In obscure economic news, the death economy really boomed in 2021 for some reason

 

Inflation remains very, very profitable for corporations and federal government spendthrifts, at your expense

 

German court rules emergency spending on climate change is unlawful, coalition government forced to freeze outlays under debt brake rules

Story here.

Freeze.

Lolz.

US House Democrat minority leader Hakeem Jeffries crows over passage of more of the same old, same old bloated spending by continuing resolution

Looking forward to a Moody's downgrade, if they've got the guts. Congress certainly doesn't.

 

Senate sends funding bill to Biden’s desk, averting a government shutdown :

WASHINGTON — The Senate passed a stopgap funding bill Wednesday night, punting the GOP’s spending fight and the threat of a government shutdown until after the holidays.

The bipartisan vote was 87-11, with 10 Republicans and one Democrat — Sen. Michael Bennet of Colorado — voting against the bill. ...

The short-term bill, known as a continuing resolution, or CR, cleared the House on Tuesday on a lopsided 336-95 vote, with all but two of the no votes coming from Republicans. The funding bill next heads to President Joe Biden’s desk for his expected signature. ...

“No spending cuts, no right-wing extreme policy changes, no government shutdown, no votes tomorrow, Happy Thanksgiving,” he said. “That is a type of report that, when you are able to give it, means morale is very high.”

Government does this every single day, I don't see what the problem is

 Many Are Spending More Than They Earn, Dimming Financial Outlook

US Treasury yields making new highs for this cycle as of Oct 19, 2023

Massive Treasury issuance to pay for massive pandemic spending has driven yields higher.

 

It's the law of supply and demand: Increase the supply of US Treasury debt and the price goes down.

 

Previously issued securities paying lower interest rates drop in price because they are much more plentiful in comparison with the new issues paying higher rates which investors demand.

 

Who wants 'em?

 

Banks are estimated to be stuck with these dogs in quantities approaching what the Fed has let roll off, which is what they also must do. The collateral backing banks, insurance companies, pension funds, et cetera et cetera et cetera, suffers.  

The Federal Reserve Bank's role as a big buyer in the bond market has been curtailed since 2Q2022, removing its big price support role. As of 3Q2023 the balance sheet is down $768 billion as securities mature. That's about $51 billion rolling off per month, and no net buying to replace it.

 

The Fed has also raised the Federal Funds Rate to an average of 5.33 to combat inflation.

 

So yields have risen for such reasons to these records for this cycle to date, but it's all predicated on the US Treasury having to dilute the supply:

 

1MO 6.02 5/26/23 (debt ceiling disagreement)

3MO 5.63 10/6/23

6MO 5.61 8/25/23

1Y    5.49  9/27/23

 

2Y 5.19 10/17/23

3Y 5.03 10/18/23

5Y 4.95 10/19/23

7Y 5.00 10/19/23

10Y 4.98 10/19/23

 

20Y 5.30 10/19/23

30Y 5.11 10/19/23.

In the aggregate as of Oct 20 yields are up a net 22% year over year to an average of 5.25692 from 4.30846 when all the wizards of smart said they couldn't possibly go any higher without breaking something.

They're still saying that.

 

US pandemic debt orgy described as fiscal slippage lol

It's so indicative of our degeneracy how economic profligacy must not be described that way in this day and age where anything and everything is great, awesome, and epic but that.

Oh well, at least they still pay a modicum of respect with huge, swelled, and deluge.

If only all that cash were a tsunami, inundating the shore with ruinous inflation.

 

 

 

CNBC, here:

. . . investors are also pricing in surprising economic resilience alongside fiscal slippage.

 The U.S. federal government ended its fiscal year in September with a fiscal deficit of almost $1.7 trillion, the Treasury Department announced on Friday, adding to a huge national debt totaling $33.6 trillion. The country’s debt has swelled by more than $10 trillion since the onset of the Covid-19 pandemic in the first quarter of 2020, prompting a deluge of fiscal stimulus to help prop up the economy.

US House passes 45-day government funding bill 335-91 minus Ukraine aid

 The House measure would fund government at current 2023 levels for 45 days, through Nov. 17, setting up another potential crisis if they fail to more fully fund government by then. The package was approved by the House 335-91, with most Republicans and almost all Democrats supporting.

More.

The three year and five month embarrassment of core inflation higher than the 10-year Treasury yield finally ended in August

 Yield for the 10-year US Treasury rose to an average 4.17% in August 2023 while core inflation year over year fell to 3.87% in August 2023.

