McGoey
2mo
There is no political penalty for spending, and political incentives for tax cutting - spend more, tax less - deficit grows. Surprise!
Robert Franz
2mo
You say a mag7 tech company, I disagree, chart looks just like Venezuela 🇻🇪’s debt issuance!! The U.S. Peso might be at parity with the Mexican peso in the next 10yrs.
Russell Abrams
2mo
it would be great if you could add GDP to the chart as well - i am trying to figure out what we got for all this debt?
We have one party that cuts taxes but not expenses and one that increases spending without increasing taxes. We need a third party.
Harold Kugelman
2mo
too much printed money generates inflation. investors demand higher yield for usg risk
Retired March 2917
2moIncreasing spending while cutting taxes is never good policy. Unfortunately in a democracy voters will always choose lower taxes but never reduce spending.