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Rate hikes could set off a crisis
But that equation would change, of course, if rates rose sharply. Given the sheer magnitude of the debt, even a tiny increase in interest is costly. Interest payments were the fastest-growing expense for the federal government even before the crisis.
One risk is that a surprisingly strong rebound in the US economy forces the Fed to rapidly reverse course.
"If the economy comes back too hot, then you could have inflation, higher interest rates -- and that could lead to a fiscal crisis," said JPMorgan's Kelly.
That's exactly why some believe the Fed will be forced to keep rates at rock-bottom levels. "It will be that much harder this time to wean the economy off ultra-low rates because the debt is that much greater," said Invesco's Hooper.
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Posted by Erin Burnett to ANT at May 6, 2020 at 7:41 PM
Wednesday, May 6, 2020
[ANT] New comment on Meghan McCain react to Pres. Trump specifying that....
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Markets don't seem to mind, at least not yet
The good news is that Uncle Sam is having no trouble, at least so far, with financing the deficit. The 10-year Treasury rate is near all-time low at just 0.7%. That signals investors don't fear the US debt situation is even near a breaking point.
Markets aren't freaking out about US debt for a few reasons.
First, this spending is temporary and emergency in nature.
Second, the US dollar remains the preeminent international reserve currency and US Treasury market is the deepest and largest in the world. Those are huge advantages that keep demand strong for US debt.
Third, it's extremely cheap to borrow right now. The Fed slashed interest rates to near-zero --and economists think they may stay there into 2022.
"It doesn't blow us up -- because interest rates are so low," said David Kelly, chief global strategist at JPMorgan Funds.
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Posted by Erin Burnett to ANT at May 6, 2020 at 7:41 PM
Markets don't seem to mind, at least not yet
The good news is that Uncle Sam is having no trouble, at least so far, with financing the deficit. The 10-year Treasury rate is near all-time low at just 0.7%. That signals investors don't fear the US debt situation is even near a breaking point.
Markets aren't freaking out about US debt for a few reasons.
First, this spending is temporary and emergency in nature.
Second, the US dollar remains the preeminent international reserve currency and US Treasury market is the deepest and largest in the world. Those are huge advantages that keep demand strong for US debt.
Third, it's extremely cheap to borrow right now. The Fed slashed interest rates to near-zero --and economists think they may stay there into 2022.
"It doesn't blow us up -- because interest rates are so low," said David Kelly, chief global strategist at JPMorgan Funds.
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Posted by Erin Burnett to ANT at May 6, 2020 at 7:41 PM
[ANT] New comment on Meghan McCain react to Pres. Trump specifying that....
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Powell: 'Not the time' to worry about debt
Jerome Powell, the Federal Reserve chair, recently expressed regret about America's failure to get its debt situation under control years ago.
"It tells you the importance of getting your fiscal house in order," Powell said during a press conference last week. "Ideally, you would go into an unexpected shock like this with a much stronger fiscal posture."
Yet Powell urged politicians not to worry about that now. "This is not the time to let that concern, which is a very serious concern, get in the way of us winning this battle," he said.
Worries about debt forced the United States to rein in spending shortly after the Great Recession a decade ago. Economists say that premature withdrawal of stimulus hobbled the economy.
"The anemic recovery was a direct result of not enough fiscal stimulus," said Kristina Hooper, chief global market strategist at Invesco.
The national debt has been on an unsustainable path for decades, in large part because of high entitlement spending on Social Security and Medicare.
Before the pandemic, Moody's forecast US debt would hit 100% of GDP in 2030. Now, it expects debt to stand at 128% of GDP by then.
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Posted by Erin Burnett to ANT at May 6, 2020 at 7:40 PM
Powell: 'Not the time' to worry about debt
Jerome Powell, the Federal Reserve chair, recently expressed regret about America's failure to get its debt situation under control years ago.
"It tells you the importance of getting your fiscal house in order," Powell said during a press conference last week. "Ideally, you would go into an unexpected shock like this with a much stronger fiscal posture."
Yet Powell urged politicians not to worry about that now. "This is not the time to let that concern, which is a very serious concern, get in the way of us winning this battle," he said.
Worries about debt forced the United States to rein in spending shortly after the Great Recession a decade ago. Economists say that premature withdrawal of stimulus hobbled the economy.
"The anemic recovery was a direct result of not enough fiscal stimulus," said Kristina Hooper, chief global market strategist at Invesco.
The national debt has been on an unsustainable path for decades, in large part because of high entitlement spending on Social Security and Medicare.
Before the pandemic, Moody's forecast US debt would hit 100% of GDP in 2030. Now, it expects debt to stand at 128% of GDP by then.
