US GDP Rose by $850 Billion in 2019 as US National Debt Surged by $1.2 Trillion. Debt-to-GDP Ratio Hit 108%

Dream of 3% economic growth remained a dream despite surge in government borrowing and spending.

By Wolf Richter for WOLF STREET.

The dreams of 3%-plus economic growth in the US remained dreams in 2019, despite tax cuts and ballooning federal government spending, which are a stimulus. But the resulting budget deficit caused the gross national debt to balloon far faster than GDP grew.

In the fourth quarter, the economy as measured by inflation-adjusted “real” GDP grew at an annual rate of 2.1% from the third quarter. This brought the total growth of real GDP for all of 2019 to 2.3%, which is the average annual GDP growth since 2012:

This is according to the first estimate by the Bureau of Economic Analysis, released today, based on incomplete data. As more data accumulates, the BEA revises the estimates. The next revision will be released on February 27. These revisions are often minor, but sometimes they’re whoppers, completely changing the economic picture, as they did for Q4 2018, when the initial estimate of GDP growth was a hot 3.1%, which was subsequently crushed down to a frigid 1.1%.

In Q4 2019, the “real” GDP growth rate of 2.1% was essentially the same as over the prior two quarters, and below the average growth rate since 2012 of 2.3%:

On the positive side in Q4, imports of goods and services fell 8.7%, with goods imports alone dropping 11.6% (a decline in imports adds to GDP). But exports ticked up only 1.4% (an increase in exports adds to GDP).

Also pushing up GDP in a big way: federal government expenditures in Q4 rose at an annual rate of 3.6%. This brought the increase in federal government spending for the entire year 2019 to 3.5%. Defense spending surged 4.9% in 2019. Nondefense spending inched up only 1.6%. We’ll get to the debt that this federal government spending produced in a moment.

Growth was dragged down in Q4 by the sharp decline in gross private domestic investment of 6.1%, including a 10.1% drop in investment in structures and a 2.9% drop in investments in equipment.

Consumer spending (“personal consumption expenditures” adjusted for inflation), which accounts for 68% of GDP, grew at an annual rate of 1.8% in Q4. While this growth rate was down from Q3 (3.1%) and Q2 (4.6%), it was higher than in Q1 (1.1%) and in Q4 2018 (1.4%). For the year 2019, consumer spending, on this inflation-adjusted basis grew 2.6%, at the low end of the range of the past six years:

GDP measures the economy in terms of the dollars that are spent or invested by consumers, businesses, and governments in a given time period. Illegal spending and investing – prostitution, retail sales of controlled substances, etc. – are not included in the US, though there are discussions under way about including it.

Nominal GDP, which is measured in current dollars and is not adjusted for inflation, increased by 4.1% in 2019, or by $849 billion from a year earlier, to $21.4 trillion:

Where do these dollars in GDP growth come from?

GDP measures the flow of dollars at a certain point. It does not include where the dollars came from that were invested or spent. In other words, GDP ignores the increase in debt.

Most of what the federal, state, and local governments spend in the US and invest in the US enters into GDP either directly or indirectly. Much of what the federal government spent came from tax revenues, fees, and other receipts. The remainder was funded by new debt.

In the calendar year 2019, the federal government’s spending that made it directly into GDP calculations, released today, grew by 3.5%, with defense spending surging 4.9%, and nondefense spending ticking up 1.6%. Federal government deficit spending ballooned the US gross national debt by $1.23 trillion in the calendar year 2019, to $23.2 trillion.

But despite the surge in federal government spending, causing additional federal borrowing of $1.23 trillion in 2019, growth in nominal GDP totaled only $849 billion.

Let that stew for a moment: What would the economy have done with a more moderate increase, or no increase, in federal borrowing and spending?

The chart below shows annual increases in nominal GDP in billion dollars (blue) and the annual increases in the gross national debt in billion dollars (red). Neither are adjusted for inflation. Note the special effects just before, during, and right after the Great Recession: Nominal GDP growth plunged in 2008 and went negative in 2009. During that time, unemployment skyrocketed, companies collapsed, federal tax receipts plunged, federal expenditures surged (unemployment insurance, etc.), and the deficit and the gross national debt exploded.

But instead of going back to the prior arrangements, where in good times, nominal GDP grew faster than the national debt, the national debt continued to outgrow nominal GDP. The only exception was 2017, when the debt-ceiling fight dragged a portion of the debt-increase into 2018 (average out 2017 and 2018 for a more accurate picture):

The year 2019 was also another milestone: The ratio of the US gross national debt to GDP jumped to 108%, up from 63% in 2006 on the eve of the Financial Crisis as all heck was already breaking loose:

And I will leave you with a chart of this issue that no one in Washington pays attention to anymore, other than the Fed, which pays lip-service to it by occasionally calling the federal debt-growth “unsustainable,” when challenged in a press conference. In terms of our elected officials in Washington, the rule is that debt doesn’t matter. Former fiscal hawks have been converted. And debt truly doesn’t matter until it suddenly does:

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  133 comments for “US GDP Rose by $850 Billion in 2019 as US National Debt Surged by $1.2 Trillion. Debt-to-GDP Ratio Hit 108%

  1. DR DOOM says:

    Sad to say , on a per capita basis ,I did not contribute my $2500 to the GDP increase. I wish I would have. It could make one feel rather worthless if you think on it too much.

    • VintageVNvet says:

      10-4 docdoom,,, my older cousin/mentor,,, very well to do MD doc in SoCal after absolutely doing his part after being drafted into US Army Med Corps the day he was graduated med school in 1943, then drafted into OSS when it was noted he spent his jr HS year in Germany and was completely fluent:::
      he always told me to be very proud to pay taxes as a sign of doing good,, etc., etc…
      Miss that older farter every day

    • Ismar Didic says:

      This is guverment numbers 666 show me real numbers.

  2. Rcohn says:

    10 year and thirty year Interest rates in the US are near all time lows.
    The obvious conclusion is that the the government should do more of the same. Instead of a 2.2 trillion deficit , government should ramp up spending to a 5 or 10 trillion deficit. Then interest rates will approach zero as inflation approaches zero.

    • Jeff says:

      That is called modern monetary theory

      • Bobber says:

        I dont think money printing is a theory. It’s more like a bad habit of the weak.

        • Cas127 says:

          There are always academic lickspittles around willing to declare the sky green if it will curry favor with the degenerates in power.

          In every nation, in every age.

          On a related note, as somebody who subjected himself to reading more than one MMT book (“How the hell can they say that money printing can’t cause countries to go broke?”) The answer is dismayingly obvious.

