Dollar

Extinction? 

US Treasury Posts Gigantic $1.16 Trillion Shortfall in Fiscal 2017, Hilariously Points out “Where We Are Headed”

by Wolf Richter • Feb 19, 2018 

Just add tax cuts and ballooning expenditures. The media chose to silence the report to death. 

 “Where We Are Headed”That $1.156 trillion in Net Operating Cost occurred in fiscal 2017. But these are the good times, the boom years, if you will, when shortfalls should shrink into oblivion. So what will happen to the shortfall when the economy slows down or goes into a recession? That was a rhetorical question.

 Is the Fed trying to send a message to Congress about all this? The chorus for four rate hikes is getting louder. But no one will be ready for those mortgage rates.

DYI:  U.S. interest rates as measured by DYI’s proxy the 10 year Treasury bond is currently at 2.88% below the long term average of 4.57%.  If rates normalize [4.57%] interest expense will explode by 60% moving  interest costs on Treasury Securities held by the public from 6% to 10%.

Add on a nasty recession our budget deficits will soar adding further to our national debt.  Of course during a severe downturn Treasury rates will drop precipitously holding off the run up of interest cost held by the public.  Once that recession plays itself out we are once again back to leaping interest costs as rates eventually normalize.

I don’t know where the tipping point where confidence is lost; my best guess when 25% of the Fed’s budget is chewed up by interest costs the dollar will accelerate its loss of purchasing power as dollar holders seek alternatives.

DYI