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Posted by Erin Burnett to ANT at May 6, 2020 at 7:40 PM
[ANT] New comment on Meghan McCain react to Pres. Trump specifying that....
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'Absolute necessity'
But for now, the focus is on keeping American businesses and households afloat. In March, Congress passed a $2.3 trillion stimulus package, the largest in US history. Half a trillion dollars of forgivable loans have been handed out to small businesses. Direct payments were made to low- and middle-income families.
The Congressional Budget Office expects the federal budget deficit will hit $3.7 trillion this year, up from an eye-popping $1 trillion in 2019.
And more stimulus is likely coming, perhaps another $2 trillion later this year, to help out states and local governments battered by the crisis.
All of this will add yet more debt to the pile. But there's no other viable option to stave off further crisis.
"The fiscal stimulus and resulting explosion of the deficit is an absolute necessity to combat the devastating impact from the economic shutdown and to avoid a second depression," said Steven Oh, global head of credit and fixed income at PineBridge, an investment firm that manages $101 billion.
Spiking deficits are also the result of a dramatic loss of tax revenue caused by the shutdown of businesses and 30 million Americans out of jobs.
The federal deficit is expected to hit 18.4% of GDP in 2020 and decline only gradually over the next decade, according to Moody's Investors Service.
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Posted by Erin Burnett to ANT at May 6, 2020 at 7:39 PM
'Absolute necessity'
But for now, the focus is on keeping American businesses and households afloat. In March, Congress passed a $2.3 trillion stimulus package, the largest in US history. Half a trillion dollars of forgivable loans have been handed out to small businesses. Direct payments were made to low- and middle-income families.
The Congressional Budget Office expects the federal budget deficit will hit $3.7 trillion this year, up from an eye-popping $1 trillion in 2019.
And more stimulus is likely coming, perhaps another $2 trillion later this year, to help out states and local governments battered by the crisis.
All of this will add yet more debt to the pile. But there's no other viable option to stave off further crisis.
"The fiscal stimulus and resulting explosion of the deficit is an absolute necessity to combat the devastating impact from the economic shutdown and to avoid a second depression," said Steven Oh, global head of credit and fixed income at PineBridge, an investment firm that manages $101 billion.
Spiking deficits are also the result of a dramatic loss of tax revenue caused by the shutdown of businesses and 30 million Americans out of jobs.
The federal deficit is expected to hit 18.4% of GDP in 2020 and decline only gradually over the next decade, according to Moody's Investors Service.
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Posted by Erin Burnett to ANT at May 6, 2020 at 7:39 PM
[ANT] New comment on Meghan McCain react to Pres. Trump specifying that....
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The US is becoming the king of debt. It's a necessary risk
President Donald Trump is living up to his self-given nickname "King of Debt." On his watch, the United States has borrowed aggressively -- during the good times, and now the bad times.
Instead of whittling down the federal deficit when the economy was strong, Trump directed the federal government pile on even more debt to pay for massive tax cuts and spending surges.
That meant that the United States entered this crisis in rough financial shape. Debt-to-GDP stood at nearly 80% even before the coronavirus pandemic struck -- a rate more than twice as high as the historical average and double the level before the Great Recession.
Now, the national debt is exploding because Washington is being forced to rescue the US economy from its greatest shock ever. The Treasury Department said this week it will borrow $3 trillion this quarter alone. That's nearly six times the previous record, which was set in 2008.
Still, while the national debt is scary -- it now stands at nearly $25 trillion -- now is not the time to cut back on the borrowing.
Economists agree that the United States must continue to rack up debt to prevent a full-blown depression. Otherwise, there won't be much of an economy left to repay the debt once the health crisis is over.
Even deficit watchdogs are urging Uncle Sam to keep borrowing.
"We made a huge mistake being so in debt when the economy was strong," Maya MacGuineas, president of the bipartisan Committee for a Responsible Federal Budget, told CNN Business. "But just because we were reckless and foolish going into the crisis, [that] doesn't mean we shouldn't borrow during it."
Of course, there will be long-term consequences for the mountain of debt Washington is racking up. Eventually it will mean higher interest rates, hotter inflation and likely higher taxes.
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Posted by Erin Burnett to ANT at May 6, 2020 at 7:38 PM
The US is becoming the king of debt. It's a necessary risk
President Donald Trump is living up to his self-given nickname "King of Debt." On his watch, the United States has borrowed aggressively -- during the good times, and now the bad times.
Instead of whittling down the federal deficit when the economy was strong, Trump directed the federal government pile on even more debt to pay for massive tax cuts and spending surges.
That meant that the United States entered this crisis in rough financial shape. Debt-to-GDP stood at nearly 80% even before the coronavirus pandemic struck -- a rate more than twice as high as the historical average and double the level before the Great Recession.
