It looks like the Federal Reserve is about to get back into the bond business and help the US government deal with its massive debt.
The Treasury Department announced yesterday that it will not have to borrow as much money in the third quarter of fiscal 2019 as originally anticipated. But this is not because of a slowdown in government spending. According to a Treasury official cited by Reuters, the reason for the lower borrowing estimate is due to an anticipated increase in Fed Treasury holdings as the central bank ends its balance sheet reduction program.
The government shutdown apparently didn’t save Uncle Sam any money. The US Treasury Department said it will borrow about $8 billion more than originally estimated in the first quarter of 2019 as deficits continue to spiral upward.
According to new Treasury Department projections, the US government will issue $365 billion through credit markets in the January-March quarter. This stacks on top of the $426 billion borrowed through credit markets in the October-December quarter.
Death-spiral — The downward, corkscrew-motion of a disabled aircraft which is unrecoverably headed for a crash.
The US federal government may well be in a death spiral – or perhaps we should call it a debt-spiral.
Sept. 30 marked the end of the federal government’s 2018 budget year. According to data released by the US Treasury Department, the federal debt grew by nearly $1.3 trillion in fiscal 2018 – $1,271,158,167,126.72 to be exact. It was the sixth-largest fiscal-year debt increase in the history of the United States.
So much for that Republican Party fiscal responsibility.
The total federal debt currently stands at $21.5 trillion.
While mainstream pundits and talking heads cluck about great jobs number and amazing economic growth, by and large, they completely ignore the fact that the entire economy is built on giant piles of debt.
In our Friday Gold Wrap podcast last week, Mike Maharrey talked about the fact that the economy is drowning in debt, focusing on ever-increasing consumer debt and government debt. He didn’t even get into corporate debt.
So, just how much debt is really out there? The following bullet points will give you a good birdseye view of the debt stretching from horizon to horizon.
The federal government is borrowing money at levels one would expect to see during a major economic crisis. According to the Congressional Budget Office, the federal deficit for the fiscal year 2018 will come in at around $804 billion. That is expected to balloon to around $985 billion in fiscal 2019.
Does that seem pretty bad to you? Well, it’s even worse than you think.
If you look at the increase in the federal debt, you’ll find that it is bigger than the deficit. How can this be? The government simply excludes some of the money it borrows in the deficit.
The economy is booming – or so we’re told. But the federal government is borrowing money like we’re in the midst of a deep recession.
Long-term US debt sales have risen to a level not seen since the height of the Great Recession. Meanwhile, the Treasury Department announced the creation of a new benchmark short-term 2-month Treasury bill.
All of this is in an effort to cover a rapidly upward-spiraling national debt even as some of the big players in the bond market sit on the sidelines.
After Pres Trump signed a bill raising the debt ceiling last fall, we warned that rising interest rates could crush the US federal budget under interest payments. Well, interest rates are going up and so is the cost of servicing the US government’s $21-plus trillion debt.