'The negative economic effects of excessive debt.'
7/16/24
from Over My Shoulder ,
7/16/24:
Lacy Hunt continues documenting the negative economic effects of excessive debt. In this quarter’s Hoisington outlook, he describes how extreme monetary and fiscal policies are combining to push the economy toward contraction.
Key Points:
- Higher deficit spending is reinforcing the contractionary influence of monetary restraint.
- The fiscal imbalance may not be reversible since, for the first time since World War II, economic growth hasn’t slowed it.
- Moreover, neither political party is offering a plan to address budget deficits that are set to keep growing.
- The monetary surge of 2020-2021 accelerated inflation, and the monetary restraint needed to control that inflation is reducing living standards.
- The dis-saving of the federal budget deficit now exceeds household, corporate and foreign saving, resulting in negative net national savings.
- As the budget deficit mounts, its benefits will be increasingly brief while longer-term negative effects grow more pronounced.