Now, the national debt is exploding because Washington is being forced to rescue the US economy from its greatest shock ever. The Treasury Department said this week it will borrow $3 trillion this quarter alone. That's nearly six times the previous record, which was set in 2008.
Still, while the national debt is scary -- it now stands at nearly $25 trillion -- now is not the time to cut back on the borrowing.
Economists agree that the United States must continue to rack up debt to prevent a full-blown depression. Otherwise, there won't be much of an economy left to repay the debt once the health crisis is over.
Even deficit watchdogs are urging Uncle Sam to keep borrowing.
"We made a huge mistake being so in debt when the economy was strong," Maya MacGuineas, president of the bipartisan Committee for a Responsible Federal Budget, told CNN Business. "But just because we were reckless and foolish going into the crisis, [that] doesn't mean we shouldn't borrow during it."
Of course, there will be long-term consequences for the mountain of debt Washington is racking up. Eventually it will mean higher interest rates, hotter inflation and likely higher taxes.
Unsubscribe from comment emails for this blog.
Posted by Erin Burnett to ANT at May 6, 2020 at 7:38 PM
Sunday, May 3, 2020
[The Global Outbreak] New comment on Simeon Courtie Says Coronavirus Vaccine Could Be R....
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In the short term, Nabarro says a vast program of testing and contact tracing would need to be implemented to allow life to function alongside Covid-19 -- one which dwarfs any such program ever established to fight an outbreak, and which remains some time away in major countries like the US and the UK.
"Absolutely critical is going to be having a public health system in place that includes contact tracing, diagnosis in the workplace, monitoring for syndromic surveillance, early communication on whether we have to re-implement social distancing," adds Hotez. "It's doable, but it's complicated and we really haven't done it before."
Those systems could allow for some social interactions to return. "If there's minimal transmission, it may indeed be possible to open things up for sporting events" and other large gatherings, says Hotez -- but such a move would not be permanent and would continually be assessed by governments and public health bodies.
That means the the Premier League, NFL and other mass events could go ahead with their schedules as long as athletes are getting regularly tested, and welcome in fans for weeks at a time -- perhaps separated within the stands -- before quickly shutting stadiums if the threat rises.
"Bars and pubs are probably last on the list as well, because they are overcrowded," suggests Neal. "They could reopen as restaurants, with social distancing." Some European countries have signaled they will start allowing restaurants to serve customers at vastly reduced capacity.
Restrictions are most likely to come back over the winter, with Hotez suggesting that Covid-19 peaks could occur every winter until a vaccine is introduced.
And lockdowns, many of which are in the process of gradually being lifted, could return at any moment. "From time to time there will be outbreaks, movement will be restricted -- and that may apply to parts of a country, or it may even apply to a whole country," Nabarro says.
The more time passes, the more imposing becomes the hotly debated prospect of herd immunity -- reached when the majority of a given population, around 70% to 90%, becomes immune to an infectious disease. "That does to some extent limit spread," Offit says -- "although population immunity caused by natural infection is not the best way to provide population immunity. The best way is with a vaccine."
Measles is the "perfect example," says Offit -- before vaccines became widespread, "every year 2 to 3 million people would get measles, and that would be true here too." In other words, the amount of death and suffering from Covid-19 would be vast even if a large portion of the population is not susceptible.
All of these predictions are tempered by a general belief that a vaccine will, eventually, be developed. "I do think there'll be vaccine -- there's plenty of money, there's plenty of interest and the target is clear," Offit says.
But if previous outbreaks have proven anything, it's that hunts for vaccines are unpredictable. "I don't think any vaccine has been developed quickly," Offit cautions. "I'd be really amazed if we had something in 18 months."
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Posted by Erin Burnett to The Global Outbreak at 3 May 2020 at 08:12
In the short term, Nabarro says a vast program of testing and contact tracing would need to be implemented to allow life to function alongside Covid-19 -- one which dwarfs any such program ever established to fight an outbreak, and which remains some time away in major countries like the US and the UK.
"Absolutely critical is going to be having a public health system in place that includes contact tracing, diagnosis in the workplace, monitoring for syndromic surveillance, early communication on whether we have to re-implement social distancing," adds Hotez. "It's doable, but it's complicated and we really haven't done it before."
Those systems could allow for some social interactions to return. "If there's minimal transmission, it may indeed be possible to open things up for sporting events" and other large gatherings, says Hotez -- but such a move would not be permanent and would continually be assessed by governments and public health bodies.
That means the the Premier League, NFL and other mass events could go ahead with their schedules as long as athletes are getting regularly tested, and welcome in fans for weeks at a time -- perhaps separated within the stands -- before quickly shutting stadiums if the threat rises.