          Usually around page 200 MMT advocates get around to saying…”Oh, of course money printing can ruin an economy…it just can’t “bankrupt” it because the government can always print more money and force you to use it. How did you think we meant “ruin” was impossible…”

          So, basically the MMT’ers lean heavily on a species of fascist fiscal totalitarianism (“Use the debauched dollar or go to jail”) and 3rd grade level disingenuousness (“Why would you think bankruptcy is just shorthand for economic ruin”)

          For all the academic babble of the MMT political lickspittles, common sense – as usual – is a better guide to truth.

      • Rcohn says:

        Inevitable result is the collapse of the currency

        • Ensign_Nemo says:

          This is nothing new. The Song emperor of China was fighting a losing battle against the Mongols in the 13th century and printed massive amounts of paper money to pay for the war.

          The table below is from this video, starting at about 13:00:

          Paper Money Supply

          1224: 240m strings of cash
          1246: 650m strings of cash
          1264: c. 15b strings of cash (?)

          In March 1279, the Song fought their last battle against the Mongols, after a series of peasant revolts that weakened them to the point of collapse.

          China’s patiently waiting for the USA to self-destruct, so that they won’t need to fight us to become the dominant global power.

    • historicus says:

      They will….
      PE ratios at 30
      and Trillion dollar deficits for the grandkids

      Atta boy Fed. You’re so good at this….

  3. Jerome says:

    “US GDP Rose by $850 Billion in 2019 as US National Debt Surged by $1.2 Trillion. Debt-to-GDP Ratio Hit 108%” – This is called a Ponzi scheme.

    • historicus says:

      Its all about Japan….
      They started this…and the beginning of the end will be when they tip over …until then, hang on.

      • nick kelly says:

        Americans can barely grasp the solidarity of Japanese society. Their infra-structure makes the US look like a third world country. To them the US looks like a country on the verge of civil war.

        This comment section is filled with nonsense about about effed Japan is.
        Take a look in a driveway near you for first hand info on Japan’s trade surplus.

        • Willy Winky says:

          Been to Japan many times. They are experts in building trains, bridges and highways to nowhere. Mostly devoid of people.

          This is a fantastic way to keep GDP growing.

          Isn’t Japan monetizing over half of their annual debt?

          If every there was a contemporary Potemkin village, Japan is it.

    • Cas127 says:

      Death spiral…Feds can never allow interest rates to be greater than GDP growth when the Debt to GDP ratio is over 100 pct – in that environment allowing long rate to go above GDP rate means that interest payment growth will exceed increase in GDP – automatically increasing the Debt to GDP ratio further…causing a death spiral.

      That is where 70 years of politically degenerate, Keynesian justified deficit spending have brought us – the Dollar Dead Zone.

      From here until DC burns, the Feds will print (any resulting inflation will be celebrated, ignored, or pinned on some other designated villain) because anything else will result in the end of the current political class.

      DC will destroy the economy and country in the sole name of preserving their rule – doubt it? What course correction has ever occurred in over 70 yrs of endlessly increasing debt to GDP ratios?

      Why/how are the bastards of yesterday going to turn into the selfless saviours of tomorrow?

      DC believes only in two things – the righteousness if its own power and the magic of zero.

      If interest rates are ultimately brought to zero, then there is absolutely no incremental annual cost to infinitely greater DC spending (ie, control). The debt will increase (but it is never intended to be paid down, let alone off) but the annual interest bill will be nil – because the Fed will print a supply of dollars sufficient to force the interest rate to zero.

      Inflation? Sure – but see the three dodges above.

      Start using something other than the dollar in the US? The Feds will jail you.

      • So… I should stop stockpiling chickens?

        There you have it. The Tragedy of The Commons writ large. Kinda makes ya feel like Cassandra, watching it play out like an idiot’s predictable, contrived screenplay, but… What can you do about it.

  4. IdahoPotato says:

    “In terms of our elected officials in Washington, the rule is that debt doesn’t matter.”

    It only matters to the deficit hawks when one party is in power.

    • historicus says:

      Google “Modern Monetary Theory”….

      this is what its NOW all about…

      • RagnarD says:

        My fave question for MMTers is
        “Why doesn’t every country do this, and right now?!?”

        Answer; MMT can only exist in a world where the Fiat currency has credibility. Thus MMTers r riding on the coattails of the vestiges of the US dollars quickly fading credibility. But what better way to trash that credibility then to implement something like MMT?

  5. nick kelly says:


    Debt rises by 1.2 T, GDP by .85 T

    Isn’t there supposed to be a multiplier effect from govt spending, aka the Laughter Curve?

    The only way these numbers are possible is if a lot of the debt increase is to pay interest. If that is the case when the govt is borrowing below 2%…..maybe it should issue a 100 year bond.

    Back when the Laughter Curve was all the rage, it was said that a dollar of govt spending created over six dollars of private spending. The last time I saw a number it was down to a dollar and change. Or treading water.

    • Nat says:

      Not all spending (government or otherwise) is the same as far as the multiplier effect. What matters and what a given multiplier is changes over time and it is dependent on where there is a lack of money and what the local velocity of money for that point in the economy is (i.e. economic slack and demand). Most of the recent increase in debt has been to tax cuts for the rich and the military industrial complex. To have a fractional multiplier (i.e. a divider) means money was injected into places that are already over-saturated with money and so there is a negative return on investment. The natural conclusion from this would be that taxes on the rich need to go way up and the military defense budget slashed so the money can be injected elsewhere where there is actually economic slack due to a large disparity between need of liquidity and its actual supply (which if picked correctly will then have a huge multiplier effect when money is injected there.)

      • Your post almost made me cry. Money… doesn’t have to go down the toilet. You can call it “Post-Modern Monetary Theory”!

        • Brant Lee says:

          The reason the tax cut went to the rich is that corporations would have had to compete with each other for tax cuts given to the middle class. Why go to the trouble? Trickle up is too much work.

      • Thank for you saying concisely what I could only countenance in broad terms.

    • Don says:

      “Back when the Laughter Curve was all the rage, it was said that a dollar of govt spending created over six dollars of private spending.”

      Do you happen to know the time period when it was a 1 to 6 ratio?

      • nick kelly says:

        To be clear, in the early 70’s, Laffer was calling for tax cuts, saying that the extra money spent by consumers would circulate several times that amount and create more revenue, so the tax cut would pay for itself, and not increase the deficit.

        Adopted by Reagan, the deficit exploded after the tax cuts.
        Leftist economists tend to cite the multiplier effect as a reason for govt spending ( aka: stimulative spending) rather than tax cuts.

        In either hand the magic wand has not panned out. I believe the heyday of the multiplier effect
        was in the 70’s.

        • NBay says:

          My filthy rich DC lobbyist uncle totally hated Carter. He often said,

          “What the hell is a damned scientist doing in the Whitehouse?”

