https://www.msn.com/en-us/money/mark...ch/ar-BB17qy05
According to a quote in the article, the [projected] Debt-to-GDP ratio is now running at 130 percent. I recall Carmen Reinhardt and Ken Rogoff - in their book "This Time Is Different" - pointing out that, historically, countries with Debt-to-GDP ratios exceeding 125[?] percent tend to suffer ruinous economic consequences.
Of course, I'm no expert on any of this, but I have a feeling if this Coronavirus had struck three months
after a Presidential election rather than three months
before a Presidential election; politicians wouldn't be falling all over themselves massively increasing the debt. I remember back in the 1970's watching "Wall Street Week with Louis Ruykeyser" every Friday night. He would have guests like Milton Friedman and Alan Greenspan decrying how a budget deficit of $300 billion and "out of control Government spending" runs the risk of bringing our country to its knees. Warren Buffett penned an article for Fortune magazine pointing out that we're eating our seed corn. Now, with budget deficits running [literally] in the trillions, returning to a $300 billion annual deficit would seem like a return to fiscal sanity.
The next President, whoever he is, is going to have to deal with this issue. A failed Treasury auction due to creditor nations refusing to finance our debt out of concerns over a [perceived] inability to meet our obligations ... that would be a real disaster.
It would seem that is what this "warning shot" from Fitch and the other credit rating firms is really saying, (i.e. that there's a limit to how much U.S. politicians can push the fiscal stimulus train before it derails.) I suppose the thinking in Washington is running something along the lines of: "OK, we know running the debt up like a rocket ship is not in our long term best interest. However, this is an emergency! Once we have a vaccine and get this virus under control, we'll return to business as usual. The real problem, right now, is to survive this immediate short term disaster."
Assuming Biden is elected President, I have a feeling it won't take long for his ratings (and popularity) to fall precipitously. If he takes steps to seriously address the debt and control spending - like raising taxes and/or cutting budgets - he'll run into a firestorm of criticism. If he decides to ignore the problem - or hopes we can "grow our way" out of the massive debt - he runs the risk of further credit downgrades. Either way it looks like he's trapped in a Catch 22 dilemma.
This Coronavirus has really screwed us.
Last edited by Former DJ; 08-01-2020 at 03:04 PM.