Post 11 – Prior Posts and the Federal Debt

Hello to all. I hope you are enjoying my posts. I always welcome feedback.

Here are couple of comments I want to make about prior posts.

• Regarding my post called Grief: When Mary Forest Engel shared her article about losing her son, the spacing in her writing was beautiful and consistent.   When I reproduced her writing, that was not the case.  I am still learning the program used to send out these posts.

• I am grateful to my cousin, Bob Loyd, for calling to my attention that the 67% growth in government spending during 2020 took place during President Trump’s administration, not President Biden’s.  During President Biden’s first year, 2021, government spending declined by nearly 28% from the high point reached the previous year.  Federal government spending increased by 9% during 2022.

• The key point made in Post 10 holds true. There is a well-documented connection between rapid money growth rates and inflation rates.

We may see this connection again in future years because recent Federal deficits (new Federal borrowing within a year) have added to total Federal government debt.  For 2020, 2021, and 2022, the Federal deficits were, respectively, $3.13 trillion, $2.77 trillion, and $1.38 trillion, for a total of $7.28 trillion.  As of June 23, 2023), total Federal debt has increased to $32.1 trillion.

In case you have not personally encountered a trillion dollars lately, I will remind you that one trillion dollars is equal to 1000 million dollars.  We are talking about a serious amount of money, don’t you think?

Here is the immediate problem.  Interest payments on this debt will likely occupy a greater portion of future Federal government spending than they have historically.  Since neither cutting Federal spending nor raising taxes is uniformly popular, the Federal government may take the short-term easy way out and finance some of the interest payments with issues of new government securities, digging the debt hole even deeper.

Whether we see a rise in inflation rates in the future depends on the extent to which the Federal Reserve chooses to buy government securities. Unless the Federal Reserve changes its focus from interest rates to control of the money supply, the large and rising Federal debt enhances the threat of rising average inflation rates.

Well, that is all for today, and all for economics for a while.   I appreciate so much that you chose to subscribe to my web site and receive these posts.  Best wishes to all.