          You would all be surprised at the people, “in his pocket”, but I will say MASSIVE amounts of MIC money kept them there.

          Carter was just asking for a “Green New Deal”, almost 50 years ago. My only beef with him is that I don’t need organized religion to tell me right from wrong, or the best of the choices before us all.

    • Bruce Johnson says:

      More corporate tax cuts…

      because corporations do pay taxes, people do…

      The first part is especially true…..

  6. Government debt rises without any new spending. The cost of servicing the debt, despite low interest rates continues to climb. There are a likely good reasons; one the decline in spending power of the investment dollars which government takes in as (borrowed) revenue. Those bucks just don’t go as far when the government tries to buy assets which rapidly depreciate. The bill for security is rising, with no added benefit really. Wonder what this virus will cost? New spending programs put people to work, new construction, without that you are simply paying more just to keep the lights on.

    • Harrold says:

      Our Secretary of Commerce says the virus will lead to more jobs.

      • historicus says:

        and rate cuts….

      • Sammy Iyer says:

        Yes very much Possible! .
        Haliburton our most reliable GOVT contractor (pun intended) is planning to acquire a small vaccine producing lab .
        There will be a Govt edict soon for a compulsory Cornoa virus vaccine (like flu vaccine ) on all the citizenry @ $30 a pop.
        Imagine how much jobs to manufature the vaccine +multi billion $ sales will increase GDP!

        • NBay says:

          Yeah. These Modern Miracle Pharmaceuticals are coming out so fast lately, that the Pharma companies have no choice but to advertise, so we all can assist our Docs in being aware of them all. Or as you point out, Pharma lobbyists working hard to help our elected representatives keep up with the necessity of demanding we avail ourselves of all these new wonder medicines.
          What a great time to be alive!
          It’s actually pretty amazing that people still get sick or die.

      • Frederick says:

        Sure won’t help the airlines or Boeing which seems to be its own worst enemy lately

  7. historicus says:

    Yield curve flattens and the talking heads are saying that means recession.
    Stocks rally 250 pts in 30 minutes…..
    Talking heads say Fed looking to promote more inflation.
    Others saying…”Hey, that’s not their job. In fact, it is the opposite of their job.” referring to the forgotten stable prices mandate.
    And the Fed promotes a flat yield curve by providing endless money to REITs who borrow short and cheap and then buy long term mortgages, driving rates down in the long end.
    Who is this Fed that absorbs federal deficit spending and suspends supply/demand price discovery?

  8. Iamafan says:

    They, Sherman and Gundlach, are talking about the same thing at doubleline now. Watching it now. I will make long comment regarding national debt later. See you.

  9. 2banana says:

    At what point, between 0% and 100% taxation, does one become a slave?

    For someone in the middle class in NYC:

    NYC Tax: 3.5%
    NYS Tax: 8%
    Federal Tax: 32%
    Social Security: 6.2% (14.4% if self employed)
    Medical: 1.45% (2.9% if self employed)

    Total: 51.15% (58.8%)

    Plus Sales Tax and Property Taxes (which can be significant).

    “despite tax cuts and ballooning federal government spending, which are a stimulus.”

    • Otto Maddox says:

      Social Security’s legal rate may be 6.2% but the economic rate is much higher. You’ve fallen for the trick they’ve been playing for a long time.

    • chillbro says:

      Must be nice to be in the 32% tax bracket champ ;)

      But be really hard being upper middle class, life is so unfair. But I guess making good money doesn’t require knowing how to actually count the money. American education at its finest!

      • 2banana says:

        32% bracket is $160-$204k

        You think that is upper middle class in NYC?

        I can never get a straight answer to my question from the smug elitists.

        “At what point, between 0% and 100% taxation, does one become a slave?”

        Why don’t you answer the question champ?

        • Unamused says:

          Why don’t you answer the question champ?

          Because it’s a loaded question and a logical fallacy, and there is no valid answer. It’s propaganda intended to promote complete privatisation of government, as if ruthless corporations haven’t fatally corrupted government already.

          If rule by corporations is your answer, you’re asking the wrong question.

        • Cas127 says:

          The other question the Left won’t answer – define “rich”.

          They want a moving target – having long seen their various State centric schemes fail – requiring more tax revenue and therefore a continuing downward definition of “rich”

          At this point, Big Gov and Big Biz are simply two mafias fighting (and occasionally collaborating) over the protection racket money (and the right to print money…).

          Citizens are simply their food.

          Any solution that transfers power/info/money *directly* into the hands of citizens/claimed beneficiaries of programs is an improvement.

          Everyone else has poisoned incentive structures.

        • echodelta says:

          The real question is at what point are you an indentured servant. Slaves are real property and cannot vote, execute their own choices in the marketplace, etc.
          It has been a long practice to avoid the cost structure that comes with slavery (overhead cost, maintenance, management) and simply treat arguably free people worse than you could treat a slave and limit their options in other ways (e.g. lumber camps, remote canneries, cruise ships). This is sort of the theme of Trump’s career. Hire people to do work then don’t pay them, don’t pay them in full, or take them to court so they must pay to recover their losses. Replace workers with illegal labor or legal laborers hired under false pretenses using J visas. Blacklist anybody who complains. Use your mafia connections. #winning!

        • Happy1 says:

          Your calculation slightly exaggerates the tax because SS does not apply above about 110K.

          But anyone who doesn’t think his question is real is fooling themselves. It mostly applies to people who have reached financial independence in mid or late career.

          I am in this circumstance. If federal tax rates for me go up to 40% (or higher) as proposed by all democratic candidates, I will cut back on my work and lower my bracket. Many people are in the same situation, where they can modulate their work and income, or elect to defer capital gains. I have enough to live on and am working because I enjoy it, but I will cut work if more than half of my income is taken by taxes. There are thousands in the same boat and we pay the bulk of federal income tax. People saving in the early part of their career may not have the same luxury but most people in the higher brackets are near retirement.

        • Happy1 says:

          This is also why NYC is shrinking and FL and TX booming.

        • RangerOne says:

          For a single person you have a firm middle class life in NYC at over $150k.

          Among all earners that should be upper middle class by definition.

          Among your peers making $160k may be pretty average. But it is an amount some can have a decent life there on. Be able to make rent and have some luxrys. Will living in a professional part of town maybe with a roomate or a well placed studio.

          And if you marry someone of similar income its clear this is an upper middle class bracket as combined you will make closer to $400k a year.

          But yeah I could see feeling average in NYC making $160k. Especially when you could probably make almost the same money in a place that cost half as much to live in. But they you wouldn’t be in NYC.

