I grew up in a conservative political home.

My parents met as members of an organization in the early 1960s called Young Americans for Freedom. They went on to have careers in politics and government service.

The high point of his political life was the Reagan administration of the 1980s…the culmination of decades of efforts to put a “true” conservative in the White House.

The core beliefs that defined his version of conservatism included anti-communism, the right to life of the unborn, and a limited role for government.

Those were long-term goals. The subject that dominated his daily political activities – and our table discussions, as I recall – was the fiscal policy of the federal government… above all, the debt.

Given the behavior of Republicans in Congress in recent months, it is clear that the conservatism of my parents has disappeared. The combination of unfunded tax cuts and last week’s budget deal to end the deficit makes them very worried.

It should worry you too…in fact, our irresponsible representatives in Washington are creating a perfect economic storm.

Just when things looked better

Thanks to our representatives in Washington, we face a future of higher interest rates, a falling dollar, and falling stock prices.

Over the past six weeks, Congress has added trillions of dollars to future federal budget deficits.

The Tax Cuts and Jobs Act passed in late December added an estimated $1.5 trillion to the 10-year deficit projections. Last week, Congress and President Donald Trump added another $300 billion to that figure with a budget deal that lasts through 2019.

The nonpartisan Committee for a Responsible Federal Budget forecasts that the federal deficit could hit $1.2 trillion next year.

The Congressional Budget Office forecasts a doubling of federal deficits as a percentage of gross domestic product (GDP) in the coming years, reaching between 7% and 8% in some estimates.

Long-term data suggests that a 1% increase in the debt-to-GDP ratio corresponds to a 3-5 basis point increase in the 10-year Treasury yield.

How can we be sure of this? After all, the government has run deficits for the last decade and we haven’t seen a rise in bond yields, have we? What is different now?

The answer is something central bank mandarins blithely call “extraordinary monetary policy.”

Following the financial crash of 2008, the world’s major central banks stepped in to buy US Treasuries and other government debt as part of a deliberate strategy to keep interest rates low. The Federal Reserve, the Bank of Japan, and the European Central Bank now hold more than $14 trillion worth of securities in their portfolios.

But the Fed has largely stopped buying those securities. At the end of last year, he began the so-called “orderly liquidation” of his Treasury position.

Therefore, unless another source of demand for Treasuries emerges, the influx of new supplies of Treasury bills to finance rising deficits will create a buyer’s market. That will drive down Treasury prices and push up yields.

Projections suggest that the Treasury Department will sell more than $1 trillion of debt in 2018 alone.

E-That’s not all, friends

Washington’s fiscal irresponsibility will affect the economy in other ways as well.

The President continually reminds us that the American economy is in growth mode. Employment is increasing and so are wages.

In that context, a massive economic stimulus in the form of deficit spending, larger even than the 2009 emergency stimulus package, will quickly turn growth into inflation. Inflation will lead to higher bond yields as Treasury buyers factor it into their future yields.

Those higher interest rates will force the government to funnel more of its funds into ever-increasing interest payments. That will leave the economy with a smaller share of federal spending, which will depress growth.

Complicated things are a weakening dollar. The dollar has weakened drastically, losing around 10% of its value in 2017.

The combination of a weaker dollar and higher US deficits will attract foreign investors looking to add to their Treasury holdings. Those buyers will want higher yields to offset inflation and the risk of higher US debt. That will drive down bond prices even further… driving up US government interest payments even higher.

Ultimately, rising bond yields and inflation will reduce the future value of anticipated corporate earnings and stock dividends. Lower future income streams mean lower stock prices. In that way, US government deficits will deflate the US stock market.

Give me that conservatism of yesteryear

Vice President Dick Cheney famously said that the Reagan presidency proved that “deficits don’t matter.”

But he was talking politics: Voters of the day simply didn’t punish Republicans for running deficits.

Reagan-era US government deficits were the largest since World War II, barring the immediate aftermath of the 2008 crash.

But the current crop of Republicans who claim to worship Reagan are on their way to creating the biggest deficits this country has ever seen. In the eight years since they gained control of the House, the national debt has ballooned from $13.5 trillion to $20.4 trillion today.

This is the future they are creating: rising inflation. A stock market in decline. Oh, and another thing… your taxes will inevitably have to go up to pay for it.

President Trump calls himself the “king of debt.” His runners-up in Congress certainly seem to agree.


천골의 긴장을 완화하는 데 마사지가 도움이 될 수 있습니까?

데 마사지가 도움이 될 수 있습니까 환자가 천골의 긴장을 가지고 마사지 테이블에 올 때, 그 부위 주변의 근육을 풀어 불편함을 완화시키는 것이 세션의 목표입니다. 또한 치료사는 SI 관절이 자연스러운 정렬을 유지하도록 돕기 위해 골반과 척추를 움직이는 근육의 균형을 맞추기 위해 노력할 수 있습니다. 천장관절(SI) 관절은…

휴대폰의 진화 – 기술 여정

기술 여정 비대면 전화 기술은 적외선 신호를 사용하여 Motorola DynaTAC에서 다른 단말기로 첫 번째 통화가 이루어진 이후 많은 발전을 이루었습니다. 한 휴대폰에서 다른 휴대폰으로, 심지어 자동차에서도 통신할 수 있는 능력은 이제 당연한 것으로 여겨지지만, 실제로 이러한 기능을 차별화하는 것은 스마트폰에서 액세스할 수 있는 애플리케이션입니다. 피트니스…

Leave a Reply

Your email address will not be published. Required fields are marked *