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

US Government Runs Another Massive Budget Deficit in January

  by    0   0

After running the biggest December budget deficit in history, the US government followed up with another massive budget shortfall in January.

According to the Monthly Treasury Statement, the January deficit came in at $162.83 billion. That’s nearly five times bigger than the January 2020 shortfall.

That brings the total deficit for fiscal 2021 to $735.73 billion in just four months. To put that into perspective, that is slightly higher than the 2014 deficit and would rank in the top-10 highest deficits ever run.

Uncle Sam spent $547 billion in January. That brings total spending through the first four months of fiscal 2021 to $1.92 trillion. Spending in January was up 26% year-on-year

Federal receipts came in at $384.7 billion, a 3% y-o-y increase.

As of Feb. 11, the national debt stood at $27.85 trillion. According to the National Debt Clock, the debt to GDP ratio stands at 130.93%. Despite the lack of concern in the mainstream, debt has consequences. Studies have shown that a debt to GDP ratio of over 90% retards economic growth by about 30%. This throws cold water on the conventional “spend now, worry about the debt later” mantra, along with the frequent claim that “we can grow ourselves out of the debt” now popular on both sides of the aisle in DC.

Even without additional stimulus, the CBO estimates the 2021 deficit will hit $2.3 trillion. That would rank as the second-largest deficit in US history, behind only last year’s $3.13 trillion shortfall. The CBO also projects the national debt will swell to an unfathomable $35.3 trillion by 2031.

As Peter Schiff noted in a recent podcast, there seem to be increasing expectations on Wall Street that faster than expected economic growth thanks to stimulus will force the Federal Reserve to tighten monetary policy faster than expected. But this seems highly unlikely given that the central bank will have to monetize all of this debt. That means more bond purchases and more money printing.

The Federal Reserve makes all of this borrowing and spending possible by backstopping the bond market and monetizing the debt. The central bank buys US Treasuries on the open market with money created out of thin air (debt monetization). This creates artificial demand for bonds and keeps interest rates low. All of this new money gets injected into the economy, driving inflation higher. The Fed expanded the money supply by record amounts in 2020.

The Fed had worked itself between a rock and a hard place. It has to print trillions of dollars to monetize the massive deficits. But that is causing inflation expectations to run hot. That is putting upward pressure on interest rates. But you can’t have rising rates when your entire economy is built on debt. The only way the Fed can hold rates down is to buy more bonds, which means printing more money, which means even more inflation. You can see the vicious cycle. At some point, there is a fork in the road and the Fed will have to choose. Step up and address inflation and let rates rise, which will burst the stock market bubble and collapse the debt-based economy, or just keep printing money and eventually crash the dollar.

This is why Peter Schiff has said we are heading toward “an inflationary holocaust.”

It’s going to be a death spiral of inflation where the more inflation we get the more inflation the Fed is forced to create.”

In effect, this is a massive tax on the American people. Instead of taking money directly from you, the Fed steals the purchasing power of your money in a stealthy inflation tax. In a nutshell, debt is neither free nor is it irrelevant. Borrowed money has to be paid back.

Download SchiffGold's Gold vs GLD EFT's Guide Today

Get Peter Schiff’s key gold headlines in your inbox every week – click here – for a free subscription to his exclusive weekly email updates.
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

CPI Housing Cost Calculation Hides True Extent of Inflation

The government CPI data for August came in slightly under expectations. Nevertheless, a 0.3% month-on-month increase in prices is significant. And a dig into the numbers reveals something wonky. The way the government calculates housing costs drastically understates rising prices and skews overall CPI to the downside.

READ MORE →

Gold’s Growing Role in Healthcare

A couple of years ago, CNBC commentator Jim Leventhal made a pretty astounding comment. When asked about gold, Leventhal said he had no interest in it because gold has no uses as a metal. Of course, this is nonsense. Gold has a wide range of uses in sectors ranging from jewelry to high-tech electronics. And […]

READ MORE →

Federal Budget Deficit Continues Its Relentless Upward Spiral

The US government ran a $170.64 billion budget deficit in August, pushing the total fiscal 2021 budget shortfall to $2.71 trillion with one month to go, according to the latest Monthly Treasury Statement. The mainstream media spun this as good news, noting that the August deficit was 15% lower than the $200 billion spending gap […]

READ MORE →

Incentives Matter: Unemployment Edition

Both Janet Yellen and Joe Biden insisted “enhanced” unemployment benefits weren’t incentivizing people not to work. The numbers prove them wrong.

READ MORE →

Producer Prices Surge Again in August

Producer prices came in hot again in August, charting the bigger annual gain in nearly 11 years. This indicates “transitory” inflation isn’t going away any time soon. The PPI for August rose 0.7% month-on-month. Economists were forecasting a 0.6% rise. This follows on the heels of two straight months with producer prices increasing 1.0%.

READ MORE →

Comments are closed.

Call Now