Connect with us

Latest

News

Economy

Goldman Sachs: Fiscal outlook for US ‘is NOT good’

Although the matter of the national deficit has faded from view during the Trump presidency, investors still worry about future effects on the US economy.

Seraphim Hanisch

Published

on

994 Views

Goldman Sachs expressed its concern over the matter of the continuing huge budget overruns the United States Government amasses every year. CNBC reported that Jan Hatzius the chief economist at Goldman, predicted the annual budget deficit rising to over $2 TRILLION by 2018, an amount that is projected to be about seven percent of the Gross Domestic Product (GDP) for that year.

He further noted:

“An expanding deficit and debt level is likely to put upward pressure on interest rates, expanding the deficit further… While we do not believe that the U.S. faces a risk to its ability to borrow or repay, the rising debt level could nevertheless have three consequences long before debt sustainability becomes a major obstacle.”

And what are those three consequences? According to Thomas Franck at CNBC:

  1. Although economic growth should indeed jump above 3 percent in 2018 thanks to the stimuli of the tax cuts passed into law at the end of 2017, the Congressional Budget Office expressed the belief that the acceleration will likely prove brief, and debt held by the public will soar to $28.7 trillion by the end of fiscal 2028.That could create a difficult situation for Congress if the economy faces a downturn in the near future, which would hamper legislators’ ability to provide additional fiscal stimulus.”Lawmakers might hesitate to approve fiscal stimulus in the next downturn in light of the already substantial budget deficit,” the economist said. “While we would expect some additional loosening of fiscal policy during the next downturn, there is a good chance in our view that it would be less aggressive than it was in the last few recessions.”
  2. But even if the debt and deficit levels don’t prevent lawmakers from approving countercyclical fiscal stimulus during the next recession, a political desire to stabilize the debt level would likely arrest growth during the next recovery, the Goldman team explained.”The current fiscal expansion … must at some point give way not just to a neutral stance, which we expect by 2020, but to a tightening of fiscal policy that could restrict growth,” Hatzius wrote.

Finally, the economist explained that regardless of how much longer the current expansion persists, increasing deficits and debts naturally put upward pressure on interest rates, expanding the deficit further.Goldman Sachs estimates that a 1 percentage point increase in the budget deficit raises the 10-year Treasury yield by roughly 20 basis points when the economy is at or beyond full employment, as it appears to be currently.

Surprises are clearly possible in both directions, but we believe the risks are tilted in the direction of larger deficits than projected,” Hatzius concluded. “While we expect Congress will eventually address the widening budget gap, it also seems quite likely to take longer than most market participants might expect.”

One disturbing statistic that Hatzius and Goldman also noted was that the total US debt was likely to rise to an amount equivalent to the actual GDP by 2028. This comes from the Congresssional Budget Office’s (CBO) April 2018 study on the matter. The CBO is widely regarded as a non-partisan “watchdog” that gives accurate and non-politically motivated projections.

The further projection shown below shows how this takes place. Although the budget deficit from year to year does not exhibit a large percentage increase, it is already very large and the trend shows that it will only become larger over time.

Despite the conservative swan song of balancing the budget and lowering taxes, 2017 featured a budget deficit of $665 billion, and 2018 is expected to have an $804 billion deficit (partly due to the $1.3 T “omnibus” spending bill that angered the President, though he signed it so as to strengthen military funding and other matters he thought too important to lose.)

The Congressional Budget Office (CBO) has a slightly more optimistic view than Goldman Sachs does. However that optimism only goes so far as to say the growth in deficits and debt will be a bit slower than Goldman predicts. For example, according to the CBO report, by the time 2028 arrives, if the trends hold, the deficit projection is expected to $1.526 Trillion just for that year alone. This is astronomically high, but it comes in about 25% lower than the $2 Trillion that Goldman predicts for the same year.

At any rate, the total national debt is expected to reach parity with the GDP in that period of time. By 2028, the publicly held debt is expected to be at about 96% of GDP, a percentage level which has not been seen in the USA since WWII.

The general understanding of budget overruns is that these are very bad things. That being said, Goldman does not appear terribly concerned, nor does the CBO. Macroeconomics are sometimes held to follow a different set of rules than the personal-level economics shared in common by most individuals and small to rather large businesses. Further, speculation on the country’s (or the world’s) economic future has been proven over and over to be a very fuzzy science.

