IT’S ALL BUSH’S FAULT!
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Prepare for another year of $1 trillion-plus deficits.
The nonpartisan Congressional Budget Office projected Wednesday that the deficit for 2012 will run $1.1 trillion, the fourth year in a row the shortfall will exceed $1 trillion.
The projection is down a bit from an earlier estimate pegging the deficit this year at $1.2 trillion.
The report also warned that a new recession is likely if an ongoing stalemate over tax and spending cuts continues between Democrats and Republicans.
In its annual summertime report, the budget office said Wednesday that letting decade-old tax Bush tax rates expire and sweeping spending cuts occur in January — which will happen without congressional action — “would lead to economic conditions in 2013 that will probably be considered a recession.”
SOURCE: https://www.foxnews.com
Gary, had the US federal gov’t not borrowed and spent over 50% equivalent of private GDP since ’08, the nominal GDP today would be $10 trillion instead of $15 trillion. LOL!!! That’s how deep in the hole the private sector is from the beginning of the secular bear market and secular deceleration of GDP since ’00.
Note that the loss of growth of real GDP since ’00 (1.67% vs. 3.33%) from the long-term trend is 19-20% (a loss of 25-26% per capita), which is where Japan was in ’99-’00 and the US was in 1939-40. IOW, the US has been in a slow-motion depression since ’00.
Gov’t spending since ’00 (war and transfer payments) has contributed to 1.9%/yr. to the 3.6% avg. nominal GDP trend (down from the historical 6.4% rate). Were the “fiscal cliff” (or wall or ceiling) to occur and gov’t spending cease to grow or be cut, the trend of nominal GDP will decelerate from 3.6% to less than 2%, real GDP will decelerate from 1.67% to 0%, and real GDP per capita will contract further from the current negative 5- and 10-yr. trend rate.
Even if nothing is done, the loss of real US GDP growth from the long-term trend rate in ’00 out to ’20-’21 will be 40-45% and a loss of more than 50% per capita (where Japan is today), which is a depression by any objective standard, albeit a slow-motion variety.
Consider where debt, profits, employment, gov’t receipts, fiscal deficits, and asset prices will be between now and ’20-’21. Think Japan in ’03, ’09, and today. This is what a secular bear market and debt-deflationary depression in capitalism does. The Fed, gov’t intervention, and banksters seeking bailouts can only postpone the inevitable with unintended consequences along the way.
The imperative is capital preservation or return “of” one’s money, not a return “on” one’s money. I doubt that many clients will pay 2% of AUM plus taxes on any short-term gains in such an environment.