Contact us
CALL US NOW 1-888-GOLD-160
(1-888-465-3160)

Feds Set Monthly Spending Record: The Swamp Is Now Bigger and More Expensive than Ever

  by    0   0

As Peter Schiff put it in a Facebook post, Trump promised to drain the swamp, but today, “The swamp is now bigger and more expensive than ever!”

The US government spent a record $433.3 billion last month, running up a monthly deficit of $214 billion, according to data released by the US Treasury Department.

That’s $433 BILLION spent in a single month.

Federal government spending came in 30% higher than August 2017 and ranked as the highest monthly outlay on record.

The deficit for the fiscal year hit $898 billion. That compares to a $674 billion deficit in the same period of fiscal 2017. This represents a 39.5% year-on-year increase. The US fiscal year begins in October.

Not only is Uncle Sam spending more, he’s taking in less money thanks to the tax cuts. The Treasury collected $219.1 billion in revenue last month, about $7 billion less than August 2017.

It’s not that tax cuts in and of themselves are bad. But without any accompanying cuts in spending, they are exacerbating the debt problem. As Peter Schiff has put it, we got tax relief without any government relief.

The government spent $32 billion just servicing the current debt. It plunked down $108 billion for Social Security, $65 billion on defense spending, $83 billion on Medicare, and $146 billion on all other government agencies and programs.

As ZeroHedge pointed out, until recently, Most Wall Street firms forecast the deficit for fiscal 2018 to come in at around $850 billion. We’re nearly $50 billion above that projection with another month to go. And things are only predicted to get worse. According to CBO estimates, the federal deficit will climb above $1 trillion per year next year – a year earlier than originally projected.

It’s easy to read all of these numbers and think, ‘ho-hum who cares.’ After all, we’ve been talking about runaway spending, budget deficits and federal debt for years. Nothing has happened. But remember, we’ve also been in an artificially low interest rate environment for years. The federal government continues to pile up debt and interest rates are climbing. The interest payment on the debt hit an all-time high of $538 billion in Q2 2018.

So, how in the world can the Federal Reserve continue pushing interest rates up? It seems highly unlikely the central bank will be able to move anywhere close to “normal” without bursting the debt bubble. Analysts have calculated that if the interest rate on Treasury debt stood at 6.2% – its level in 2000 – the annual interest payment on the current debt would nearly triple to $1.3 trillion annually.

ZeroHedge flashed a big warning sign about ever-increasing debt payments.

Interest costs are increasing due to three factors: an increase in the amount of outstanding debt, higher interest rates and higher inflation. Needless to say, all three are increasing; furthermore, a rise in the inflation rate boosts the upward adjustment to the principal of TIPS, increasing the amount of debt on which the Treasury pays interest, turbocharging the amount of interest expense. The bigger question is with short-term rates still just around 2%, what happens when they reach the mid-3% as the Fed’s dot plot suggests it will?”

Politicians in Washington have created a vicious cycle of skyrocketing debt and borrowing that is only likely to accelerate, and seem completely unwilling to do anything about it.

Many GOP pundits claim economic growth thanks to the tax cuts will solve the problem. But this traditional GOP talking point falls flat. Again – we got tax relief with no government relief.

As we’ve reported previously, high levels of debt are a cancer on economic growth. Several studies have estimated that economic growth slows by about 30% when the debt to GDP ratio rises about 90%. Most analysts say the US economy is already in the 105% range. Most economists believe the tax cuts have boosted the economy, but the boost will likely be short-lived unless Uncle Sam gets his spending problem under control.

Get Peter Schiff’s latest gold market analysis – click here for a free subscription to his exclusive monthly Gold Videocast.
Interested in learning how to buy gold and buy silver?
Call 1-888-GOLD-160 and speak with a Precious Metals Specialist today!


Related Posts

Peter Schiff: Investors Are Playing Checkers Instead of Chess

Last week, we got data on the producer price index. It came in at o.6%, a much hotter number than expected. It was the biggest jump in the PPI in six years. Year-over-year, producer prices are up 2.8%. Analysts expected the monthly increase to come in at half that – 0.3%. While the Fed typically […]

READ MORE →

Silver-Gold Ratio Hits Quarter-Century High

The silver-gold ratio hit the highest level in over a quarter century this week. The ratio hit to 86:1 as dollar strength pulled both the price of silver and gold lower this week after the Federal Reserve indicated it plans to keep pushing interest rates higher. The price of silver fell even more steeply than […]

READ MORE →

Drop in Credit Card Spending Could Signal Problems in Economy Built on Consumer Debt

Americans took on another $10.9 billion in debt in September, according to data released by the Federal Reserve. That pushed total consumer debt to a seasonally adjusted $3.95 trillion. American indebtedness is growing at a 3.3% rate. But there are signs that American credit card borrowing is slowing down and that’s not good news in […]

READ MORE →

Peter Schiff: Divided Congress Will Produce Even Bigger Deficits

Well, the midterm elections are finally over. The Republicans managed to hold on to the U.S. Senate, but the Democrats took control of the House. The “Blue Wave” was more like a “Blue Ripple.” To me, it smells a lot like gridlock, which is generally good news if you’re a person who favors smaller government. Gridlock […]

READ MORE →

South Africa Gold Mine Output Drops 19%

Gold production in South Africa dropped by 19% year-on-year in September, according to a report at Fin24. This continues a trend of monthly gold mine production drops. South African gold output fell by 15% in August and 15.5% in July. The country once led the world in gold production. The precipitous drop in output over […]

READ MORE →

Comments are closed.

Call Now