Diamond News Archives

It’s as if the federal government is driving a car with no clutch, no brake, no steering wheel. There’s only an accelerator stamped with four all-caps letters. D-E-B-T.

Is this turning out to be our democracy’s fatal flaw? Is this an argument for longer term limits? What can be done to stop the vicious cycle of wild overpromising that is required to gain elected office, and then the subsequent excessive debt spending that is required in the impossible attempt to live up to those campaign promises?

The inexorable math of past promises is choking off our national fiscal lifeblood. Social security and Medicare remain unfunded liabilities that only set to become larger sinkholes^[1] as damning demographics see baby boomers becoming elderly while the US birth rate hits all-time lows^[2].

Do you feel as if you’re drowning in debt? It’s worse than you think. The U.S. government reached a new milestone when our country’s debt topped $21 trillion for the first time.

The national debt grows by an average of $17,000 every second – more than some people earn in an entire year. That’s only an average, and During the past eight months, the national debt grew by $52,000 per second. And the trend toward bigger and higher spending is only getting worse.

The ratio of national debt to GDP is at 105 percent, larger than the economy as a whole. In 1981, the national debt comprised a mere 31 percent of GDP. We are not moving in the right direction. The Treasury Department has plans to borrow $1 trillion this year^[3], an 84% jump from last year.

During times of economic chaos, the government has historically resorted to giving the printing presses free...

Gold futures rose slightly Tuesday as the dollar pulled back from multi-month highs, but the precious metal still hovers near the lowest levels of the year.

June gold GCM8, +0.08%^[1] was up $3.70, or 0.3%, at $1,294.40 an ounce. That’s more than $10 up from the $1,281.20 it grazed at one point Monday, the lowest intraday level since December. July silver SIN8, +0.58%^[2] meanwhile, tacked on 10 cents, or 0.6% to $16.62 an ounce.

“The safe haven is still trading near the $1,290/ounce level, where it has remained stuck for a week now, showing little response to developments on the trade or geopolitical fronts,” said Marios Hadjikyriacos, a strategist with brokerage XM.

Commentary: Don’t believe promises that the trade deficit with China will shrink by $200 billion^[3]

Don’t miss: North Korea cannot ‘play’ President Trump, warns VP Pence^[4]

Gold continued to slog near chart lows, gathering little momentum from the still-swirling geopolitical factors around Iran oil^[5], China trade and North Korea diplomacy. Focus instead has been on firmer dollar trading and the U.S.-favored interest-rate differential over other economic powerhouses. A light economic calendar on Tuesday keeps attention on Wednesday’s release of Federal Reserve monetary policy meeting minutes and any signals within those notes for the likelihood of a rate increase next month and beyond.

The benchmark index ...

Economic growth should jump above 3 percent in 2018 thanks to the stimuli, the CBO said, but the acceleration will likely prove brief, and debt held by the public will soar to $28.7 trillion by the end of fiscal 2028.

That could create a precarious situation for Congress^[1] if the economy faces an economic downturn in the near term, Hatzius wrote, hampering legislators' ability provide additional fiscal stimulus.

"Lawmakers might hesitate to approve fiscal stimulus in the next downturn in light of the already substantial budget deficit," the economist said. "While we would expect some additional loosening of fiscal policy during the next downturn, there is a good chance in our view that it would be less aggressive than it was in the last few recessions."

But even if the debt and deficit levels don't prevent lawmakers from approving countercyclical fiscal stimulus during the next recession, a political desire to stabilize the debt level would likely arrest growth during the next recovery, the Goldman team explained.

"The current fiscal expansion ... must at some point give way not just to a neutral stance, which we expect by 2020, but to a tightening of fiscal policy that could restrict growth," Hatzius wrote.

Finally, the economist explained that regardless of how much longer the current expansion persists, increasing deficits and debts^[2] naturally put upward pressure on interest rates^[3], expanding the deficit further.

According to estimates by Goldman Sachs, a 1 percentage point increase in the budget deficit raises the 10-year Treasury yield^[4] by roughly 20 basis points when the economy is at or beyond full employment, as it appears to be currently.

"Surprises are clearly possible in both directions, but we...