fiscal stimulus – The Burning Platform

The driving catalyst behind the furious market rally since the presidential election has been the market’s hope that Trump will unleash a “huge”, still undetermined, debt-funded financial stimulus package, which will grease the volatile handover from monetary to fiscal policy, boosting inflation and rerating risk assets higher. Indeed, the market was so transfixed by this hope, that it has so far ignored all warning signs, duly noted previously on this website.

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Nearly a month ago, we warned that when comparing Trump’s proposed budget and the House’s own budget blueprint, “An Unexpected $12 Trillion Hole Emerges In Donald Trump’s Plan To “Make America Great Again“.”

As we first demonstrated, there was a massive $12 trillion debt difference between the plan that Trump espoused, which envisioned a $5 trillion cumulative increase in debt…

Debt Under Central Estimate of Candidates’ Proposals (Percent of GDP)

Continue reading “The Narrative Changes: Republicans “Pour Cold Water” On Trump’s Massive Stimulus, Will Block Tax Cuts”

by Tyler Durden

Aug 7, 2016 9:38 AM

Even as policy wonks are calling for the U.S. federal government to turn away from monetary policy and “austerity”, Treasury debt outstanding has already seen massive annual increases since 2007, and not just in the US but around the entire world, Bloomberg market strategist Chris Maloney writes.

Which brings us to this week’s report on the U.S. federal government’s monthly budget statement. As Maloney puts it, “for eight-plus years now the U.S. federal government’s fiscal policy has been one of unprecedented deficit spending, pushing total debt to $15.3t from $6.1t (a 153% increase); this excludes ~$5.1t intra-govt debt holdings.”

Yet GDP since the end of Jan. 2008-June 2009 recession has averaged just 2.1%, below the 2.7% average seen from 2000-2007 while the last five quarters have seen a steady drop from 3.3% to 1.2%.

Meanwhile, debt has continued its relentless rise higher, pushing the ratio of US government debt/GDP to an all time post World War II high of 105%.