U.S. Deficit Could Make Next Financial Crisis Even Worse

From Gary Halbert's Weekly Newsletter. Sign up for free at http://forecastsandtrends.com/subscribe.php

Trillion-dollar deficits are coming back to Washington, and this time they could be here to stay. The White House Office of

Management and Budget (OMB) projects that the federal budget deficit will top $1 trillion in FY2019 which began yesterday, up from $666 billion for FY2018.

Unlike the trillion dollar budget deficits that occurred during the Obama administration that were temporary and largely the result of the Great Recession, the Trump deficits are projected to exceed $1 trillion permanently. The Congressional Budget Office (CBO) projects the deficit to hit $1.5 trillion by 2028, and that is probably optimistic.

Thanks to the anticipated rise in interest rates coupled with growing debt, the CBO now projects that annual interest costs alone will hit $915 billion by 2028. “That's roughly triple what they are this year in nominal terms and roughly double when measured as a percentage of GDP," the CBO said.

The Trump deficits are the result of changes in federal spending and revenue that will continue to be in place until some future president and Congress decide to reverse them – that is, to increase taxes and/or cut spending on popular programs.

Not only has there been little appetite to do that, many in Congress and the Trump administration seem to be hell-bent on ignoring the deficit and national debt and increasing spending and reducing revenue (more tax cuts) even further.

In conclusion, our national debt, including “debt held by the public” and “intergovernmental debt,” now totals $21.51 trillion (the chart below is a little dated). With annual budget deficits of $1 trillion or more, the national debt is on-track to balloon to $30-35 trillion over the next decade.

For the record, I don’t believe that will happen. At some point, investors will decide that it’s just too risky to own US Treasuries, and we’ll face another financial crisis that could be much worse than 2008-2009.

Comments

What happened when a Trump Supporter Challenged Me About the Wall

Vicky Alvear Schecter wrote in Medium | Poltics on Dec. 27, 2018 using her headline above. I thought it was pretty well written -- at least she made an attempt to keep her liberal bias out of it -- regardless of a few illogical fallacies.

But she does make an attempt, in an effort to avoid her liberal bias, as she ponders "...in order not to be accused by bias, I explained that I would only use conservative sources to prove my point."

To me, that's bias to start out with that premise. And I believe her premise is that she is against the wall. That's her stance. But she makes some good points, but some are skewed, even though she attempt to take a "conservative" approach, even by citing some "conservative" sources in her footnotes.

Here's the first problem: if she wanted to avoid bias, why not just stick to the the historical facts as written (when you can find them without bias), and not concern oneself with bias. "I must reject that becau…

Weekly wrap for Nov 9

After Thursday and Friday, it might seem the markets are down, but the weekly numbers tell a different story, with the three major indices up for the week. The Nasdaq, with its tech exposure, had the smallest increase. The tech sector is obviously under recent pressure.

IndexNov 2Nov 9+/-%S&P 5002,723.062,781.01+ 57.95+ 2.12%Nasdaq7,356.997,406.90+ 49.91+ 0.67%DOW 3025,270.8325,989.30+ 718.47+ 2.84%
Over the last 12 months, the Dow is up 10.77 percent, the SP 500 up 7.6 percent, and the Nasdaq up 9.7 percent.

The weekly chart of the SPY still indicates a long position in the broader market. (The blue line is the 34-week moving average; the red is the 13-week moving average).

While the U.S. economy still seems to be just fine from most reports, investors seemed to worry about a couple of things on Thursday and Friday: 1) The Eurozone, 2) trade with China, and 3) the Fed and interest rates. Another topic of interest has been oil.

First, it seems that the Fed has really not indicated …

U.S. Top Oil Producer, Thanks to Obama

\ You read that right.

The U.S. is now the largest oil producer in the world, according to the EIA, producing some 15 million BOE per day, surpassing Russia and Saudi Arabia. (Remember back when Jimmy Carter said in 1979 the answer to our energy problems was to wear a warmer sweater...but you probably don't. He actually said this on national TV).

The United States is the top oil-producing country in the world, with an average of 14.86 million b/d, which accounts for 15.3% of the world's production. This is down from 15.12 million b/d in 2015, but it was enough to land the United States in the No. 1 spot, which it has held for the past four years running. (Source: Investopedia.)

Guess who takes credit for it? Granted, this increase in production began in 2012, but only because of private industry and the fact that the price of oil was at nearly all-time highs. And it dipped in 2016 because of Obama's anti-oil policies!

But here he is again:

Former President Barack Obama sure l…

personal economics 101

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