Seems like a vicious circle to me. I used to pay some attention when I was working and a good economy meant more to me. Since I've retired and can't and must go with the flow and know or feeling that the Congress does not care or is smart enough enough to know or understand these forces at work, I blow it off., let come what may or let it snow, let it snow, or not.
The 3rd estimate of 2Q, 2017 GDP is released. The 2nd quarter was revised to 3.1% annualized in real dollars (2009 dollars). In real dollar terms the economy has grown 2.23% from same period of last year. In nominal terms, the GDP has grown 3.84%. Nominal is important when considering national debt. In the current fiscal year, the marketable national debt has risen 3.24% and overall national debt 3.2%. Thus far the economy is barely outpacing the rise in national debt. (Data for fiscal year is through 9-26, with 3 more days to be added).
The latest month's inflation information has been published by the BLS. The unadjusted index showed a slight decrease, although the "core" was up an unadjusted 3.3% on an annualized basis. The latter is playing with fire, imo.
I'm a couple of days late, but November's CPI is available for viewing. I always compare my results to the CPI. For the year, I came in under the CPI, but property taxes edged up, as well as homeowner and vehicle insurance. Thankfully, not as much on the vehicle insurance as the CPI listed. 8% over the last year!! Of course my homeowner's insurance went up, but the CPI has it going down. As for property taxes... short of downsizing to a tent, when have they ever gone down?
There is no doubt that interest rates on the U.S. debt is rising and has been for the past 3 years. On top of that the national debt is rising rapidly and now outpacing growth in nominal GDP. That means the debt to GDP ratio is also rising. The national debt is already $1.3T above the year ago level. The interest rates have been slowly rising, which is in large part to the European Central Bank's cold feet, regarding tapering bond purchases and lifting interest rates, as well as an abundance of zombie companies and internal EU problems. It keeps the demand for U.S. debt in play and keeps the rates from rising rapidly. So a hearty thank you to the EU and the ECB. U.S. debt over the years....
Then it sounds like the US is dependent on the EU and not the other way around? Europe sneezes and the US catch a cold? Analysts over here don't get tired of pointing at the writing on the wall and have anxiously been waiting for the Fed to raise interest rates further. Even if the ECB would not have to follow suit immediately, when it does, it will make life for the debtor countries in southern Europe much more difficult in the long run. On the other hand, savers, who are partly having to pay penalty interest on their savings, would feel relieved as they have been suffering from that unexpected and cold expropriation or "financial repression" as they subtly put it. Financing models of lots of retirees have collapsed. Do American savers actually have to pay penalty interest? A debt-to-GDP ratio of 104% is considerable compared to euro zone's 87 percent (Greece 182, Italy 132). The US will, however, be in a better position to cope with it given that they can rely on its own currency and a huge domestic market.
I was not/am not good at economics. Don't understand all those charts. All I can do is reconcile my checkbook/bank statement and live on what I make with little or no dept.
It is so sad to watch this happen. Congress now spends without much regard to income. That is why they pass "spending bills" instead of budgets...and most of the "laws" are made in the Executive Branch.
If I were to study your financial dealings, it would be called a study of microeconomics. You may know more about economics than you realize.
Sorry for the delay in response. I presume you are referring to the ECB's -0.4% interest on excess reserves (IOER), it charges the banks... just to keep liquidity moving. If my memory serves, the ECB instituted this policy to keep money flowing between banks and into the EC economy. The upshot being that large bank depositors would face penalties on their saved money. This in turned (imo) forced money into global stock markets, U.S. Treasuries, etc. Is that presumption correct? The answer would be no to US bank depositors paying a penalty, as the FED pays 1.95% interest on both required reserves (IORR) and IOER. (Just bumped it up 0.2% as of today). However, none of that seems to be making it to savers, such as myself. By law, the FED cannot charge a negative interest rate and were prohibited paying any interest on IOER or IORR, prior to October 1st, 2008. The current result is still a very large excess in reserves. Something that really did not exist prior to 2008. The U.S. originally passed the aforementioned law in 2006, to be more like the ECB, which was originally not to take place until 2011. In a nutshell, the low interest rates still in place in the U.S. can continue, as the ECB avoided talking about IOER rates, which remain negative. In my opinion, not all is well within the EU banking sector and there are rumors of an increasing abundance of zombie companies. The U.S. has several as well, but would not harm the overall economy, such as would happen in the EU. Japan also has negative interest rates, which has flowed money into the same paths. Until the ECB lifts that negative interest policy, I am not too terribly worried. Frankly, I am not sure they could in the near term, without disastrous results within the EU.
Thanks for your explanation. Is that presumption correct? Exactly right as regards large bank depositors - but I actually had private clients/savers in mind who are having to pay penalty (or negative nominal) interest starting from a certain amount of their savings. And I also meant negative real interest because all savers in Germany and other European countries have been suffering from interest below the inflation rate (the spread now being almost 2% ) for some years in addition which is de facto also negative interest and effectively a cold expropriation of savers. You are right, no light at the end of the tunnel for the next years(s) although the ECB is beginning to curb its easy-money policy. In my opinion, not all is well within the EU banking sector and there are rumors of an increasing abundance of zombie companies. This may be true and this fact is one of the reasons why banks need to have a higher rate of equity than prior to 2008. Thank goodness, some people say, because it's a reaction to the financial crisis of 2008 when the state had to bail out banks with taxpayers' money which mustn't happen again. It may be insufficient but far better than leaving the situation as it was before 2008. This crisis has shown very clearly that in the banking sector at least Smith's invisible hand was indeed not to be seen.
That would be true to a large extent in the U.S. as well. There are a few banks with interest on CDs above any of the current inflation gauges, but most are below that level. As you said, as much as 2%. I could be wrong, but I seem to recall an era when banks advertised how benevolent they could be if only you entrusted your savings with them. Even to the point of giving away toasters, advertising a myriad of ways you could be paid interest, etc. Although it was generally below the inflation rate, with the exception of CD's etc. Now it seems to be all about how they can help fulfill your dreams... if only you could stop by to see if you are qualified for a loan.
The 3rd estimate of 1st Quarter GDP is out and slid a bit. Current dollar GDP increased 4.73% since same period last year. The national debt increased 7.37%. In difficult times, such as a recession, debt levels rising faster than nominal or current dollar GDP is indicative of government stimulus. These aren't difficult times, so the reverse should be true. There is some modest hope the 2nd quarter will do much better, yet the national debt will likely have risen 8%+ yoy. The expectation of inflation running a bit above 3% for that same period and real growth estimates at 4.5% from the most optimistic. That is still 0.5% shy of holding serve. The trade imbalance is shaving 3.2% off growth, but has been so for quite awhile, although the total dollar impact has jumped 8.8% from year ago levels. Federal spending must be reduced. The trade deficit must be reduced. Each of which would create havoc while being corrected, so I have no illusion that Americans will be receptive of any meaningful actions to correct our slide into oblivion.
In our present situation here in America, the traditionally accepted "reasonable fees" concept generally adhered-to by most financial institutions has been bastardaized to include fees of unbelievable origin. For example, "lack of use" fee. They gladly take your money, then charge you for not using their services, which include fees for use, for "non-use". Frank