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zugzwang

Us Deficit Shrinking? Nope. Up $1.1Tn In Fiscal 2014!

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The septic tanks enjoy some Osborne-style austerity.

http://wolfstreet.com/2014/10/05/dwindling-deficit-ha-us-government-debt-jumps-by-1-1-trillion-in-fiscal-2014/

When it comes to the Federal deficit, reliable numbers are as elusive as unicorns. Not that there aren’t plenty of numbers out there, but they don’t match reality. And reality is ultimately the change in the gross national debt which shows in its unvarnished manner just how much money the federal government actually had to borrow to fill the fiscal holes.

Regardless of what has been proffered by the White House, the Congressional Budget Office, and others, the total gross national debt outstanding of the US of A hit $17.824 trillion in fiscal 2014 ended September 30. A jump for the fiscal year of $1.086 trillion.

It could have been worse: note how it jumped on October 1, the first day of fiscal 2015, by another $51 billion. That’s certainly one elegant way of putting some lipstick on the debt in fiscal 2014 – by kicking part of it into the next fiscal year. But hey, we all do that. From the Treasury Department:

US-gross-national-debt-jumps-51billion-1

The fact that the total debt taxpayers will have to deal with in the future soared by $1.1 trillion in fiscal 2014 is in part due to last year’s debt ceiling charade in Congress.

Starting in March 2013, when Treasury debt outstanding hit the debt ceiling, the Treasury Department couldn’t sell additional debt to bring in the money that the government continued to spend. So it borrowed that money via “extraordinary measures” from other accounts, to be repaid later. Then on October 16 last year, so in fiscal 2014, President Obama signed a deal into law that avoided default. The next day, the gross national debt jumped $328 billion to $17.075 trillion.

Most of the $328 billion should have fallen into fiscal 2013. If subtracted from the $1.086 trillion by which the debt ballooned in fiscal 2014, it reduces the increase in the debt to $758 billion.

The chart below summarizes the glorious fiscal condition of the US over the years. Note the exponential increase since 2001, after four fiscal years of so-called “surpluses.” In quotes because these “surpluses” between 1998 and 2001 that at one point exceeded 2% of GDP should have brought down the gross national debt by the amounts of the surpluses. But not these “surpluses!” The debt increased in every one of those four years, in total by $394 billion. That’s how much real money it took to cover these government accounting “surpluses.”

Since 2002, the US government borrowed $12 trillion, or two-thirds of the total debt outstanding! Since 2008, the government borrowed $8.8 trillion, or about half of the total debt outstanding, at an average rate of $1.26 trillion per year. Come to think of it, not all that much as changed in fiscal 2014!

US-Gross-National-Debt-1972-2014.png

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Pah. A trillion here and a trillion there, who cares. Give it another 10 years and some politician might actually notice.

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Pah. A trillion here and a trillion there, who cares. Give it another 10 years and some politician might actually notice.

I think economists have suddenly taken a reality check and fear is gripping the Markets.

It wasn't meant to play out like this, the Western economies have just exited the trough and economic theory contended that maximum escape velocity always follows.

The backward looking GDP figures, indeed, look healthy enough...except on the continent, of course.

But going forward we now have real austerity (in order to close structural deficits) and a clamp on private lending. Forward forecasts of -8% London housing market and -1% for the provisional market ( that haven't even regained 2007 peak) aren't exactly compatible with growth. Neither is the real public sector austerity we face.

Debt deflation and misery here we come.

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the kickstarter is getting very tired in his leg. Kick, kick, kick, kick...

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That's almost an exponential curve.

There's only two kinds of people who believe exponential growth can go on forever, madmen and economists.

Most nominal charts look like that. It's why debt charts are rarely posted with a log scale by those wanting to suggest a scary outcome.

100% increase today looks far greater than a 100% increase 30 years ago.

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I think economists have suddenly taken a reality check and fear is gripping the Markets.

It wasn't meant to play out like this, the Western economies have just exited the trough and economic theory contended that maximum escape velocity always follows.

The backward looking GDP figures, indeed, look healthy enough...except on the continent, of course.

But going forward we now have real austerity (in order to close structural deficits) and a clamp on private lending. Forward forecasts of -8% London housing market and -1% for the provisional market ( that haven't even regained 2007 peak) aren't exactly compatible with growth. Neither is the real public sector austerity we face.

Debt deflation and misery here we come.

By economic theory you mean the utterly discredited Keynesian/Neoclassical general equilibrium orthodoxy. You might just as well try to fly to the Moon in rocket made of rice paper and bamboo.

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Most nominal charts look like that. It's why debt charts are rarely posted with a log scale by those wanting to suggest a scary outcome.

100% increase today looks far greater than a 100% increase 30 years ago.

Yep in 30 years time we'll look back at the good old days when the debt only went up by $1.1tr dollars a year. When in 2044 the yearly increase is $100tr a year.

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Yep in 30 years time we'll look back at the good old days when the debt only went up by $1.1tr dollars a year. When in 2044 the yearly increase is $100tr a year.

