Five charts to start your day

The US budget deficit has widened over the last quarter of a century

The bout of market volatility witnessed over the last few days seems to have calmed a little. There’s been lots of talk about accelerated Fed interest rate cuts and the possibility of a US recession growing stronger. The market is no longer focused as much on the US election and the impact that either candidate will have on the US economy. Frankly, looking at the data, I don’t think a lot will change, especially when it comes to US indebtedness and government spending.

Since the start of the millennium, the US budget deficit has trended downward under both Republican and Democratic presidents. This trend is clearly depicted in the chart below and is largely attributed to fiscal housekeeping.

As economist Mohamed El-Erian observes, “instead of rebounding sharply and fully after a shock, the fiscal balance has tended to stabilize at a larger deficit... so much for the notion of repairing the roof when the sun is shining (to quote former President Kennedy and ECB President Lagarde).”

Although the US government is in a unique position to borrow, given it has the largest government bond market in the world, it still needs to balance out in the end. It’s probably time to close that gap if possible.

What do you think? Leave a comment. No one seems to leave comments with my newsletter.

Source: Eeagli

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