Donald Trump and Chinese Vice Premier Liu inked their signatures on the Phase 1 trade deal this week. But was it really a big deal? Or was it no deal? Mike Maharrey talks about it on this week’s Friday Gold Wrap podcast. He also talks about why the gold market seems to be holding steady despite some strong headwinds and the outlook for the yellow metal in 2020.
The US federal government ran a budget deficit of over $1 trillion in the 2019 calendar year. It was the first budget deficit over $1 trillion in any calendar year since 2012 — in the midst of the Great Recession.
The budget shortfall from January through December totaled $1.02 trillion, according to the latest report issued by the Treasury Department. That continued a rapidly accelerating upward trajectory. The 2019 budget gap was 17.1% bigger than the 2018 deficit, which was a 28.2% increase over 2017.
A paper by Scott A. Wolla and Kaitlyn Frerking for the Federal Reserve Bank of St. Louis warns that the Fed’s own policy could lead to “economic ruin.”
The paper titled “Making Sense of National Debt” explains the pros and cons of national borrowing in typical Keynesian fashion. In a nutshell, a little debt is a good thing, but too much debt can become a problem.
But in the process of explaining national debt, Wolla and Frerking stumble into an ugly truth — Federal Reserve money printing can destroy a country’s economy.
Jerome Powell lectured Congress about the national debt last week, calling it unsustainable. The Federal Reserve chairman is concerned. He admitted that with interest rates already close to zero, the central bank has very little room to cut rates in the event of an economic downturn. Peter Schiff appeared on the Claman Countdown, along with Milken Institute economist Bill Lee to talk about Powell’s comments.
Peter said that while Powell is lecturing Congress, it’s really the Fed’s fault.
There was more optimism about a trade deal this week. There was also more pessimism about a trade deal this week. Markets reacted accordingly. But there was some other interesting news out there. Jerome Powell lectured Congress about the national debt and last month’s inflation data came in hotter than expected. Host Mike Maharrey covers these stories and more, and basically ignores the trade war gossip, on this episode of the SchiffGold Friday Gold Wrap podcast.
Uncle Sam is spending money far faster than he’s taking in. The US federal government ran the biggest budget deficit in seven years in fiscal 2019, according to the Treasury Department. And the spending is even worse than advertised.
The $984 billion deficit amounts to 4.7 percent of GDP. That’s the highest percentage since 2012. It was the fourth consecutive year in which the deficit increased as a percentage of GDP. The debt-to-GDP ratio is estimated to have increased a hefty 26 percent over last year.
When is a $984 billion budget deficit good news?
When you thought you might get a $1 trillion budget deficit.
The Treasury Department released the fiscal year 2019 budget numbers on Friday. The budget shortfall came in at $984 billion right on the CBO estimate. A CNBC report said this would likely, “come as a relief to the Trump administration, which had previously forecast that the deficit would hit $1 trillion during the 2019 fiscal year.”
The US national debt increased by a staggering $814 billion between Aug. 1 and Oct. 6, according to Treasury Department data.
That represents a 4% increase in the debt — in just a little over two months.
News of a possible “phase 1 trade deal” and movement toward a resolution of the Brexit fiasco have buoyed stocks and put a lid on silver and gold this week. But positive vibes on these two fronts overshadowed a lot of economic data that came out this week that was less than ideal. It seems the American consumer might be getting close to being maxed out. In this episode of the SchiffGold Friday Gold Wrap podcast, host Mike Maharrey digs into a big pile of debt and more.
The national debt continues to spiral upward. It increased by another $1.2 trillion in fiscal year 2019. But Paul Krugman says it’s not that big of a deal. He downplayed the national debt in a tweet, claiming emphatically that “DEBT IS MONEY WE OWE TO OURSELVES.”
This encapsulates a common Keynesian argument. Debt can’t really burden future generations. In the aggregate, Americans won’t be any worse off. Paying the national debt merely shifts dollars from one American to another. While future taxpayers will be out some money, the American bondholders who receive the interest payments will end up with more money. When all is said and done, it’s a wash.
