The mainstream narrative is that the Fed will soon admit that inflation isn’t transitory. At that point, it will raise interest rates and taper its bond-buying program to fight rising prices. But this narrative ignores the elephant in the room – the ever-increasing national debt.
In June, the US government ran another big deficit of $174.16 billion, continuing the trend of overspending and massive budget shortfalls.
Yesterday, President Joe Biden announced Republicans and Democrats have come up with a $1.2 trillion infrastructure deal. But where is Uncle Sam going to come up with the money? And what does this tell you about the likely trajectory of Federal Reserve monetary policy? Host Mike Maharrey talks about it in this episode of the Friday Gold Wrap podcast. He also discusses the latest talk, talk, talk coming out of the Fed.
President Biden has proposed a borrow and spend “to infinity and beyond” budget featuring $6 trillion in government spending. That’s the largest amount of spending ever proposed in a presidential budget. It’s not accurate to call it a “budget.” The federal government has given up on actual budgeting.
The federal government has already run a $2.06 trillion budget deficit in fiscal 2021 with four months left to go. But somewhat surprisingly, over the last few months, the national debt hasn’t increased at nearly the pace you would expect considering the budget shortfalls. Given the level of spending, borrowing should be much higher. How has the federal government maintained its spending pace without borrowing at a much higher rate?
The US Treasury has been drawing down the balance in its Treasury General Account (TGA) at the Federal Reserve. But that maneuver is about to come to an end, so you can expect Treasury bond sales to spike in the coming months.
Typically, the US government runs a budget surplus in the month that tax returns come due. Not this year. Despite a surge in receipts, the federal government ran a $131.95 billion deficit in May, continuing the trend of overspending and ballooning budget shortfalls.
The federal budget deficit for fiscal 2021 now stands at $2.06 trillion with four months left to go. That compares with a $1.9 trillion deficit through the first seven months of fiscal 2020, which included the first round of stimulus checks in April 2020.
With some positive economic data coming out this week, investors suddenly went bullish on the economy again and decided that the Fed is surely going to deal with inflation now. Will it though? In this Friday Gold Wrap Podcast episode, host Mike Maharrey speculates about the Fed’s next move. He also looks ahead and talks about the long-term future of the dollar. Can we assume it will always be the reserve currency?
President Joe Biden released his 2022 budget this week. The $6 trillion spending plan offers a glimpse into Biden’s long-term fiscal strategy – borrow and spend to infinity and beyond.
The Biden budget would take the US to its highest sustained spending levels since World War II.
And here you thought the pandemic emergency was winding down and spending would go back to normal. Well apparently, this is the new normal.
The Fed wants us to believe everything is under control. The economy is improving. Inflation is transitory. Good times are ahead. But behind the scenes, central bankers and government officials are scrambling to keep all the economic props in place. As they intervene in one area of the economy, they create problems in another. In this episode of the Friday Gold Wrap podcast, host Mike Maharrey talks about some of these interventions along with gold’s recent rally above $1,900.
The US government continues to run massive budget deficits. That means it has to sell bonds to finance the debt. So, who’s buying all these Treasuries?
The Federal Reserve is buying a lot of them as it continues to monetize the ever-growing federal debt. Between March 2020 and March 2021, the central bank monetized more than half of the massive pandemic debt.
Inflation came in hot in April. Initially gold sold off on the news. But over the following week, there appears to have been something of a pivot in the market. Gold and the dollar both started behaving as one would expect in an inflationary environment. Peter Schiff said it looks like investors are starting to worry the Fed won’t fight inflation after all.