However, the notion of a national debt growing to nearly US $30 trillion is not a comforting thought, especially when contrasted with other great powers such as the Russian Federation which holds a rather low debt presently of $1,306 per person. China presently has a debt level of $3,709 per person. The US, as of May 21, 2018 carries a debt load of $64,996 per citizen. 

This is a situation which has not yet been resolved and it does not appear to be sustainable. And at this time, there appears to be no solution offered to fix the problem.

Liked it? Take a second to support The Duran on Patreon!
Advertisement
Click to comment

Leave a Reply

avatar
  Subscribe  
Notify of

Latest

European Court of Justice rules Britain free to revoke Brexit unilaterally

The European Court of Justice (ECJ) ruled that Britain can reverse Article 50.

RT

Published

on

By

Via RT…


The UK is free to unilaterally revoke a notification to depart from the EU, the European Court has ruled. The judicial body said this could be done without changing the terms of London’s membership in the bloc.

The European Court of Justice (ECJ) opined in a document issued on Monday that Britain can reverse Article 50, which stipulates the way a member state leaves the bloc. The potentially important ruling comes only one day before the House of Commons votes on Prime Minister Theresa May’s Brexit deal with the EU.

“When a Member State has notified the European Council of its intention to withdraw from the European Union, as the UK has done, that Member State is free to revoke unilaterally that notification,” the court’s decision reads.

By doing so, the respective state “reflects a sovereign decision to retain its status as a Member State of the European Union.”

That said, this possibility remains in place “as long as a withdrawal agreement concluded between the EU and that Member State has not entered into force.” Another condition is: “If no such agreement has been concluded, for as long as the two-year period from the date of the notification of the intention to withdraw from the EU.”

The case was opened when a cross-party group of British politicians asked the court whether an EU member such as the UK can decide on its own to revoke the withdrawal process. It included Labour MEPs Catherine Stihler and David Martin, Scottish MPs Joanna Cherry Alyn Smith, along with Green MSPs Andy Wightman and Ross Greer.

They argued that unilateral revocation is possible and believe it could provide an opening to an alternative to Brexit, namely holding another popular vote to allow the UK to remain in the EU.

“If the UK chooses to change their minds on Brexit, then revoking Article 50 is an option and the European side should make every effort to welcome the UK back with open arms,” Smith, the SNP member, was quoted by Reuters.

However, May’s environment minister, Michael Gove, a staunch Brexit supporter, denounced the ECJ ruling, insisting the cabinet will not reverse its decision to leave. “We will leave on March 29, [2019]” he said, referring to the date set out in the UK-EU Brexit deal.

In the wake of the landmark vote on the Brexit deal, a group of senior ministers threatened to step down en masse if May does not try to negotiate a better deal in Brussels, according to the Telegraph. The ministers demanded that an alternative deal does not leave the UK trapped within the EU customs union indefinitely.

On Sunday, Will Quince resigned as parliamentary private secretary in the Ministry of Defense, saying in a Telegraph editorial that “I do not want to be explaining to my constituents why Brexit is still not over and we are still obeying EU rules in the early 2020s or beyond.”

Liked it? Take a second to support The Duran on Patreon!
Continue Reading

Latest

Seven Days of Failures for the American Empire

The American-led world system is experiencing setbacks at every turn.

Published

on

Authored by Federico Pieraccini via The Strategic Culture Foundation:


On November 25, two artillery boats of the Gyurza-M class, the Berdiansk and Nikopol, one tugboat, the Yany Kapu, as well as 24 crew members of the Ukrainian Navy, including two SBU counterintelligence officers, were detained by Russian border forces. In the incident, the Russian Federation employed Sobol-class patrol boats Izumrud and Don, as  well as two Ka-52, two Su-25 and one Su-30 aircraft.

Ukraine’s provocation follows the advice of several American think-tanks like the Atlantic Council, which have been calling for NATO involvement in the Sea of Azov for months. The area is strategically important for Moscow, which views its southern borders, above all the Sea of Azov, as a potential flash point for conflict due to the Kiev’s NATO-backed provocations.

To deter such adventurism, Moscow has deployed to the Kerch Strait and the surrounding coastal area S-400 batteries, modernized S-300s, anti-ship Bal missile systems, as well as numerous electronic-warfare systems, not to mention the Russian assets and personnel arrayed in the military districts abutting Ukraine. Such provocations, egged on by NATO and American policy makers, are meant to provide a pretext for further sanctions against Moscow and further sabotage Russia’s relations with European countries like Germany, France and Italy, as well as, quite naturally, to frustrate any personal interaction between Trump and Putin.

