Episode 242 - US Monetary Outlook

Today the gang's all here, gathered around the fireplace, eating metaphorical marshmallows as papa Karim, our resident economist, busts out the spit facts. We're going over the current economic state of the US, monetary strategies, how they affect economies and trade between them, and much, much more. So, grab a stick, poke a marshmallow and relax while Karim gets them FACTS into your brain.

The U.S. Treasury Will Borrow A Record $3 Trillion This Quarter As Stimulus Spending Soars

• Over last two months Congress has authorized more than $3 Trillion in emergency stimulus
• In order to come up with that cash the Treasury will have to issue record breaking amount of debt
• Last quarter, the Treasury borrowed about $500 billion, and it plans to borrow another $677 billion in the third quarter.
• relatively cheap to borrow with record low interest rates (10 year note yielding about 0.6%)
• The Treasury’s numbers only account for legislation that has been passed to date. Another stimulus package is in the works

US Debt big picture

• $25 Trillion threshold crossed, $7 trillion in the last 5 years
• According to data from the US Treasury growth is
• $1.2 million per minute
• $1.7+ billion per day

National Debt Clock

• Every 15 secs our tax revenue is falling by like 100k
• Debt per citizen $75,600
• Per Tax payer though that’s $200,000
• Currency Creation (M2 Money supply) +$100,000 every few seconds

Who owns that debt?

• Majority of US debt owned by Americans (investors, fed, banks).
• 30% owned by foreign entities
• China and Japan more than 1 Trillion each

Debt to GDP

• 2019 -publicly held federal debt was almost 80% percent, $17 trillion
• According to CBO estimates then, debt was already rising faster than the economy and was projected to reach 98% by 2030
• now at 107% and projected to 108% by 2021, our record was 106% year after WWIIAnother chart shows Gross debt to GDP after WWII at around 118%
• Checked again this morning on Nat debt clock, looks like we broke this barrier as of 5/21 119.08%

Saw this back of envelope simplifications 35m to 1 reduction

US as household

• Income - 100k p/yr
• Debt - $714k
• Unfunded liabilities (medicare,SS,VA) - $4.2m

International perspective

• 06-18

FWIW Trump said if he gets re-elected he’ll wipe the debt =) he said that last time too and it was +5Trillion going into this (last time we cleared the debt was Andrew Jackson 1835)

Interesting quote though to keep this in perspective -

“If the Fed didn’t take these and other emergency measures, “the system already would have blown up,The markets would have crashed 10 times over.” - Tim Duy University of Oregon (Economist, US Treasury)

Modern Monetary Theory, I