This ends the 3-year 5-month run where core inflation exceeded the 10-year yield, something which has never happened in the data.

The only time core inflation outran the 10-year previously for a comparable period was in 1974 and 1975 when core inflation averaged 7.91% and 8.35% vs. the 10-year yield which averaged 7.56% and 7.99% respectively.

That lackadaisical response to inflation by the Federal Reserve under Arthur F. Burns (1970-1978) prefigured the 1980 resurgence of core inflation to 9.19%. Under his successor Paul Volcker, interest rates were hiked to unprecedented levels to curb inflation. The 10-year yield rose to an average of 13.92% in 1981 as a result.

The current fear is that the Powell Fed has set up the economy for a repeat of this awful period of inflation.

Whatever is said about it, there is no question that inflation is a benefit to the Federal government because it depends on borrowing to finance deficit spending and consequently the debt, now at an unprecedented $33 trillion. Inflation simply reduces that cost to the government over time by making the dollars previously borrowed worth less.

It is true that new borrowing costs much more, but the debt mountain mammoth in the living room is the more pressing problem. This is why the cognoscenti teach that inflation is a good thing.

Extending the duration of inflation at the currently relatively low level has been in the government's interest. The costs born by the public in the form of higher prices for goods, services, and borrowing are becoming routinized so that the voters are becoming inured to the deleterious effects for them while clueless of the benefits for the debt mongers. 

This is particularly the case for voters who have no memory of that horrible inflation which gave rise to the backlash represented by Ronald Reagan's election in 1980, and who now vastly outnumber those who still remember.

It should not be forgotten that Jimmy Carter got elected in 1976 anyway, after the Burns' inflation. The voters then took it all in stride, too, until they didn't.

Same as it ever was.

 

It turns out that former S&P Sovereign Ratings Committee Chair John B. Chambers, who presided over the AAA downgrade in 2011, is a partisan wackadoodle

 Here commenting about today:

“The external position is about the same, but I think the governance has weakened and the fractiousness of the political settings is much worse, and that has led to government shutdowns, it’s led to fears that the government might default on its debt because of the debt ceiling, and it’s led to a failed coup d’état on the 6th [of] January, 2021.”

And here a couple years ago:

"I don’t think the chance of a default because of a debt ceiling is that high as long as the Democrats control both Congress and the White House, that won’t always been the case. That could reemerge."

 Because, this:

The Wall Street bean counter who trashed America’s global credit reputation is a New Yorker who never studied economics, majored in literature and philosophy, and has a master’s in English lit. ...

Chambers grew up outside Kansas City, Kan., and went to liberal Grinnell College in Iowa, where he was a star on the swim team, ranking eighth in school history in the 1,000-meter freestyle. After graduating in 1977 with a bachelor of arts in literature and philosophy, he went Ivy League, enrolling at Columbia University, where he got a master’s degree in English literature.  ...

S&P was found to have made an estimated $2 trillion error in its 10-year deficit projection but brushed that aside, citing instability in Washington and the fact that the deficit-reduction cuts fell short of S&P’s recommended $4 trillion.

Chris Christie credits Fed interest rate policy for denting government-spending-induced inflation but misses the role of collapsing energy prices

 Chris Christie is a smart guy with many of the right ideas about government spending, taxes, inflation, energy, and the environment.

But it's a real stretch to think that the timid interest rate increases of the Fed are responsible for this year's so-far moderating inflation indicators when it's falling energy prices since the winter which deserve the real credit. Christie himself admits that outrageous government spending hasn't been curbed at all.

His is a simple binary view which, while conventional and correct as far as it goes, doesn't get to the heart of the current matter. 

Low energy prices have always been and remain key to a successful economy, and it was the spike in natural gas cost inputs because of the Russia-Ukraine war which accelerated inflation globally, not just in the US.

Fed chair Jerome Powell was correct in June of 2021 to believe that inflation would be transitory for "weak supply" reasons, but the Fed rate increases didn't actually commence until the start of the war in Ukraine, which compounded those reasons with the cutoff of European natural gas supplies.

But since the winter the natural gas price is down 73% from peak, coal is down 70%, and gasoline is down too, but a comparatively modest 24%. 

Americans consumed in 2022 the energy equivalent of 26.9 billion kWh/day of natural gas, 13 billion kWh/day of gasoline, and 7.9 billion kWh/day of coal.

Natural gas is twice as important as gasoline in the overall American energy picture, primarily for heating, and as a substitute for coal in electricity generation.