        • NBay says:

          Happy 1 said he was a “Medical Doctor”.
          Banana said “serving in the military was a privilege.”
          Cas said “the left” won’t define “rich”.

          Just observations from a coastal elite, very happy to be in a 500 sq ft hotel style apartment, and not on the street or in jail.

          No questions, no answers, just hopes.

    • Sammy Iyer says:

      On the other day I saw a graph here -in NewYork cost of housing & transportation is close to 50% of take home salary !
      So living decently as a family (couple+2 kids )is going to be tough despite having 200k salary (after 51.15% tax …)

      • chillbro says:

        It is not a 51% tax. FICA tops after about 130k. And y’all clearly don’t know how the tax bracket system works. Smart enough to type stupid comments though.


        • Cas127 says:

          Well Chillbro, what *is* the effective tax rate on 2 earner 200k in NYC?

          We know that rent/cost of living is triple the US median…

        • chillbro says:

          Its an individual calc. But if it is two person household federal income tax rate drops to 24%, more FICA might apply depending on who works and how much they earn. Also if they have kids and daycare. But the rate is unlikely to hit 40% under vast majority of scenarios. Sorry to disappoint the original commenter with his hyperbolic questions.

          I wish people in the US cared this much about low income people as they do about affluent urban class!

  10. Duane Snyder says:

    Recently I came across a financial term I was not familiar with, “Okun’s Law”. I don’t know how seriously I take this “Okun’s Law” but it suggests that for each 1 percent decline in unemployment we should see 2 percent growth in GDP above the typical rate of GDP growth needed to just hold the unemployment rate steady. After the crash 10 years ago we should have seen consistent annual GDP growth of 4 percent to cause 6 point decline in unemployment over the last decade. Yet despite the record debt spending and prolonged record low interest rates we see average GDP at only 2 percent. How did unemployment fall so much when inflation and GDP growth are essentially equal? Is it simply the McJob pandemic sweeping the economy?

    • Paulo says:

      Mr Snyder,

      I am not sure the US unemployment rate is as low as stated.

      Quick search:
      “In this sense, the U-6 rate may be considered the true unemployment rate. According to BLS data, the average annual U-3 rate for 2018 was 3.9%, while the average annual U-6 rate was much higher, coming in at 7.7%.”

      Definition: “The U-6, or real unemployment rate, includes the underemployed, the marginally attached, and discouraged workers. For that reason, it is around double the U-3 report.”

      • Nat says:

        Its actually worse then that. Even the U-6 measurement doesn’t include people that have been flat out tossed out of the labor force against their will. Its hard to figure who to include when looking at labor force participation rate because there are lots of people who shouldn’t be counted as in the labor force (like say people too young or too old to work). But that is the problem, its very easy to hide lots of society that should be counted as unemployed “outside the labor force” with all the people who really aren’t in the labor force, and thus it is easy to massively fudge the unemployment statistics that way.

        Of note: the % of the population currently counted as “not in the labor force” is approaching record highs. This is true even as more people past the accepted retirement age then ever before say they can’t afford to retire and must work then ever before. It is also true now when the largest portion of individuals from both genders believe they need a job then ever before. This means the % of the population that feels they need a job is higher then ever before at the same time that the % of people whose unemployment doesn’t count towards actual unemployment statistics (including U-6) is approaching record highs. Hmmmm… something is wrong there…

        • Cas127 says:

          Take a look at the employed-to-population ratio for 25 to 54 yr olds over at FRED.

          That is an infinitely more accurate metric of the true state of the US employment market than the born-to-be BS unemployment rate endlessly trumpeted by DC’s familiars in the MSM.

          This ratio has improved – but it lags the unemployment rate improvement by two or three years. Only now (after 20 yrs) is this working age ratio approaching the rate of the late 90s.

          That is a helluva lot closer to the felt experience of the majority of Americans (20 years of slow growth, stagnation, and periodic implosions).

          There is a reason why rather brain dead socialism has seen a resurrection of sorts – an entire generation has been through a fair amount of economic sh*t – beyond the two implosions and pending third.

        • Duane Snyder says:

          Labor participation rate is a puzzle, it hasn’t risen as much as the unemployment rate has fallen. One reason often cited is that baby boomers are retiring driving the labor participation rate down. But if you look at BLS stats, labor participation rates among older workers has been rising. In 1998 labor participation among those 65-74 was 17.7 percent. In 2018 it was 27 percent.

        • NBay says:


          Is “brain dead” socialism different from, say, “thoughtful or selected” socialism (which is where I am politically) or just a blanket insulting remark on all socialism, which I’m sure you are aware is absurd. Perhaps just a heat of the moment remark?

          I mean, would you just send all government employees home and tell them to go find work in the private sector?

          If not, then let’s do some work on that middle ground, eh? Obviously net worth inequality is totally out of hand.

          And you know what Plato said about that.

      • Frederick says:

        Of course the real unemployment rate is MUCH higher than stated No doubt about that Can’t have reality spoiling the party now can we?

    • rhodium says:

      I don’t want to take the time to read up on it, but I think that was something of an econometric correlation that held for a long time in the U.S. economy hence why they dubbed it a “law.” However, it’s broken down over the last couple decades, especially the latter. I think the “Mcjob pandemic” as you put it has a lot to do with it. Many Americans at the bottom and middle have had stagnant or declining discretionary income due to the increase in other costs (looking at rents and mortgage payments, it’s as if the economy can’t even supply housing). If you eliminate money from the equation and think of cost as the amount of work (time and energy) it takes to produce something, you’d think we’re getting less productive. How can they claim there has been economic growth then? Unless value, as measured by money, is being siphoned off to somewhere else…

  11. Scott says:

    If the Central Bankers of the world want to increase inflation, just print money and give it to their citizens.

    This massive debt build up is just mad economics.

    • Trent says:

      It has nothing to do with economics. It’s about power. If the system goes bust, who has the most to lose? The bottom lower 90% of the United States or the top 10%. This was never about economics and it never will be. Capitalism in 2008 was telling us our “betters” aren’t that much better and wanted to wipe out all of their “wealth”. Instead they bailed themselves out and have been talking about “green shoots” ever since.

      • Cas127 says:

        “It’s about power.”

        Exactly – of the multiple ways of getting what they want, fraud (gvt printing money to bribe people to do their bidding) is almost as effective as force (gvt shooting people in the head if they don’t do gvt’s bidding) – and it creates a greater sense of normalcy/easier control.

        By destroying private savings thru printing, the Feds are destroying the concept of limited gvt.

        They want to be the only holder of assets (the printing press), the only locus of control.

        It is simply easier to run the gvt that way.

        The same way it is easier to control 4 TBTF banks, rather than 15000 (now 6000) smaller ones.

        Equal protection of the laws? Not when it gets in the way of DC’s will.