Of course yep, and people will STILL be posting nominal debt charts with scary headlines. Perhaps alongside scary nominal SDR charts, and/or scary nominal Yuan charts, and Daily Wail articles saying by 2065 house prices will be £1bn!! and (son of) Errol saying he hopes gold will fall to $10,000 an ounce so he can back up the truck

Edited by R K

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http://www.debt.org/blog/united-states-federal-debt-timeline/

Shortly after the American Revolutionary War (1775-1783), public debt grew to more than $75 million and continued to swell considerably over the next four decades to nearly $120 million. However, President Andrew Jackson shrank that debt to zero in 1835.

..

The Civil War (1861-1865) alone is estimated to have cost $5.2 billion when it ended and government debt skyrocketed from $65 million to $2.6 billion. Post-Civil War inflation along with economic disturbance from Europe’s financial struggles contributed to the vulnerable economic climate of the late 19th century.

.

President Franklin D. Roosevelt developed programs for unemployment pay and social security pensions, along with providing assistance to labor unions. Although Roosevelt addressed many problems in the U.S. economy, the funding for his programs grew the national debt to $33 billion.

World War II Debt

During World War II (1939 to 1945), the U.S. lent Britain and other countries money to help pay for military costs, and spent a great deal for their own military. By the end of that war, U.S. debt reached $285 billion.

..

At the start of the 1980s, an increase in defense spending and substantial tax cuts continued to balloon the federal debt. The national debt at the end of the Ronald Reagan era was $2.7 trillion.

The era under President Bill Clinton was marked with tax increases, reductions in defense spending and an economic boom that reduced the growth of debt, but it still reached a staggering $5.6 trillion by 2000.

..

President George W. Bush passed the Troubled Asset Relief Program in 2008 to help the economy recover. That program cost around $700 billion. President Barack Obama later passed the American Recovery and Reinvestment Act of 2009, costing around $831 billion.

By the end of 2009, the federal debt had grown to $12.3 trillion.

Today’s National Debt

June figures show the national debt at $16.7 trillion.

Only nominal so it doesn't matter, especially when you can print more.

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If they hadn't outsourced expansion of the money supply to the private banking sector they could have just printed more and had no debt whatsoever.

Where would China have got their money supply from?

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Most nominal charts look like that. It's why debt charts are rarely posted with a log scale by those wanting to suggest a scary outcome.

100% increase today looks far greater than a 100% increase 30 years ago.

An excellent point if debts could be paid back in logarithmic amounts of a currency.Unfortunately,last time I checked,creditors prefer to take nominal denominations of GBP/USD.

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How do we reconcile the increase in the amount of outstanding Treasuries of $1.1 trillion with the reported deficit of a bit under $700 billion?

http://money.cnn.com/2013/10/30/news/economy/deficit-2013-treasury/

This extract (from the OP article) explains most of the difference.

Starting in March 2013, when Treasury debt outstanding hit the debt ceiling, the Treasury Department couldn’t sell additional debt to bring in the money that the government continued to spend. So it borrowed that money via “extraordinary measures” from other accounts, to be repaid later. Then on October 16 last year, so in fiscal 2014, President Obama signed a deal into law that avoided default. The next day, the gross national debt jumped $328 billion to $17.075 trillion. Most of the $328 billion should have fallen into fiscal 2013. If subtracted from the $1.086 trillion by which the debt ballooned in fiscal 2014, it reduces the increase in the debt to $758 billion

Edited by oldsport

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This extract (from the OP article) explains most of the difference.

You are right. The difference is still $80 billion or so which is about 12% of the reported deficit.

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:lol: Well clearly they could have just done the same!

? They have a closed capital a/c. They issue renminbi against accumulated dollar debt reserves. That's how they've entered the global economy and grown their domestic economy.

We're back to Kindleberger's benevolent hegemon and the Triffin Dilemma (even ignoring the fact that debt = savings domestically too)

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? They have a closed capital a/c. They issue renminbi against accumulated dollar debt reserves. That's how they've entered the global economy and grown their domestic economy.

We're back to Kindleberger's benevolent hegemon and the Triffin Dilemma (even ignoring the fact that debt = savings domestically too)

Can you walk me thought this whole debt = savings thing please?

I can see that one needs savings to buy government debt but I think that a debt free government would result in people investing in more productive assets than government debt.

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? They have a closed capital a/c. They issue renminbi against accumulated dollar debt reserves. That's how they've entered the global economy and grown their domestic economy.

We're back to Kindleberger's benevolent hegemon and the Triffin Dilemma (even ignoring the fact that debt = savings domestically too)

They choose to do that. Clearly they could choose to do otherwise.

Credit creates deposits which create further credit and further deposits, ex nihilo de novo. Rinse and repeat and debt quickly exceeds total income and so, as savings are simply a portion of income not yet consumed, far exceeds savings.

Edited by Neverwhere

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They choose to do that. Clearly they could choose to do otherwise.

Credit creates deposits which create further credit and further deposits, ex nihilo de novo. Rinse and repeat and debt quickly exceeds total income and so, as savings are simply a portion of income not yet consumed, far exceeds savings.

? If China chose to do otherwise US wouldnt need to print so much dollar debt would it, and China wouldnt be creating c/a surpluses/US wouldnt be creating trade deficits.

2nd para - youre confusing private & govt. debt.

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They choose to do that. Clearly they could choose to do otherwise.

Credit creates deposits which create further credit and further deposits, ex nihilo de novo. Rinse and repeat and debt quickly exceeds total income and so, as savings are simply a portion of income not yet consumed, far exceeds savings.

Credit and deposits are not money.

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