2018-06-01 07:30:00 Fri ET
treasury deficit debt employment inflation interest rate macrofinance fiscal stimulus economic growth fiscal budget public finance treasury bond treasury yield sovereign debt sovereign wealth fund tax cuts government expenditures
The U.S. federal government debt has risen from less than 40% of total GDP about a decade ago to 78% as of May 2018. The Congressional Budget Office predicts that this ratio will surge to 96% in 2028. Although many blame the Trump tax cuts as the key root cause, the increases in health care and retirement benefits suggest a different real reason for U.S. deficit severity.
Harvard professor Martin Feldstein attributes the recent rise of U.S. budget deficit from 4% to 5% of total GDP to increases in Medicare and social security retirement benefits for middle-class older Americans. These increases in core health care and retirement benefits account for about 2.7% of total GDP. The neoclassical Sargent-Wallace thesis suggests that the central bank cannot finance incessant increases in core deficits with government bond issuance regardless of money supply growth. This money supply expansion would lead to inexorable inflationary pressures that defeat the dual mandate of both maximum employment and price stability in the suboptimal fiscal-monetary policy coordination. Inflation serves as a seigniorage tax that would in turn dampen real macroeconomic variates such as household consumption, capital investment, labor supply, and total economic output. In light of this ripple effect on sustainable financial market growth and prosperity, the law of inadvertent consequences counsels caution.
If any of our AYA Analytica financial health memos (FHM), blog posts, ebooks, newsletters, and notifications etc, or any other form of online content curation, involves potential copyright concerns, please feel free to contact us at service@ayafintech.network so that we can remove relevant content in response to any such request within a reasonable time frame.
2018-11-23 09:39:00 Friday ET
Former White House chief economic advisor Gary Cohn points out that there is no instant cure for the Sino-U.S. trade dilemma. After the U.S. midterm electio
2019-01-25 13:34:00 Friday ET
Netflix raises its prices by 13% to 18% for U.S. subscribers. The immediate stock market price soars 6.5% as a result of this upward price adjustment. The b
2022-04-05 17:39:00 Tuesday ET
Corporate diversification theory and evidence A recent strand of corporate diversification literature spans at least three generations. The first generat
2020-01-01 13:39:00 Wednesday ET
President Trump approves a phase one trade agreement with China. This approval averts the introduction of new tariffs on Chinese imports. In return, China s
2018-08-23 11:34:00 Thursday ET
Harvard financial economist Alberto Cavallo empirically shows the recent *Amazon effect* that online retailers such as Amazon, Alibaba, and eBay etc use fas
2019-04-13 14:28:00 Saturday ET
Saudi Aramco unveils the financial secrets of the most profitable corporation in the world. In its recent public bond issuance prospectus, Aramco offers the