This last objective seems to have been achieved, with the planned meeting between Trump and Putin at the G20 in Buenos Aires being cancelled. As to the the other objectives, they seem to have failed miserably, with Berlin, Paris and Rome showing no intention of imposing additional sanctions against Russia, recognizing the Ukrainian provocation fow what it is. The intention to further isolate Moscow by the neocons, neoliberals and most of the Anglo-Saxon establishment seems to have failed, demonstrated in Buenos Aires with the meeting between the BRICS countries on the sidelines and the bilateral meetings between Putin and Merkel.

On November 30, following almost two-and-a-half months of silence, the Israeli air force bombed Syria with three waves of cruise missiles. The first and second waves were repulsed over southern Syria, and the third, composed of surface-to-surface missiles, were also downed. At the same time, a loud explosion was heard in al-Kiswah, resulting in the blackout of Israeli positions in the area.

The Israeli attack was fully repulsed, with possibly two IDF drones being downed as well. This effectiveness of Syria’s air defenses corresponds with Russia’s integration of Syria’s air defenses with its own systems, manifestly improving the Syrians’ kill ratios even without employing the new S-300 systems delivered to Damascus, let alone Russia’s own S-400s. The Pantsirs and S-200s are enough for the moment, confirming my hypothesis more than two months ago that the modernized S-300 in the hands of the Syrian army is a potentially lethal weapon even for the F-35, forbidding the Israelis from employing their F-35s.

With the failed Israeli attack testifying to effectiveness of Russian air-defense measures recently deployed to the country, even the United States is finding it difficult to operate in the country. As the Washington-based Institute for the Study of War confirms:

“Russia has finished an advanced anti-access/area denial (A2AD) network in Syria that combines its own air defense and electronic warfare systems with modernized equipment. Russia can use these capabilities to mount the long-term strategic challenge of the US and NATO in the Eastern Mediterranean Sea and the Middle East, significantly widen the geographic reach of Russia’s air defense network. Russia stands to gain a long-term strategic advantage over NATO through its new capabilities in Syria. The US and NATO must now account for the risk of a dangerous escalation in the Middle East amidst any confrontation with Russia in Eastern Europe.”

The final blow in a decidedly negative week for Washington’s ambitions came in Buenos Aires during the G20, where Xi Jinping was clearly the most awaited guest, bringing in his wake investments and opportunities for cooperation and mutual benefit, as opposed to Washington’s sanctions and tariffs for its own benefit to the detriment of others. The key event of the summit was the dinner between Xi Jinping and Donald Trump that signalled Washington’s defeat in the trade war with Beijing. Donald Trump fired the first shot of the economic war, only to succumb just 12 months later with GM closing five plants and leaving 14,000 unemployed at home as Trump tweeted about his economic achievements.

Trump was forced to suspend any new tariffs for a period of ninety days, with his Chinese counterpart intent on demonstrating how an economic war between the two greatest commercial powers had always been a pointless propagandistic exercise. Trump’s backtracking highlights Washington’s vulnerability to de-dollarization, the Achilles’ heel of US hegemony.

The American-led world system is experiencing setbacks at every turn. The struggle between the Western elites seems to be reaching a boil, with Frau Merkel ever more isolated and seeing her 14-year political dominance as chancellor petering out. Macron seems to be vying for the honor of being the most unpopular French leader in history, provoking violent protests that have lasted now for weeks, involving every sector of the population. Macron will probably be able to survive this political storm, but his political future looks dire.

The neocons/neoliberals have played one of the last cards available to them using the Ukrainian provocation, with Kiev only useful as the West’s cannon fodder against Russia. In Syria, with the conflict coming to a close and Turkey only able to look on even as it maintains a strong foothold in Idlib, Saudi Arabia, Israel and the United States are similarly unable to affect the course of the conflict. The latest Israeli aggression proved to be a humiliation for Tel Aviv and may have signalled a clear, possibly definitive warning from Moscow, Tehran and Damascus to all the forces in the region. The message seems to be that there is no longer any possibility of changing the course of the conflict in Syria, and every provocation from here on will be decisively slapped down. Idlib is going to be liberated and America’s illegal presence in the north of Syria will have to be dealt with at the right time.

