The Congressional Budget Office, CBO, is out with their projections for debt, deficit, spending, and revenue levels out to 2050 – and it ain’t a pretty picture. Even accounting for the effects for COVID-19 and the government response thereof, deficits are expected to increase to 5 percent of GDP by 2030 and to a whopping 13 percent by 2050. For context, the average deficit as a percentage of GDP has been 3 percent for the past 50 years. Following suit, the federal debt will increase to a record size of the economy when it hits 107 percent of GDP in 2023. This trend, unfortunately continues and hits a striking 195 percent of GDP by 2050. The CBO even remarks about the fragility of the economy and it will likely not be able to tolerate higher interest rates. Also noting that inflation may be on its way depending on how the government decides to “finance” the debt. And lastly, warning of a potential fiscal crisis and/or decline in the value of Treasury securities. All of the above points have been discussed at length by The Kapital News – most of which on a near daily basis. This is nothing short of a government that is out of control. And sadly, neither the President, nor VP Biden, are likely to comment on this fiscal disaster, nor address the structural issues that have led us to this destination, nor have a realistic plan to address it. The lack of honesty and leadership is a tragedy in and of itself.
In other news, the US dollar index is rallying, putting downward pressure on precious metals, some commodities, and likely stock prices as well. Is this a rush to “safety” in the US dollar? Or is liquidity starting to dry up once again, thus causing an increase in demand for US dollars in response to all of the US dollar denominated debt(s) that are outstanding and due? This is something worth monitoring. Interesting to note, however, is that the 10-year Treasury has barely moved and has been range-bound for quite awhile. Perhaps this fact throws water on the safe-haven play, as one would also expect to see falling yields in such a scenario. Today, Federal Reserve Chairman Jay Powell and Treasury Secretary Mnuchin, gave testimony on the state of the economy and the various efforts undertaken to revive the economy. Long-story short, they are requesting more spending and cannot figure out how to get money in the hands of small businesses, but have no problem giving it to major banks and large corporations – American or otherwise. And lastly, with rising COVID-19 cases in Europe, UK Prime Minister, Boris Johnson, made a public announcement urging Brits to social distancing and utilize other measures to get the numbers down, and should numbers continue to increase, then lock-down 2.0 is the likely outcome. Other countries may follow suit. Stay diversified, stay vigilant, and stay with The Kapital News. #Economy #Jobs #Debt #Deficits #Recession #Depression #Inflation #USA #BananaRepublic #EndTheFed #Liberty #Revolution #Gold #Silver