Well, well, well what do we have here? After about a decade of sleeping on the job, an economist at Goldman has awoken from his slumber to report that the US is flat broke, getting broker, and there’s nothing that can be done about it.
According to forecasts from bank’s chief economist, the federal deficit will increase from $825 billion (or 4.1 percent of gross domestic product) to $1,250 (5.5 percent of GDP) by 2021. And by 2028, the bank expects the number to balloon to $2.05 trillion (7 percent of GDP).
“An expanding deficit and debt level is likely to put upward pressure on interest rates, expanding the deficit further,” Jan Hatzius – Goldman’s top economist – wrote Sunday. “While we do not believe that the U.S. faces a risk to its ability to borrow or repay, the rising debt level could nevertheless have three consequences long before debt sustainability becomes a major obstacle.”
Economic growth should jump above 3 percent in 2018 thanks to the stimuli, the CBO said, but the acceleration will likely prove brief and debt held by the public soaring to $28.7 trillion by the end of fiscal 2028.
That could create a precarious situation for Congress if the economy faces an economic downturn in the near term, Hatzius wrote, hampering legislators’ ability provide additional fiscal stimulus in times of economic downturn.
“Lawmakers might hesitate to approve fiscal stimulus in the next downturn in light of the already substantial budget deficit,” the economist said. “While we would expect some additional loosening of fiscal policy during the next downturn, there is a good chance in our view that it would be less aggressive than it was in the last few recessions.”
“The current fiscal expansion … must at some point give way not just to a neutral stance, which we expect by 2020, but to a tightening of fiscal policy that could restrict growth,” Hatzius wrote.
The great lie that Goldman and other banks like it are pushing now is that high deficits is forcing rates higher. In a natural world, this might be true. But in our world where the dollar is currency reserve and the banks make up the rules as they go along, this is entirely artificial. There isn’t any tangible inflation, as evidenced by the CPI. So why in the fuck is the Fed raising rates? The only outcome this is guaranteeing, given the fiscal deficit and Congressional inability to manage a budget, is a collapse.
If we cannot extricate ourselves from a fiscal deficit during the good times, what in the fuck will happen during contraction?
Short term, enjoy the rallies and the perversion of GAAP accounting, because long term our fate is secured and we’re all fucked.If you enjoy the content at iBankCoin, please follow us on Twitter