"Bars and pubs are probably last on the list as well, because they are overcrowded," suggests Neal. "They could reopen as restaurants, with social distancing." Some European countries have signaled they will start allowing restaurants to serve customers at vastly reduced capacity.
Restrictions are most likely to come back over the winter, with Hotez suggesting that Covid-19 peaks could occur every winter until a vaccine is introduced.
And lockdowns, many of which are in the process of gradually being lifted, could return at any moment. "From time to time there will be outbreaks, movement will be restricted -- and that may apply to parts of a country, or it may even apply to a whole country," Nabarro says.
The more time passes, the more imposing becomes the hotly debated prospect of herd immunity -- reached when the majority of a given population, around 70% to 90%, becomes immune to an infectious disease. "That does to some extent limit spread," Offit says -- "although population immunity caused by natural infection is not the best way to provide population immunity. The best way is with a vaccine."
Measles is the "perfect example," says Offit -- before vaccines became widespread, "every year 2 to 3 million people would get measles, and that would be true here too." In other words, the amount of death and suffering from Covid-19 would be vast even if a large portion of the population is not susceptible.
All of these predictions are tempered by a general belief that a vaccine will, eventually, be developed. "I do think there'll be vaccine -- there's plenty of money, there's plenty of interest and the target is clear," Offit says.
But if previous outbreaks have proven anything, it's that hunts for vaccines are unpredictable. "I don't think any vaccine has been developed quickly," Offit cautions. "I'd be really amazed if we had something in 18 months."
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Posted by Erin Burnett to The Global Outbreak at 3 May 2020 at 08:12
[The Global Outbreak] New comment on Simeon Courtie Says Coronavirus Vaccine Could Be R....
Erin Burnett has left a new comment on your post "Simeon Courtie Says Coronavirus Vaccine Could Be R...":
What life without a vaccine looks like
If a vaccine can't be produced, life will not remain as it is now. It just might not go back to normal quickly.
"The lockdown is not sustainable economically, and possibly not politically," says Neal. "So we need other things to control it."
That means that, as countries start to creep out of their paralyses, experts would push governments to implement an awkward new way of living and interacting to buy the world time in the months, years or decades until Covid-19 can be eliminated by a vaccine.
"It is absolutely essential to work on being Covid-ready," Nabarro says. He calls for a new "social contract" in which citizens in every country, while starting to go about their normal lives, take personal responsibility to self-isolate if they show symptoms or come into contact with a potential Covid-19 case.
It means the culture of shrugging off a cough or light cold symptoms and trudging into work should be over. Experts also predict a permanent change in attitudes towards remote working, with working from home, at least on some days, becoming a standard way of life for white collar employees. Companies would be expected to shift their rotas so that offices are never full unnecessarily.
"It (must) become a way of behaving that we all ascribe to personal responsibility ... treating those who are isolated as heroes rather than pariahs," says Nabarro. "A collective pact for survival and well-being in the face of the threat of the virus.
"It's going to be difficult to do in poorer nations," he adds, so finding ways to support developing countries will become "particularly politically tricky, but also very important." He cites tightly packed refugee and migrant settlements as areas of especially high concern.
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Posted by Erin Burnett to The Global Outbreak at 3 May 2020 at 08:12
What life without a vaccine looks like
If a vaccine can't be produced, life will not remain as it is now. It just might not go back to normal quickly.
"The lockdown is not sustainable economically, and possibly not politically," says Neal. "So we need other things to control it."
That means that, as countries start to creep out of their paralyses, experts would push governments to implement an awkward new way of living and interacting to buy the world time in the months, years or decades until Covid-19 can be eliminated by a vaccine.
"It is absolutely essential to work on being Covid-ready," Nabarro says. He calls for a new "social contract" in which citizens in every country, while starting to go about their normal lives, take personal responsibility to self-isolate if they show symptoms or come into contact with a potential Covid-19 case.
It means the culture of shrugging off a cough or light cold symptoms and trudging into work should be over. Experts also predict a permanent change in attitudes towards remote working, with working from home, at least on some days, becoming a standard way of life for white collar employees. Companies would be expected to shift their rotas so that offices are never full unnecessarily.
"It (must) become a way of behaving that we all ascribe to personal responsibility ... treating those who are isolated as heroes rather than pariahs," says Nabarro. "A collective pact for survival and well-being in the face of the threat of the virus.
"It's going to be difficult to do in poorer nations," he adds, so finding ways to support developing countries will become "particularly politically tricky, but also very important." He cites tightly packed refugee and migrant settlements as areas of especially high concern.
Unsubscribe from comment emails for this blog.
Posted by Erin Burnett to The Global Outbreak at 3 May 2020 at 08:12
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