namely Herbert Hoover, W and Trump yip, their successors (FDR, Obama and Biden) had/have to clean up their mess/reckless spending
Setting aside the incredibly superficial and flawed analysis that you put on display... I'd love to hear what Biden is doing to "clean up" the deficit. Passing a $1.9 trillion bailout of the failed blue states and now talking about a $3 trillion infrastructure/climate/social justice BS bill is deficit spending on a level that we haven't seen since... well, the Obama stimulus plan... But I'd hate to see the facts get in the way of your Wednesday morning liberal emotional surge! GOOD DAY
you can't start by pointing the finger at W and Trump's contribution towards increasing the deficit. stop publicizing your ignorance. blue states like Cali and NY have paid more in taxes to the US treasury than federal funding received read states like ND / SD / WY have received more from federal funding that their tax collection. perfect eg of welfare recipients / states
Deficit does not seem to matter too much now because the dollar is a global currency, so the fed can print as much as possible without huge consequences. If that goes away due to digital currencies, we are going to be in big trouble. There is no other country in the world that can run the deficit as the US.
Then they default and negotiate with bondholders like Greece and Venezuela and a number of other countries do all the time. That said, there's no reason that would ever happen - the US can always simply print more currency. The last time there was a fear that the US would default on it's debt - 2010 or 2011 when the GOP held the debt ceiling hostage - S&P lowered the US credit rating and interest rates went down making it even easier for the US to borrow money. Why? Because when the world is in crisis, they want dollars.
The problem with the dollar is that the American economy is now only 20% of the global economy so it's beginning to strain when exporting countries hold large reserves that emphasize trade imbalances. Post-2008 policy created a big trap where the US needed to repair its balance sheets only for the rest of the world to sync up and repair their own balance sheets at the same time. Lowering interest rates and QE was already dubious, but when the ECB and Japanese bank started doing the same thing, it triggered a race to the bottom with even lower (and now negative) interest rates. With lowered rates, the fallacy is that it would spur customer spending and decrease saving. How can you invest and create value when banks won't trust Joe Sixpack to pay back a six figure loan at 2-3% interest? Yes, we're still talking about the GFC. Back to the OP... forever wars, wasteful stimulus and trillion dollar+ 9/11s do matter. So don't elect another dub**** or a wasteful klepto thin skinned prick bent on spending trillion dollars on corporate cash grabs that generated zero real wealth with financial engineering. An activist, pro-moral hazard Fed is all we have in defense of a financial armageddon. At least that's what the media and markets have been telling us...but other than that, economic indicators are fine and on schedule I've only seriously researched gold lately...from what I can tell is that gold is more a flight for safety play than an inflation play. Copper looks to be a better proxy of inflation sentiment in industrial and consumer demand. If there is inflation and confidence in the dollar is strong, people will gravitate towards treasuries that should pay out higher yields. In that sense, a stronger dollar is bad for gold. But if things go t*** up, you will see a flight for gold. That pattern has weakened lately because people like returns for digital gold much much more. If you're worried about hyper inflation, allocating more into gold and commodities in general is a good play, but it's still likely overpriced if you're planning on buying gold now.
why, when US's balance sheet is SO MUCH healthier than any other global economic power ? btw, your convenient claim that the US balance sheet is damaged is not supported by fact. US debt as a % of GDP ~ 80% England / EU are all way above 100% China and Japan are approaching 300% it's too bad that you don't understand.
Not sure i understand this. Is the concern that people are spending or that people are not spending? Pretty sure the intent of cutting rates is to get people spending more instead of saving. Banks can always set higher rates based on risk profile (and they do).
It is too bad you are using fake data. The real data shows: China Debt-to-GDP ratio is 61.7% in 2020. USA Debt-to-GDP ratio is 136% in 2020.
The policy came in response to unwind a panic in the financial markets. On one hand, you had TARP to deescalate contagion, but on the other, there was still unease over what loans were toxic and what was salvageable. Meanwhile, looming financial reform legislation plus the correction in the housing markets and the inability for consumers to repay their mortgages made the situation for banks even worse. There's less resistance that 08 is becoming more and more our Japan Moment with zombie institutions. What QE unofficially did was to swap bank assets for boring treasuries as a reserve. Those reserves didn't enter the money supply so it became a backdoor for Americans to pay off our own debt as we typically avoid low yielding bonds with a passion. With ultra low interest rates, banks held onto those reserves for the nominal value of treasury bonds rather than increasing the money supply by lending out loans to retail customers. Folks like Peter Schiff were warning hyperinflation during that time but the policy ended up being deflationary rather than inflationary. The Fed backdoored Americans into servicing bank debt while they repaired their balance sheets and did not loan out money the way the government was encouraging them to. But if you were banks, why would you trust people's creditworthiness at that time? Better off hoarding more and more treasuries as collateral. Fast forward to last year when the Fed gobbled up corporate bonds and reinstated QE...Seems like a familiar play. I guess you can win a blue ribbon for being the least ugliest contestant in a beauty pageant but holding debt w/ 80% of GDP is not a normal situation. Having less than 2% as an interest rate is not normal. The theory is that low rates will encourage customer spending and increase the economy. In reality, to increase the economy, increasing the money supply (and inflation) through customer lending is more important. If banks aren't lending and the government isn't spending, you won't see inflation.
You both may be accurate in your numbers. China was 317% in the Q1 2020. And the USA debt ended 2020 at 95% https://www.thestreet.com/mishtalk/economics/chinas-debt-to-gdp-ratio-hits-317-percent https://www.cbo.gov/publication/56598#:~:text=Debt.,percent of GDP by 2050. So the timing of the numbers are important. And maybe including source citations will help.
it's a case of FakeFan providing fake data China’s total debt hit 317 per cent of gross domestic product (GDP) in the first quarter of 2020.
way to back-pedal. from the convenient baseless claim that the US balance sheet is damaged to another one that it is not normal if only you can parrot more convenient spin as to what "normal" is
I'm not sure how I'm back pedaling when we're sinking deeper into ZIRP and debt as a higher % of GDP. Post GFC policy has been big success? You get a zero calorie cookie.
translation, ur unwilling / unable to describe what a normal US balance sheet would look like, even tho your latest accusation is that it is not normal
I suppose I'm implying some knowledge for what caused the GFC, the trillion dollar wars from Iraq and Afghanistan each, the trillion dollar spending from Bush stimulus and tax cuts, and the loss from disasters like Katrina and 9/11. This plus the bubble and financial collapse in 08 across different asset classes meant the government had to backstop losses during Obama's term. This included housing and mortgage relief, reconcilling the repo market with making the Fed as a last resort lendor, several bailouts, and then his own sub trillion dollar stimulus plan backed with government spending in increased unemployment and welfare benefits. Throughout all of this banks didn't fully recover from just TARP with their bad loans and firesale runs during the panic at the repo market. They reshuffled and restructured their debt. Otherwise they risked getting taken over by the government through conservatorships. It's my thesis that the government didn't want conservatorships or more liquidatations either so they floated policy similar to what Japan did in the 90s, which was QEs and the propping of zombie institutions. Hope that's sufficient for you. I'll need more in exchange than what I'm currently getting.
I was trying to understand your original point was about creating value. Wouldn't you agree that low rates have helped innovative companies get funding, accelerating technology and creating value? The flip side of course is zombie companies get propped up resulting in inefficient capital/resource allocation if rates get too low. Rest of world can learn from Japan - don't go negative.
