Bond market tightening complicates Powells task

[bronxiteforever]

January 31, 2018 / 4:46 PM / UPDATED AN HOUR AGO
Reuters
By Christopher Beddor

WASHINGTON (Reuters Breakingviews) - Bond market tightening will complicate Jerome Powell’s task. U.S. Treasury yields rose to near four-year highs even as the Federal Reserve left policy unchanged at Janet Yellen’s last meeting. But a fresh growth spurt and worsening deficit outlook will pose a serious challenge for her successor.

The recently passed U.S. tax cuts have helped alter the picture, putting the budget deficit on track to rise to nearly $1 trillion in 2019 and giving a fresh impetus to growth and potentially inflation...
Rising bond yields have a direct impact on the economy because they influence the rates companies pay to borrow and consumers pay on their mortgages. That may in part explain why both the S&P 500 Index and Dow Jones Industrial Average declined earlier this week and the CBOE Volatility Index jumped briefly above 15 for the first time in more than five months.

https://www.reuters.com/article/us-usa-fed-breakingviews/breakingviews-bond-market-tightening-complicates-powells-task-idUSKBN1FK36F

Now look we have a rising deficit! Nobody with an R next to their name mentioned it during the midnight rush job tax “reform”.

[Fred Sanders]

1. Trillion dollar deficits from here to eternity, tax dollars stolen from the 99% to feed the rich.

[bronxiteforever]

2. The year of magical thinking to steal from Joan Didion

3% gdp forever and we grow ourselves out of the huge increase.

You describe the GOP thieving best and succinctly.

[unblock]

3. the tax cuts were designed to increase debt by $1.5 trillion over 10 years

but that's not noteworthy when republicans are in charge.

on the other hand, the entire budget for the national endowment for the arts, which is $0.0015 trillion over 10 years, that's a huge scandal that republicans have railed against for ages, and the media has indulged them in covering that huge controversy.

but $1.5 trillion for nothing, meh. whatever.

[bronxiteforever]

4. We are in uncharted waters or Japanese waters

“In November, Fitch Ratings said optimistically that, “under a realistic scenario of tax cuts and macro conditions,” the US gross national debt would balloon to 120% of GDP by 2027. The way things are going right now, we won’t have to wait that long. Back in 2012, gross national debt amounted to 95% of GDP. Before the Financial Crisis, it was at 63% of GDP. At the end of 2017, gross national debt was 106% of GDP!
Over the next six month, the debt will grow by about 3%. Unless a miracle happens very quickly, the debt will likely grow faster over the next five years due to the tax cuts than over the past five years. But over the past five years, the gross national debt already surged nearly 25%, or by $4.1 trillion.
So that’s a lot of borrowing, for an economy that is growing at a decent clip. What will happen when the full force of the tax cut hits US government receipts, or when the next recession appears out of the blue and outlays jump as receipts fall? What will happen to the government’s borrowing needs?

The bond market is barely starting to do the math.”
https://wolfstreet.com/2018/01/30/us-national-debt-will-jump-by-617-billion-in-5-months/

[Fred Sanders]

5. Reuters: Powell has equally tough job because of good economy as Yeltsin had in 2009!?

You go with that, the rest of us think reviving a dying Republican economy is easier than maintaining Obama's booming economy.

[bronxiteforever]

6. For mine I forgot sarcasm emoji!