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Potential downside of a Biden Presidency, Demo Sweep
Posted on: August 7, 2020 at 12:49:30 CT
ScottsdaleTiger MU
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Would suggest that if Biden wins the Presidency, the Democrats will also keep the House and win the Senate.
In such a scenario, there will be no effective brake on their ability to enact their "progressive programs", i.e. Medicare for All, AOC's Green New Deal, etc. All of these programs require additional Federal spending.
The Federal Government currently operates at a deficit. It finances that deficit by borrowing in the credit market (sells U.S. government bonds, T bills, etc).
At the macro level, the U.S. Government doesn't pay off any debt. It merely "rolls over" existing debt and then adds more. Total U.S. Government debt has been increasing and appears likely to continue to increase in the future even if the GOP wins the 2020 election, just not as much as if the Dems win.
The U.S. Government's ability to "roll over" and "expand" its borrowings is dependent upon world investors (i.e. government, institutions and individuals) being confident that if they buy U.S. debt and then want to sell it, that there will be someone in the world credit markets who will take it at a reasonable price and rate. Note that's very different than being confident that the U.S. will fully pay its debt at some future time. It is a lower standard.
If investors lose confidence that someone will in fact be there to take their U.S. debt if they decide to sell, then the cost to the U.S. of borrowing will go up (much higher interest rates) or ultimately the U.S. will find it is unable to borrow at all. See Argentina, Greece and Venezuela. Essentially, if there are fewer buyers for the dollar, the returns to those buyers must go up in order for them to continue to buy, to continue to accept the risk.
If that happens (the dollar ceases to be regarded as the World's reserve currency), the U.S. Government will be unable to raise funds to pay its obligations or the cost of those funds (interest rates) will go up.
Potentially, the U.S. government could be forced into a situation in which it defaults or the value of the dollars it uses to pay its obligations declines. If that were to happen, the resulting social unrest would make the unrest of the past several months look like child's play.
Solutions to the problems would be for the U.S. government to simply default on various obligations and/or drastic increases in taxes. The former would be devastating to the U.S. economy and its society. The latter would likely result in the worse economic crisis than the Great Depression of the 1930's.
That at least is the view from the Sonoran desert on a balmy 108 degree day.
In such a scenario, there will be no effective brake on their ability to enact their "progressive programs", i.e. Medicare for All, AOC's Green New Deal, etc. All of these programs require additional Federal spending.
The Federal Government currently operates at a deficit. It finances that deficit by borrowing in the credit market (sells U.S. government bonds, T bills, etc).
At the macro level, the U.S. Government doesn't pay off any debt. It merely "rolls over" existing debt and then adds more. Total U.S. Government debt has been increasing and appears likely to continue to increase in the future even if the GOP wins the 2020 election, just not as much as if the Dems win.
The U.S. Government's ability to "roll over" and "expand" its borrowings is dependent upon world investors (i.e. government, institutions and individuals) being confident that if they buy U.S. debt and then want to sell it, that there will be someone in the world credit markets who will take it at a reasonable price and rate. Note that's very different than being confident that the U.S. will fully pay its debt at some future time. It is a lower standard.
If investors lose confidence that someone will in fact be there to take their U.S. debt if they decide to sell, then the cost to the U.S. of borrowing will go up (much higher interest rates) or ultimately the U.S. will find it is unable to borrow at all. See Argentina, Greece and Venezuela. Essentially, if there are fewer buyers for the dollar, the returns to those buyers must go up in order for them to continue to buy, to continue to accept the risk.
If that happens (the dollar ceases to be regarded as the World's reserve currency), the U.S. Government will be unable to raise funds to pay its obligations or the cost of those funds (interest rates) will go up.
Potentially, the U.S. government could be forced into a situation in which it defaults or the value of the dollars it uses to pay its obligations declines. If that were to happen, the resulting social unrest would make the unrest of the past several months look like child's play.
Solutions to the problems would be for the U.S. government to simply default on various obligations and/or drastic increases in taxes. The former would be devastating to the U.S. economy and its society. The latter would likely result in the worse economic crisis than the Great Depression of the 1930's.
That at least is the view from the Sonoran desert on a balmy 108 degree day.
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Potential downside of a Biden Presidency, Demo Sweep - ScottsdaleTiger MU - 8/7 12:49:30
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