Ukraine’s provocation has only strengthened Russia’s military footprint in Crimea and reinforced Russia’s sovereign control over the region. Israel’s recent failure in Syria only highlights how the various interventions of the US, the UK, France and Turkey over the years have only obliged the imposition of an almost unparalleled A2AD space that severely limits the range of options available to Damascus’s opponents.

The G20 also served to confirm Washington’s economic diminution commensurate with its military one in the face of an encroaching multipolar environment. The constant attempts to delegitimize the Trump administration by America’s elites, also declared an enemy by the European establishment, creates a picture of confusion in the West that benefits capitals like New Delhi, Moscow, Beijing and Tehran who offer instead stability, cooperation and dialogue.

As stated in previous articles, the confusion reigning amongst the Western elites only accelerates the transition to a multipolar world, progressively eroding the military and economic power of the US.

Liked it? Take a second to support The Duran on Patreon!
Continue Reading

Latest

Is Silicon Valley Morphing Into The Morality Police?

Who gets to define what words and phrases protected under the First Amendment constitute hate — a catchall word that is often ascribed to any offensive speech someone simply doesn’t like?

The Duran

Published

on

Authored by Adrian Cohen via Creators.com:


Silicon Valley used to be technology companies. But it has become the “morality police,” controlling free speech on its platforms.

What could go wrong?

In a speech Monday, Apple CEO Tim Cook said:

“Hate tries to make its headquarters in the digital world. At Apple, we believe that technology needs to have a clear point of view on this challenge. There is no time to get tied up in knots. That’s why we only have one message for those who seek to push hate, division and violence: You have no place on our platforms.”

Here’s the goliath problem:

Who gets to define what words and phrases protected under the First Amendment constitute hate — a catchall word that is often ascribed to any offensive speech someone simply doesn’t like?

Will Christians who don’t support abortion rights or having their tax dollars go toward Planned Parenthood be considered purveyors of hate for denying women the right to choose? Will millions of Americans who support legal immigration, as opposed to illegal immigration, be labeled xenophobes or racists and be banned from the digital world?

Yes and yes. How do we know? It’s already happening, as scores of conservatives nationwide are being shadow banned and/or censored on social media, YouTube, Google and beyond.

Their crime?

Running afoul of leftist Silicon Valley executives who demand conformity of thought and simply won’t tolerate any viewpoint that strays from their rigid political orthodoxy.

For context, consider that in oppressive Islamist regimes throughout the Middle East, the “morality police” take it upon themselves to judge women’s appearance, and if a woman doesn’t conform with their mandatory and highly restrictive dress code — e.g., wearing an identity-cloaking burqa — she could be publicly shamed, arrested or even stoned in the town square.

In modern-day America, powerful technology companies are actively taking the role of the de facto morality police — not when it comes to dress but when it comes to speech — affecting millions. Yes, to date, those affected are not getting stoned, but they are being blocked in the digital town square, where billions around the globe do their business, cultivate their livelihoods, connect with others and get news.

That is a powerful cudgel to levy against individuals and groups of people. Wouldn’t you say?

Right now, unelected tech billionaires living in a bubble in Palo Alto — when they’re not flying private to cushy climate summits in Davos — are deciding who gets to enjoy the freedom of speech enshrined in the U.S. Constitution and who does not based on whether they agree with people’s political views and opinions or not.

You see how dangerous this can get — real fast — as partisan liberal elites running Twitter, Facebook, Google (including YouTube), Apple and the like are now dictating to Americans what they can and cannot say online.

In communist regimes, these types of folks are known as central planners.

The election of Donald Trump was supposed to safeguard our freedoms, especially regarding speech — a foundational pillar of a democracy. It’s disappointing that hasn’t happened, as the censorship of conservative thought online has gotten so extreme and out of control many are simply logging off for good.

A failure to address this mammoth issue could cost Trump in 2020. If his supporters are blocked online — where most voters get their news — he’ll be a one-term president.

It’s time for Congress to act before the morality police use political correctness as a Trojan horse to decide our next election.

Liked it? Take a second to support The Duran on Patreon!
Continue Reading

JOIN OUR YOUTUBE CHANNEL

Your donations make all the difference. Together we can expose fake news lies and deliver truth.

Amount to donate in USD$:

5 100

Validating payment information...
Waiting for PayPal...
Validating payment information...
Waiting for PayPal...
Advertisement

Advertisement

Quick Donate

The Duran
EURO
DONATE
Donate a quick 10 spot!
Advertisement
Advertisement

Advertisement

The Duran Newsletter

Trending