        • Trent says:

          exactly, savings=freedom. Debt=slavery. Why do you think the system makes it so hard to save? In my current job i’m able to save 1,000 a month. It sounds like a lot but it isn’t. My prior job I quit with 15,000 saved. That kept me housed and fed for about 11 months. And I totally agree with 15,000 banks vs. 4 big ones. Decentralization offers the most freedom. Most americans haven’t thought that far. Agree and don’t agree with Wolf about debt jubliees.

        • NBay says:

          Which is EXACTLY why we have Citizens United and armies of lobbyists. I was very surprised to hear they even play on the GOP Congressional baseball team. And on the Dem’s, too, most likely. Cozy, huh?

          DC’s will? Think again about who’s WILL you are talking about.

          I read 6-10 major GOP donors collectively tell Mitch what to do. No wonder he is so calm, he’s just the messenger.
          Sorry, over $2B in CU money is completely totally black, so sourcing is impossible…..I could guess, though….

      • NBay says:

        That jerk Kudlow just loves “green shoot” babble. I wonder what he was like when working for Reagan and running on a diet of RX opiates and alcohol?
        And how many millions of people are in jail and/or just economically crushed and recrushed over and over and over for using less than he did?

    • Rcohn says:

      Workers in the Weimar Republic were paid multiple times/ day to make up for the daily inflation. One of the most famous examples of a currency collapse.
      But there is zero chance for this to happen in the US. Why ?
      400 million guns in the hands of the so called deplorables.

  12. timbers says:

    A minor quibble with…

    “despite tax cuts and ballooning federal government spending, which are a stimulus.”

    Tax cuts targeted at the rich and overseas corporate profits have a low stimulus on the economy. Much of that goes towards buying assets which do not show up in many measures of the economy. But it does make the rich richer…Ka Ching.

    Increased government spending on war & aggression combined with domestic spending austerity, have low stimulus because much of the war & aggression spending flows overseas or into corporate profits and grift and corrpution, and that which doesn’t has a lower multiple of flowing into consumer spending.

    On a slightly related topic, Michael Hudson is getting some attention on his analysis of historical use of debt forgiveness. He claims debt forgiveness has been used throughout human civilization to revive economies burdened by unjust oligarchical societies, and it is justified today (examples Greece, Argentina, U.S. student and other forms of debt).

    In fact, he stated very clearly that when societies refuse to embrace debt forgiveness, violent social revolutions became more common.

    • Wolf Richter says:


      “… when societies refuse to embrace debt forgiveness, violent social revolutions became more common.”

      We have debt forgiveness that is broad and common in the US. Its rules are in the bankruptcy code. And the debt forgiveness is decided in bankruptcy court. In the US, there are over 60,000 consumer bankruptcy filings every month, and there about 3,500 commercial bankruptcy filings every month – and that’s in good times, like now. During the Financial Crisis, there were more than twice as many every month. I report on these bankruptcy filings once or twice a year. Maybe it’s time again :-]

      • Cas127 says:

        Printing money to gut rates, also operates as interest reduction if not forgiveness…and the resultant inflation can be

        1) celebrated (10 pct of the 65 pct owning houses see their worth soar…back to 2007 peaks…pay no attention to those dirty renters and no one living inland…),

        2) Ignored (hour 36,745 of CNN’s missing airplane/Avanotti/Reds under the Bed coverage…), or

        3) blamed on a patsy (Let’s shoot all the speculators/energy suppliers/business people who did not build that…/anybody who ever saved a dollar/etc…)

      • timbers says:

        No need for you to do another article for my sake. It’s not needed.

        But you might want to read up on Michael Hudson and also U.S. student debt which is not subject to the same bankruptcy rules and is….HUGE.

        Nor is Greece or Argentina. Nor was Mesopotamia (which I think is how far back Hudson goes).

        The U.S. saw an anti-establishment candidate win POTUS, dispute an unprecedent smear campaign by the Establishment to stop him at any cost and lie and smear.

        There are signs this might be happening again but from the left.

        Maybe the first very early signs of what’s could come, namely:

        “when societies refuse to embrace debt forgiveness, violent social revolutions became more common.”

        • Wolf Richter says:


          The bankruptcy process and the debt-restructuring process we already have in place is all I accept. For me, student-loan forgiveness or a broader loan forgiveness, such as auto-loan forgiveness, mortgage forgiveness, gambling-debt forgiveness, or some kind of idiotic “debt jubilee” or whatever is the third rail, and I vote against anyone coming even close to suggesting it because these people are clueless about how our credit-based economy works.

          Debt (credit) is someone else’s income-producing asset. People need to get a handle on this. People who promote these idiotic ideas about a debt jubilee or whatever don’t know how this asset-credit relationship works and what essential role it plays in the economy.

          If you forgive the debt, you zero out those assets. This is like stealing those assets from one entity (pension fund, 401k, bank, retail investor, creditor, etc.) and transfering them to another entity without a legal process, such as outlined by bankruptcy law.

          In the US, there are about $40 trillion in income-producing assets that are someone else’s debt. Are you going to blow up the world as we know it just to get rid of that debt? You can kiss the banks goodbye; you can kiss your paycheck goodbye. There won’t be food in grocery stores. There won’t be grocery stores.

          This is a credit-based economy. Nothing works without credit. The entire financial system is based on it. The dollar in your pocket is a credit. Willy-nilly debt forgiveness destroys this credit-based system and thereby the foundation of the economy. People need to wrap their brains around this.

        • Dan Romig says:

          “Credit is a sacred trust, it’s what our free society is founded on. Do you think they give a damn about their bills in Russia? … … I said, do you think they give a damn about their bills in Russia?

          “They don’t pay bills in Russia, it’s all free.”

          “All free? Free my ass. What are you, a f###in’ commie? Huh?”

          “No, I ain’t no commie.”

          “Well, you better not be. I don’t want no commies in my car. … ”

          And for the New York Fed:

          “Repo Man’s got all night, every night.”

    • Iamafan says:

      Is anyone suggesting to forgive the LARGEST DEBTOR in the world?

      That will require the Japanese and Chinese to literally become slaves.
      Who forgave Rome?

      • Willy Winky says:

        Wolf – surely the Fed can make them all whole and dump all that forgiven debt into a ‘bad bank’ entity (or just sell it to pension funds in Denmark) and everyone walks away happy :)

        So what if the Danish pensioners end up eating cat food. Buyer beware eh… eh????

      • POTUS did promise to default on that debt in his campaign.

    • FluffyGato says:

      JMO, but one may want to reconsider using Greece and Argentina as economies on which to be modeled.

