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These 11th hour fiscal maneuvers, in fact, are so asinine that the numbers have to be literally seen to be believed.
To wit, an already weak-growth crippled revenue baseline will be cut to just $mark. Nine years into a business cycle expansion, the King of Debt and his unhinged GOP majority on Capitol Hill have already decided upon (an nearly implemented) the fiscal measures that will result in borrowing .
So what we have now is a central bank desperately trying to recapture lost time via its “automatic pilot” commitment to systematic and sustained balance sheet shrinkage at fixed monthly dollar amounts.
This unprecedented “quantitative tightening” or QT campaign has already commenced at per month (0 billion annualized) next October .
And the cause is not the exogenous effects of so-called automatic fiscal stabilizers associated with a macroeconomic downturn, but deliberate Washington policy decisions made by the Trumpian GOP.
During FY 2019, for example, these discretionary plunges into deficit finance include slashing revenue byfor defense, disasters, border control, Obama Care bailouts and domestic pork barrel of every shape and form.
Taking the cue, Wall Street dubbed it the Goldilocks Economy—-meaning a macroeconomic environment so stable, productive and balanced that it would never again be vulnerable to a recessionary contraction and the resulting plunge in corporate profits and stock prices. During the 20 months from the July 2007 peak to the March 2009 bottom, the RUT gave it all back.
Ordinarily, soaring fiscal deficits occur early in the cycle.
That is, during the plunge unto recession, when revenue collections drop and outlays for unemployment benefits and other welfare benefits spike; and also during the first 15-30 months of recovery, when Keynesian economists and spendthrift politicians join hands to goose the recovery—-not understanding that capitalist markets have their own regenerative powers once the excesses of bad credit, malinvestment and over-investment in inventory and labor which triggered the recession have been purged.
By contrast, the Federal deficit is now soaring at the tail end (month #102) of an aging business expansion.
JM Keynes himself would be grinning with self-satisfaction.
Moreover, this foolhardy attempt to re-prime-the-pump nearly a decade after the Great Recession officially ended means that monetary policy is on its back foot like never before.Needless to say, that’s the very opposite of the “accommodative” Fed posture and substantial debt monetization which ordinarily accompanies an early-cycle ballooning of Uncle Sam’s borrowing requirements.