- Apr 11, 2023
- 45,795
- 22,087
- 2,488
Watching the bond market gives on a feel for future inflation, so that tells me that the President is watching water polo, instead. He better shift his vision, or Chicago Fed Reserve President Austan Goolsbee, a no nonsense knocker, may have to knock nonsense into the Oreganator.
www.msn.com/en-us/money/markets/the-bond-market-is-an-economic-lie-detector-test-and-trump-is-failing-it/ar-AA1Fuq6m?ocid=msedgntp&pc=HCTS&cvid=34cee8731e164326b59637b793e8cf87&ei=117
The market for U.S. debt, aka the bond market, is a huge and critical part of global finance, but one that usually percolates in the background. Yet lately it’s been in the headlines. What’s behind this disturbance in the force?
You don’t need to be an expert in finance to answer that question, and it’s important that you understand the answer, because it will have a direct impact on your economic life. Perhaps not surprisingly, politics are at the root of these recent developments: the recklessness of both the Trump administration’s economic agenda and congressional Republicans’ deficit-exploding legislation are playing out in real time in ways you need to know about.
Starting at the beginning: As we all know, the U.S. government consistently spends more than it collects in taxes. This difference between government receipts and outlays is the deficit, which in 2024 was $1.8 trillion, or 6.4% of America’s gross domestic product.
Yet our President does not get it.
OK, so why the anxious headlines, like “The Bond Market Is Waking Up to the Fiscal Mess in Washington” in The Wall Street Journal and “Bond Market Shudders as Tax Bill Deepens Deficit Worries” in The New York Times? Why are economists, myself included, who formerly told debt scolds to stop obsessing over the debt now urging the opposite?
“In a short amount of time,” economist Larry Summers recently told The Atlantic, “the fiscal picture has gone from comfortably in the green-light region to the red-light region.” As the headlines suggest, a key trigger for this angst is the legislation that passed the House this week. Global investors in U.S. debt are learning how many trillions the GOP’s bill is likely to pile on to the already swollen deficit (since it’s a work in progress, we don’t know the number yet, but my analysis suggests something in the $5 trillion range).
The Wall Street Journal’s chief economics commentator Greg Ip noted that the deficit implications of this budget “would be higher than any other sustained stretch in U.S. history, and more than almost any other advanced economy. … Before 2023, [U.S. deficits] accounted for half of advanced economies’ deficits, according to the International Monetary Fund. From 2023 through 2030, it will be two-thirds.”
www.msn.com/en-us/money/markets/the-bond-market-is-an-economic-lie-detector-test-and-trump-is-failing-it/ar-AA1Fuq6m?ocid=msedgntp&pc=HCTS&cvid=34cee8731e164326b59637b793e8cf87&ei=117
The market for U.S. debt, aka the bond market, is a huge and critical part of global finance, but one that usually percolates in the background. Yet lately it’s been in the headlines. What’s behind this disturbance in the force?
You don’t need to be an expert in finance to answer that question, and it’s important that you understand the answer, because it will have a direct impact on your economic life. Perhaps not surprisingly, politics are at the root of these recent developments: the recklessness of both the Trump administration’s economic agenda and congressional Republicans’ deficit-exploding legislation are playing out in real time in ways you need to know about.
Starting at the beginning: As we all know, the U.S. government consistently spends more than it collects in taxes. This difference between government receipts and outlays is the deficit, which in 2024 was $1.8 trillion, or 6.4% of America’s gross domestic product.
Yet our President does not get it.
OK, so why the anxious headlines, like “The Bond Market Is Waking Up to the Fiscal Mess in Washington” in The Wall Street Journal and “Bond Market Shudders as Tax Bill Deepens Deficit Worries” in The New York Times? Why are economists, myself included, who formerly told debt scolds to stop obsessing over the debt now urging the opposite?
“In a short amount of time,” economist Larry Summers recently told The Atlantic, “the fiscal picture has gone from comfortably in the green-light region to the red-light region.” As the headlines suggest, a key trigger for this angst is the legislation that passed the House this week. Global investors in U.S. debt are learning how many trillions the GOP’s bill is likely to pile on to the already swollen deficit (since it’s a work in progress, we don’t know the number yet, but my analysis suggests something in the $5 trillion range).
The Wall Street Journal’s chief economics commentator Greg Ip noted that the deficit implications of this budget “would be higher than any other sustained stretch in U.S. history, and more than almost any other advanced economy. … Before 2023, [U.S. deficits] accounted for half of advanced economies’ deficits, according to the International Monetary Fund. From 2023 through 2030, it will be two-thirds.”