  13. Deanna Johnston Clark says:

    “Have nots and have yachts”….that’s what Max Keiser says.
    Since there’s not much for us but to save for car repairs and give help when possible to others….we may as well laugh at these sissie bank clowns who can’t support their business efforts without corporate welfare from Uncle Sam.
    And Reagan sneered at welfare queens.

    • NBay says:

      “…where free unions and collective bargaining are forbidden, freedom is lost.”

      -Ronald Reagan 1980 Labor Day Speech

  14. Paulo says:

    Years ago, I commented on a different forum about countries living and budgeting like families, and that the current trend was unsustainable. I was laughed at for thinking something so complicated could be explained in “Kitchen Economic” terms.

    Okay, I get it that ‘real growth’ is the confounding factor. But this article and stats clearly show that 2+2+2 does not eventually equal 8, 9, or 10.

    I also remember seeing numerous press interviews by Kevin Hassett, who, with his smiling little pinched mouth, scoffed at the interviewer who ventured that the ‘tax cuts’ weren’t paying for themselves and proclaimed that 3-4% growth was inevitable under Trump.

    Here we are.

    In Kitchen Economics we understand that people, families, and countries have to live within their means, and that if they don’t, there will be consequences.

    Weather event(s)
    Civil Unrest
    Terrorist attack

    I’m 64 and I’ve seen all of the above unfold. Current leaders are spending like there is literally no tomorrow. Think about it this way. There has to be a mass evacuation of US citizens from China. The chartered jets, fuel, and quarantine housing is all being paid for with borrowed money. Just like every other emergency. Try this at home. I think they call it, ‘Kiting Cheques”.

    • Frederick says:

      You left out “ false flag” attacks Paulo Donning aluminum foil hat and all that

  15. breamrod says:

    nothing is measured correctly anymore. inflation is understated therefore GDP is overstated. “greatest economy” my ass!

    • Frederick says:

      Now now That’s alittle too much truth right there bubba and I agree completely

  16. Paul Morphy says:

    Thanks Wolf.

    There’s a lot of detail in that article, which I’ve read once.
    I’ll need to read this article a few times to try to assimilate the details.

    Just spotted a small typo, in the article

    “The year 2019 was also another milestone: The ratio of the US gross national debt to GDP jumped to 108%, up from 63% in 2006 on the eve of the Financial Crisis as all heck was already breaking lose” – presumably this should read “as all hell was already breaking lose”?

    • Missouri Jon says:

      You corrected the wrong word, I think, as “lose” (as in win/lose) should be “loose” (as in tight/loose). So the corrected version would read, “… as all heck was already breaking loose…”

      I see the words lose and loose used interchangeably on the Internet for some reason, maybe due to an auto-incorrect feature, written no doubt to sow confusion ;)

      As for “hell” vs. “heck”, I think that is simply a matter of politeness on Wolf’s part for the benefit of a home audience, and some of us folk in the Midwest. Of course, when I look at those debt numbers, my thoughts become anything but polite.

      I think the problem for the average person (and voter) is understanding how it impacts them personally. They’ve heard about the debt problem for decades, and the government isn’t broke (heh), we’re not in Wiemar-like inflationary times, etc.

      Plus the financial media obfuscates things by randomly focusing on parts, like the deficit, then the total debt, then maybe just decreased increases on spending (generously labeled “budget cuts”), which all seem to tell contradictory stories. That’s why articles like this are so good, because they endeavor to give a more complete picture.

      It doesn’t help that many elected to office are financially illiterate. I can attest to this at the local level with certainty, being on the School Board of a modest district (for Missouri). Out of seven people, only two of us really know any financial jargon at all. I recently found out one of them didn’t know that a bond was a form of borrowing, even though he voted to put a $12 million bond issue on the ballot three years ago.

    • Wolf Richter says:

      Paul Morphy,

      Yes. I’m surprised you didn’t find any other typos :-]

  17. njbr says:

    ….This is one of the more misleading headline numbers we have ever seen. It simply does not reflect the overall weakness in the data. The key growth of consumer spending was down nearly a full percentage point (-0.91pp) from the prior quarter. Commercial and private fixed investments were stagnant, and inventories were being allowed to contract. The healthy headline number is generated almost entirely from a huge uptick in imports ‘growth’ and an implausibly low inflation deflator….For this estimate the BEA assumed an effective annualized deflator of 1.50%. During the same quarter the inflation recorded by the Bureau of Labor Statistics (BLS) in their CPI-U index was significantly higher at 3.39%. Under estimating inflation results in optimistic growth rates, and if the BEA’s nominal data was deflated using CPI-U inflation information the headline growth number would have been a minuscule 0.22%….

    • Wolf Richter says:


      Why don’t you READ THE ARTICLE FIRST before posting this stuff.

      And while you’re at it (reading the article), look at the third chart from the top on “real” consumer spending.

  18. DawnsEarlyLight says:

    In other words, this was an actual inflation of 5.9% That’s almost -2% GDP!

  19. Iamafan says:

    Debt to GDP ratio is now about 105.46, meaning more debt doesn’t even improve GDP by the same amount.

    The public and the leadership doesn’t seem to care about this impending disaster and are enamored by the stock market or the current politics. Europe and Japan don’t seem to care, too.

    We can go on and on showing numbers that make the debt situation look completely unsustainable and that something has to give sooner than later. But doing that seems to be unwelcomed socially at this time. Heaven help us should a crisis ensue. I’ll just stay liquid and with no debt because that’s the only thing I can do. Crying wolf ain’t PC.

    • Wolf Richter says:


      Just to do a little nitpicking here but I agree with you about the rest of your comment.

      “Debt to GDP ratio is now about 105.46,…”

      It’s NOT 105%. It’s 108%. You linked an outdated chart. The St. Louis Fed last updated the chart in Dec with Q3 data. So #1, it’s outdated, and #2 it uses quarterly data instead of annual data. So do the math yourself:

      Nominal GDP for 2019 = $21.429 trillion; Gross national debt on Dec 31 was $23.2 trillion; so 23.2/21.429 = 108.26%.

      My second chart from the bottom shows you the annual debt-to-GDP ratio going back to 1996. I put these charts there for a reason.

      I agree with you about the rest of your comment :-]

    • Frederick says:

      Debt clock shows 106.8 but whose counting?

  20. timbers says:

    Supposedly previous POTUS was only American President in history to never reach 3% growth for a full year. Now it looks current POTUS may soon join him. Do you suppose that’s why each of their respective supporters made sure we all knew their’s was the best economy ever?

  21. Mike says:

    Great write up. If we were to remove military spending (form of gov spending) from the equation then the true/real GDP “growth” would be negative.

