Treasury Sees Second-Half U.S. Borrowing at Most Since 2008

[RandomGuy]

It is eye-watering.


The Treasury Department predicted the U.S. government’s borrowing needs in the second half of this year will jump to the most since the financial crisis a decade ago as the nation’s fiscal health deteriorates despite a strong economy.


The department expects to issue $329 billion in net marketable debt from July through September, the fourth-largest total for that quarter on record and higher than the $273 billion estimated in April, Treasury said in a report Monday. The department’s forecast for the October-December quarter is $440 billion, bringing the second-half borrowing estimate to $769 billion, the highest since $1.1 trillion in July-December 200

https://www.bloomberg.com/news/articles/2018-07-30/treasury-raises-borrowing-outlook-with-2h-hitting-769-billion

[boutons_deux]

It is eye-watering.



https://www.bloomberg.com/news/articles/2018-07-30/treasury-raises-borrowing-outlook-with-2h-hitting-769-billion

Repug "deficits don't matter" -- corrupt dickhead Cheney

[Winehole23]

two Santa Claus theory:


in March of 1976, The National Observer published an article by the conservative thinker Jude Wanniski entitled, "Taxes and the Two-Santa Theory" (http://wallstreetpit.com/26546-jude-wanniski-taxes-and-a-two-santa-theory/) that argued that Republican fiscal policy had gone dangerously astray.

The GOP had committed itself to a program of permanent austerity, Wanniski observed, meaning that in good times Republicans wanted to raise taxes to ward off inflation while in bad times Republicans wanted to cut spending to balance the budget. In contrast, he argued, Democrats had the political sense to play Santa, offering the economy increased spending whenever they could and paying for it with higher taxes when the bill came due.



Wanniski thought that a triumph of the Democratic Santa would harm the economy, as rising taxes dampened incentives for entrepreneurship and choked off the capital that businesses need to expand.

What the economy required, he wrote, was two Santas: a Democratic one to deliver the gift of government spending, and a Republican one to hand out tax cuts. The addition of the tax-cutting Santa would unleash private enterprise, expand the business sector and dampen the demand for social services, Wanniski thought.

Notice that Wanniski wasn't especially fearful of deficits. He hinted that it was the absence of the tax-cutting Santa that tended to push deficits higher anyway. First, the permanent austerity demanded by the GOP meant that Americans could only receive a bit of succor from the spending delivered by the Democrats. So naturally, they demanded ever more of it. Second, the resulting high tax rates constrained business formation so much that revenues were actually lower than they would be if rates were cut.

The two-Santa theory became the political complement to supply-side economics, a phrase also popularized by Wanniski, and formed the basis of the fiscal policies of the Ronald Reagan presidency, when taxes were cut and spending was increased. https://www.bloomberg.com/view/articles/2018-02-09/republicans-deficits-and-the-two-santa-theory

[Winehole23]

Tax cuts plus deficit spending is practically Republican dogma when Republicans are in power; they become fiscal hawks when the other party holds the reins.

[boutons_deux]

Another epic economic collapse is coming

https://www.washingtonpost.com/opinions/another-epic-economic-collapse-is-coming/2018/08/17/c26fb12c-a182-11e8-93e3-24d1703d2a7a_story.html?utm_term=.4d9ed5f85172

[boutons_deux]

Leveraged Loans: Cov-Lite Volume Reaches Yet Another Record High (http://www.leveragedloan.com/leveraged-loans-cov-lite-volume-reaches-yet-another-record-high/)
http://www.leveragedloan.com/wp-content/uploads/2018/06/cov-lite-May-18-1.jpg

http://www.leveragedloan.com/leveraged-loans-cov-lite-volume-reaches-yet-another-record-high/

[boutons_deux]

The Big, Dangerous Bubble in Corporate Debt

By William D. Cohan
Mr. Cohan is a former investment banker and the author of four books about Wall Street.

the larger domestic debt market — at around $41 trillion for the bond market alone — reveals more about our nation’s financial health.

And right now, the debt market is broadcasting a dangerous message (https://www.nytimes.com/2018/08/02/upshot/next-recession-three-most-likely-causes.html):

Investors, desperate for debt instruments that pay high interest, have been overpaying for riskier and riskier obligations.

University endowments, pension funds, mutual funds and hedge funds have been pouring money into the bond market with little concern that bonds can be every bit as dangerous to own as stocks.

for much of the last decade, risk has been mispriced to a staggering degree. In other words, the prices of bonds (and corporate loans) have not accurately reflected the riskiness of the underlying borrower’s credit.

A company that is a poor credit risk, because it has too much debt or is struggling, should have to pay higher rates of interest.

Until recently, investors have been paying higher prices for the debt of riskier companies and not getting properly compensated for that risk.

as interest rates continue to rise, and

some companies and other borrowers fail to meet their debt obligations, defaults will inevitably increase along with the spreads.

When they do, trillions of dollars in invested capital could be lost.

If that happens, as it did after September 2008, access to credit for most borrowers could dry up, setting off yet another potentially devastating economic crisis.

To be sure, the growing concern about the mispricing of risk doesn’t mean we’re on the verge of a recession.

But the corporate debt bubble inevitably will play a role in causing it.

Here’s the crux of the problem:

https://www.nytimes.com/2018/08/09/opinion/corporate-debt-bubble-next-recession.html