Natural gas produced 4.6 billion kWh/day of electricity in 2022, the top source of electricity, vs. coal at 2.3 billion kWh/day and nuclear at 2.1 billion kWh/day.

Chris Christie is right though. We must "uncap" US oil and gas production and be energy independent.

Europe's natural gas storage, by the way, is presently 93% full as the war in Ukraine drags on. They are ready.

The US used 88.5 billion cubic feet of natural gas per day in 2022. We presently have about 35 days in storage.

Crude oil consumption in 2022 was about 20.3 million barrels per day. The Strategic Petroleum Reserve is down to about 17 days of supply, from about 35 in 2011.

 

Watch CNBC’s full interview with GOP Presidential Candidate Chris Christie

Christie lets Fed off the hook for inflation, blames Trump and Biden for overspending

 

 

The US debt downgrades of 2011 and 2023 have one thing in common: Nancy Pelosi's record of the four most fiscally irresponsible years in the post-war

Nancy Pelosi owns the record for the four most fiscally irresponsible years in the post-war, spending 316% of tax receipts in 2020, 276% in 2021, 310% in 2009, and 296% in 2010.

Her four years as Speaker 2007-2010 averaged current expenditures as a percent of current tax receipts of 251%, highest for any Speaker ever.

S&P downgraded the debt in August 2011.

The Boehner/Ryan interregnum averaged 219%.

Pelosi's next four years as Speaker 2019-2022 averaged 252% in overspending.

Fitch has now downgraded the debt in August 2023.

Taken all together, Pelosi's Speakership produced the worst overspending in the post-war at 251% of revenues. The excess has to be borrowed, ballooning the debt.

The ratings agencies sound the alarm bells no one else will ring, but they are mocked by all the experts, whose livelihoods depend on the scam continuing. 

 All Bills for raising Revenue shall originate in the House of Representatives; but the Senate may propose or concur with Amendments as on other Bills.     

-- US Constitution, Article One, Section Seven

 

The national debt is up $1.06 trillion since May 31, 2023

 To $32.518 trillion on July 12th.

It was $23.171 trillion on January 2, 2020, $9.347 trillion ago.

InflAtIOn Is sO OvEr.

Congress went on a spending orgy since 2019 adding $8.77 trillion to the national debt and dimwits blame the Fed for being unable to control inflation

 Inflation is always and everywhere a monetary phenomenon. Blame yourselves. You elected them.

 

The chief penalty is to be governed by someone worse if a man will not himself hold office and rule.

-- Plato, Republic, I, 346f.

The national debt is up $457 billion since May 31st

 

Debt ceiling compromise clears the US Senate 63-36, Republican Senators extract pledge from Chucky Schumer for more defense spending which amounts to a pig in a poke so 31 vote against it anyway

Hello, all spending bills must originate in the House.

Some Senate Republicans are pretending you don't know that.

What a joke.

 CNBC:

Majority Leader Chuck Schumer spent much of the day Thursday hammering out an agreement with a group of Senate Republicans who demanded that he pledge to support a supplemental defense funding bill before they would agree to fast-track the debt ceiling bill.

The current House debt ceiling bill provided $886 billion in defense spending for fiscal year 2024, an increase of 3% year over year. That figure rose to $895 billion in 2025, an increase of 1%.

But GOP Sen. Susan Collins of Maine called this “woefully inadequate” Thursday, arguing that a 1% increase did not keep pace with inflation, so in practical terms, it was actually a decrease in military funding. The solution came in the form of a rare joint statement from Schumer and Senate Minority Leader Mitch McConnell, R-Ky., which was read on the floor.

“This debt ceiling deal does nothing to limit the Senate’s ability to appropriate emergency supplemental funds to ensure our military capabilities are sufficient to deter China, Russia and our other adversaries and respond to ongoing and growing national security threats,” Schumer read. “Nor does this debt ceiling limit the Senate’s ability to appropriate emergency supplemental funds and respond to various national issues, such as disaster relief, combating the fentanyl crisis or other issues of national importance,” said Schumer.

The Hill:

The normally slow-moving chamber raced through a dozen votes in just over three hours. ...

A total of 31 Republicans voted against the measure ...

Just four Democrats voted against the measure: Sens. John Fetterman (Pa.), Ed Markey (Mass.), Jeff Merkley (Ore.), Elizabeth Warren (Mass.), along with Bernie Sanders (I-Vt.). ...