    • Sammy Iyer says:

      @Mike you are right !
      USA has 700 and 800 military bases Worldwide in 63 countries.
      Also There are 6000 military bases /military warehouses located in the U.S &US overseas territories.
      Total Military Personnel is of the order of 1,4 million of which 1,168,195 are in the U.S and the rest in US overseas territories.
      Apart from off the supervision Defence Trillion’s of $’s spending (most channeled via our honest contractors like Haliburton) ,I have a nagging doubt that CIA/Deep State for it’s Black ops in 100’s of bases all over the world,has more “un official” off the book funding via 40′ container loads of freshly printed US currency directly picked up from Fed printing press & transported via military spy planes and used for spending in all the trouble spots to arm all the factions in the middle east.
      All the towel head infidel fighters of all factions in middle east/north africa/libya are spending in US$ cash& using us supplied arms. These should reflect as +ve GDP in defence contractor balance sheets ?(joking)

  22. Iamafan says:

    Trying to estimate how many Treasuries (how much debt) are maturing for 2020, which we have to repay.

    In 2019, the Treasury issued 9,135.474 (mil) in T bills. I think we can use this as an estimate for how much T bills will retire by 2020, and we have to rollover and pay.

    About 2,111.300 (mil) in 2Y to 10Y notes and TIPs will mature in 2020.

    Finally, about 32.032 (mil) in long term bonds matured in 2019.

    Add them together, and you can estimate about 11,278.806 (mil) in maturing Treasuries that we need to retire (by issuing new Treasuries) by 2020. In 2019, that number was about 11,030.919 (mil).

    We issued 12,070.884 in 2019, so net-net we raised 1,039.965 (million) to spend.
    But part of that spending is paying for interest.
    According to Treasury Direct, the Gov’t paid $574,587,783,463.63 in interest in 2019.
    That leaves $465.18 billion to spend on other things.

    I think you know where I’m going here. If you add the amount of maturing Treasuries we need to rollover and the interest on outstanding debt, you will easily realize that eventually there’s no one out there who can lend us this much (or bail us out). The Fed will have to buy more and more of our debt. I have no idea why we are debating MMT, when we are already doing it now in some form.

    • Has Fed ever (re)monetized this much short term paper? Stocks pull back and rates fall, so far so good. Then you come to the moment when investors conditioned to chase yield say no mas. You move out on the long end of the curve I guess, Op Twist II, which was not good for markets, but ultimately did prevent the (MBS) world from ending. YC was much better shape. Holding TBills, they are very close to direct monetizing. It may take a crisis to sneak that one in, but here it comes.

      • Wolf Richter says:

        Ambrose Bierce,

        Before the Financial Crisis and before QE, about a quarter of the Fed’s $850-billion balance sheet were T-Bills. During QE, it stopped that entirely, and T-Bills went to zero. Now it has restarted it, but they’re still below where they had been in 2007:

  23. oee says:

    the economy is in recession . the industrial sector recession has transferred to the rest of the economy. look for reductions in the GDP for the 4th quarter and revisions down for employment for 2019.

  24. Tom says:

    It’s all doom and gloom.
    Almost February, have not been able to
    Park the equipment and get some winter down time.
    Phone keeps ringing, backlog keeps building.
    This economy gets any worse I might be down to a 50hr week.
    Survived 08. I would fear this next dowturn..but our industry never replaced the youngsters that were let go in 08.

    To be 25yrs old again.
    The business opportunities are incredible.

    • Iamafan says:

      Looks like your competitors bit the dust.

      • tom says:

        It was a field in need when I started my business.
        It is a field in need as I get closer to retirement.

        For some odd reason most want their children to get a degree
        instead of a career dealing with sh*t. I can’t quite meet bay area employee salary for the poop patrol squad. Of course I see they may a have a job opening.

    • Willy Winky says:

      Are you in the auto repossession business by chance?

      Or perhaps the San Fran street sanitation industry?

      • tom says:

        Neither. Though I am in the sanitation business.

        • Trent says:

          Does the majority of your money come from the government?

        • NBay says:

          Just a guess, but it sounds like installing, repairing, pumping septic systems. Where I grew up everybody (except in “towns”, where there was just a very large system for all) had one. Ours was the old upside down redwood box with no bottom system. Right next to the house. Pretty ripe in rainy winters, and nobody ever walked on it.
          Ours was pumped a couple times, and nobody ever asked or cared where it was discharged…..any old nearby logging road would do.

    • Frederick says:

      Yeah sure Where I lived the opportunities were great if you spoke Spanish Otherwise not so much

  25. Citizen AllenM says:

    Yes gawds, this recurring comment thread gets so silly. First fact, huge capital transfers have been a fact of life for decades. Where are the$100 bills? The Fed continues to print them like confetti. Oh yeah, overseas. Like so much of the budget deficit, it ceases to have any domestic affect. And so much of the deficit spending doesn’t hit the domestic economy.

    As for the long run, until foreign demand for dollars finally stop, this will continue.

  26. tommy runner says:

    One of the Presidents stated principal objectives in the renegotiation of nafta was to ensure the agreement benefits American workers. The USMCA requires Mexico to change its laws to make it easier for workers to unionize. The (us) administration pushed hard for this because it should cause wages to rise in Mexico, making it less attractive for companies to move factories south of the U.S. border. Democrats and U.S. labor unions insisted on tougher enforcement to ensure Mexico follows through on its commitments. There will be a formal committee to monitor Mexico on labor issues (as well as “labor attachés”). There’s also a new rule that a significant percentage of the work done on the car must be completed by workers earning at least $16 an hour, or about three times what the typical Mexican autoworker makes. (but wait) Jesus Seade, Mexico’s deputy foreign minister for North America had complained that the attaches represented a bid to circumvent Mexico’s refusal to permit unilateral American inspections of factories in Mexico. Under the trade deal, only an independent panel chosen by both countries can visit factories to investigate alleged mistreatment of workers. Seade said Mexico would never accept foreign labor inspectors “for a simple reason: Mexican law doesn’t allow them.” President Andrés Manuel López Obrador expressed his anger at the idea that U.S. inspectors would be allowed in Mexico. “It’s a problem to the extent that the panel system is misused for protectionist reasons, if U.S. producers begin using labor protections to prevent Mexican exports to the U.S.,” said Luis de la Calle, a former Mexican NAFTA negotiator. “The protections are meant to ensure that the benefits of trade are accrued by Mexican workers, not to prevent Mexican exports.” But after meeting in Washington with Robert E. Lighthizer, the chief U.S. trade negotiator, Seade said the issue had been settled. Lighthizer released a letter to the Mexican official stating that the attaches “will not be ‘labor inspectors’ ” and would not conduct factory inspections. Jesus Seade, said he was “very satisfied” with (us) administration assurances about limits on new labor attaches at the U.S. Embassy in Mexico City, did the us ‘lose’ inspection jobs in the negotiations or on the back of a napkin? what/where are the benefits to the American workers? well, maybe the fence is.. so you cant see people going to/from your jobs.

