J.P. Morgan was wrong to call it "stealth" stimulus. It's not stealth, it's right there out in the open for all the world to see.
The fact that it is stimulus is not in question. Every penny of deficit spending is stimulus.
From Global Macro Monitor, August 10:
The Treasury released the latest budget data earlier today, which shows the 12-month rolling deficit at $2.3 trillion or 8.4 percent of GDP.
We are confused as to how many are worried about the deficit coming in at 6 percent for the fiscal year. According to our analysis — and it ain’t rocket science, folks — we are already there and then some. Here is CBO’s take,
CBO’s most recent baseline projections, which were published in May, show revenues totaling $4.8 trillion and outlays totaling $6.4 trillion, for a deficit of $1.5 trillion for 2023.1 On the basis of its estimate of the deficit through July and preliminary estimates of revenues and outlays in August and September, CBO now expects that the total deficit for 2023 will be $1.7 trillion, or about $200 billion larger than the estimate it published in May. Revenues and outlays alike are now anticipated to be below amounts CBO projected in May, but the reduction in revenues is larger. – CBO
In order to hit the CBO estimate of a $1.7 trillion FY2023 deficit, the August and September deficits will have to average $50 billion. Not likely. We suspect the bond market is finally waking up....
....MUCH MORE
Here's that JPM comment and some of our own after the jump (please note the quotation marks, it was Morgan-Chase calling it stealth, not us):
"JP Morgan on the 'stealth stimulus' supporting the US economy even after rapid rate hikes"Huh.
Lifted in toto from ForexLive, July 26:
JP Morgan on the US deficit and how its supporting the economy. Main points from their note:
- The FY23 deficit is tracking about US$1.5 trillion, but only thanks to the odd accounting of student debt forgiveness
- Excluding student debt, the deficit would be closer to $1.8tn, and almost $1tn larger than in FY22
- This widening should partly reverse as we move into FY24, when we project a deficit around $1.6tn
- This year's "stealth stimulus" may help explain the economy's resilience to rapid interest rate hikes
If interested see also:
July 16: "Why Does The U.S. Economy Need $154 Billion-737 Million In Stimulus PER MONTH?" which ended with our market recommendation: Keep on Dancing.
July 26: Spoiler Alert: "It's All Been A Pack Of Lies"
And a random sampling of related posts:
The Diminishing Marginal Productivity of Debt in the U.S.
The Real Problem With Stimulus
Mohamed El-Erian: "The Growth Engines Are Sputtering"
We are in a situation where years worth of economic growth have been pulled forward from future years by deficit spending, call it stimulus, call it sweet, sweet Biden love, whatevs; and the only way to keep the hamster wheel spinning is to keep feeding money into the system.
And have I mentioned marginal productivity of debt?* ....
And as patient reader is well aware the smallest state is Delaware we have been beating this drum since the bailouts of the Great Financial Crisis.
It doesn't really matter what you call it:
The Real Problem With Stimulus
I've mentioned a few times that Keynes was all about the countercyclical thing.
In the U.S. we have devolved to perma-stimulus, every dollar of deficit spending being stimulus, and have no plans to ever stop. Anyone who argues that stimulus isn't stimulus unless it is labeled stimulus is being sillier than I felt when I typed this sentence.
Deficit spending is stimulus whether you call it ARRA,sweet, sweet Biden loveor Democracy's flaw.....
June 15 reporting on the May deficit:
"US Budget Gap Widens to $1.2 Trillion in Fiscal Year Through May"
Keeping in mind that every penny of deficit spending is stimulus, why does the U.S. economy need over $100 billion of stimulus per month in what is considered by many commentators to be a good economy?
Why Does The U.S. Economy Need $154 Billion-737 Million In Stimulus PER MONTH?
So there I was, idly scrolling through the
Monthly Treasury Statement
Receipts and Outlays of the United States Government
For Fiscal Year 2023 Through June 30, 2023, and Other Periods
Noting the One Trillion, Three Hundred Ninety Two Billion dollar nine-month deficit when once again I ask myself "Self, what would happen to the U.S. economy if we stopped the stimulus?"
And though I don't have experiential knowledge, I'm pretty sure the answer is "the economy would collapse."
That is the very definition of a Ponzi scheme, always hustling the new money to keep the game going just a little bit longer until...
Until what? Until the current batch of politicians can retire and get on with their lobbying businesses? Until the Sweet Meteor of Death strikes and clears the books for this go-round?
I was reminded of a March 2009 post:
The optimal design of Ponzi schemes in finite economies...