The legislation would provide $886 billion for defense, which negotiators described as a 3 percent increase, and $637 billion for non-defense programs, according to a White House summary. ...

Senate Republican Whip John Thune (S.D.) said McCarthy didn’t sign off on the agreement between Senate leaders and defense-minded GOP senators. ...

Asked how confident he is about a defense supplemental spending bill passing later in the year, Thune said, “hard to say.” 

“It was important for some of our members have folks on the record acknowledging there clearly could be a need, will be a need for our national security interests,” he said.

The US House passed the debt ceiling compromise 314-117 this evening

 

Seventy-one Republicans and 46 Democrats voted against the bill in the House — mostly liberals and conservatives protesting specific provisions of the bill. Their numbers, however, were never a threat to the bill’s passage because of a hodgepodge of moderates and leadership allies who — despite some acknowledging the bill wasn’t exactly what they wanted — threw their support behind the measure. ...

The Congressional Budget Office (CBO) Tuesday estimated that the bipartisan debt limit deal could reduce projected deficits by about $1.5 trillion over the next decade, a meager assessment compared to the roughly $4.8 trillion the nonpartisan scorekeeper said the GOP bill would save. ...

While votes on rules, which govern debate over legislation, typically break along party lines, 29 Republicans broke from the GOP and opposed the rule on Wednesday as a way to boycott the debt limit bill. Shortly before the vote closed — as the bill was poised to be blocked — 52 Democrats threw their support behind the rule, bringing the final vote to 241-187 and allowing the debt limit bill to advance to the floor for a full vote.

More.

Thomas Massie of Kentucky voted for the rule advancing the debt ceiling compromise to the House floor because the compromise contains the Penny Plan and a return to regular order

 The Penny Plan would be triggered in the event 12 appropriations bills are not passed by Jan. 1 annually, automatically reducing spending 1% across the board.

Ending the present bad habit of omnibus spending bills is essential to a return to good governance and represents a good reason to vote for this bill despite its shortcomings.

 

Massie followed through with his statement during Tuesday evening’s vote when he supported the rule. He also told reporters that he plans to vote for the bill when it comes to the floor on Wednesday after announcing it in a closed-door GOP conference meeting minutes earlier.

“It’s because it cuts spending,” Massie told The Hill Tuesday night when discussing his intent to support the bill.

“Nothing I’ve ever voted on has ever cut spending that’s passed that’s become law; this will,” he added.

During Tuesday’s Rules Committee hearing, Massie highlighted a provision in the debt limit bill that incentivizes Congress to pass 12 appropriations bills rather than relying on omnibus measures to fund the government. The provision threatens to cut government spending by one percent across the board if the measures are not approved by Jan. 1.

“There is one way in which I think this bill got better, and it is this 1 percent cut that we’re all agreeing to if we vote for this bill, Republicans and Democrat, come Jan. 1. If we haven’t done our homework, and if the Senate hasn’t done their homework, and if the president hasn’t signed those bills — so everybody is gonna be in this, responsible for the outcome,” Massie said.

More.

The debt ceiling compromise freezes spending in the next fiscal year about $400 billion too high, and does nothing to pay for the $4.9 trillion added to the debt over and above "normal" deficit spending

The Washington Examiner, here:

In exchange for a two-year hike in the federal borrowing limit, the legislation roughly freezes next year's spending at fiscal 2023 levels, followed by a 1% increase in 2025. The legislation also imposes some changes to work requirements for food stamps and will speed the development of energy projects with permitting reform.

Fiscal outlays for 2023 are projected to hit $5.792 trillion. Adjusted for inflation since 2019 that should be more like $5.385 trillion.

 

 

 

Meanwhile, deficit spending since 2019 through fiscal 2023 has added, will add, $8.5 trillion to the debt, which has been the solution to, and the cause of, all our problems.

We are not governed by serious people.

We have the government we deserve.

The lie of the day comes from Reuters via CNBC

... the national debt, which at $31.4 trillion is roughly equal to the annual output of the economy.

 

More.

 

1Q2023 GDP, 2nd estimate: Nominal: $26.4863 trillion.

 

118% is not "roughly equal".

 

And look what has happened to interest payments on the debt, which come out of current revenues. They have gone vertical. At $929 billion annualized, they represent 31.4% of current tax receipts annualized.

 

Everyone minimizing the gravity of this situation is whistling past the graveyard when government social benefits to persons already exceed the tax receipts.

 

This will continue until it can't, and great will be the fall of it.