  27. Patrick says:

    Hi Wolf and other Wolf Street regulars,

    While comparing apples to apples on ‘adjusted’ GDP numbers is certainly useful in tracking a decline or rise in US productive activity, would you tend to agree or not agree with Shadow Stats Alternate GDP findings that, according to the US Gov’s own data and own 1980’s inflation formula, we’ve been in recession (i.e. negative GDP) for virtually every year since 1998?

    Hyperbole aside. Wouldn’t a recession of that excessive duration be accurately described as a depression; especially as it’s last longer than even the 10 year Great Depression of 1929?

    I bring this up because, anyone looking at the market and jobs recovery after the ’29 Great Depression, the gains there seem authentic by comparison. So if in fact we’re in a greater (silent) depression with markets soaring and Gov reported unemployment numbers at historical lows then the only conclusion seems that it’s entirely inflation driven. At this point a lot here are thinking, “and your point is?” That point is, IF all asset increases going forward are instead due to a global currency collapse vs traditional boom/bust cycle then can anyone point to a historical precedent where asset valuations crashed and remained there ‘while’ the currency was in the process of collapsing?

    • Patrick says:

      To add. How useful is it to layer on a boom/bust ‘market’ cycle type of thinking on top of a global currency collapse. Isn’t that like trying to predict the wave troughs in a pool that’s filling up with water?

    • JMiller says:

      John Williams of ShadowStats does not use the 1980-based CPI which currently says that we have 10% inflation today which is false. John Williams uses the 1990-based CPI which is currently estimated at 6%. That is more inline with what inflation is today, which is around 5%.

  28. historicus says:

    Just have the Fed credit every account in the country with the proviso the money must be spent in 12 months.
    There. Immediate injection to the GDP.

    • Mean Chicken says:

      The process of choosing winners is selective, not all accounts receive deposits so it’s safe to assume yours is among those excluded?

  29. Mark says:

    Isn’t national debt to GDP only part of the picture? Corporate debt Is at or near all time highs, household debt is still significant. When all credit market debt is added up we are like 350% of GDP. I’d like to know how much total credit market debt was added in 2019 to get the $850M GDP growth.

    • NARmageddon says:

      Excellent point, Mark. There is a large subset of the population, especially on the political right side of the spectrum, that has been indoctrinated with the cockamamie idea that private debt does not matter, because they think it is some how virginal, pure and always productive. That idea is of course pure nonsense.

      • Cas127 says:

        “That idea is of course pure nonsense.”

        Sure, but unlike government, private debtors cannot print money at will to cheat their debt – while defrauding me and every other saver of their purchasing power via induced inflation.

      • Ensign_Nemo says:

        Before the 2008 crisis, banks were expected to take losses when they made bad decisions and gave mortgages to strippers and dogs that later went into default.

        A dozen years later, the Fed still owns about $1.4 trillion in mortgage-backed securities (MBS), down from the $1.77 trillion peak.

        The central bank is willing to buy a few trillion dollars of bad assets that nobody else is willing to buy, just to backstop privately owned banks. It’s not accurate to make a strict distinction between “public” and “private” debt. There’s an implicit “public” backstop to most large blobs of “private” debt that are held by the politically well-connected large banks.

        There’s also a blurring of lines between private and public entities – the Fed acts as a national central bank but is owned by a secret consortium of private banks, and mortgages are now issued mostly by quasi-governmental companies such as FNMA and GNMA.

        Another way of putting it is that it’s more important for big banks such as Goldman Sachs and JPMorgan Chase to have one of “their” guys as a Treasury Secretary or Federal Reserve honcho than it is for them to sensibly manage their financial affairs to minimize risk. Private access to trillions of dollars of public money during a financial crisis, such as TARP and the MBS buyout, is a new ‘thing’.

        Back in the day, J.P. Morgan – the man, not the bank – bailed out the US Government. Now it’s the other way around.

    • NARmageddon says:

      Private-debt-to-GDP is in the vicinity of 200%, much worse than the public- debt-to-gdp of 105%. But the data is not updated very often.

      Would be nice if FRED had a total private debt tally. Could not find it.

  30. joe says:

    Wait a minute, why is government spending included in GDP? It is just money taken from earners. I guess it is a way to account for the spending that the earners would have done if the money was not taken from them.

    I think government spending should be discounted in the GDP roll up based on the inefficiencies, mal-investments, failures, frauds, and corruption bleed-offs.

    • Cas127 says:

      A lot of widely trumpeted gvt stats are manufactured crap, GDP included – for the reasons you list.

      The GDP measure tends to favor *activity* and pays very little attention to whether it is productive or destructive in the medium or long term.

      If the gvt prints money (defrauding savers of their purchasing power and therefore alienating them from long term use of the fictive currency) to hire hit men to shoot monetary dissidents in the head (and hospitals to keep them in a vegetative state)…the GDP will go up (veg care being the real, multi year winner here).

      But is any of that murderous psychopathy *productive*?

      The ocean of stupid waste that DC funds (perpetually sustained only due to kickbacks) is similar but *absolutely* intrinsic to American political life (and American economic decline) for the last 70 yrs.

  31. If inflation was at Feds 2% target (assumption the dip is random noise) what is the real GDP? All things being equal what will GDP look like if Fed manages 3%?

  32. Iamafan says:

    Bad Timing

    The Government bank account at the Fed (called TGA or Treasury General Account) goes to a HIGH level of around $400+ billion. This high amount started around the end of 2016; before that the high as about half that.

    In 2018, the level of Bank Reserves started to drop (as Quantitative Tightening started) and continued to drop all the way till September 17, 2019. It dropped to less than $1.4T from more than $2.2T. Bank Reserves are important since that’s the money banks use for Liquidity Requirements and for buying Treasuries (or lending at Repo).

    At the same time, the Government’s bank account TGA fell from around $400b in May 2019 to around $125.7b in August 21, 2019. A deal suspending the Federal Debt Cieling for two years was reached on July 22, 2019. This led to the Treasury being able to replenish its funds and increase its TGA again.

    The problem was where was this money was coming from? Most of the money comes from Treasury Auctions and Taxes and these money come from Banks (and their dealer/brokers). With Bank Reserves at their lowest levels (after QE), there was a slight liquidity problem. Repo broke.

    So now we have to live with much higher Bank Reserve levels at the Fed or the Treasury fails.
    The new normal (at least for now) is a high level of TGA around ~$400+b and Bank Reserves at ~$1.6T.
    The problem is this can only be supported by borrowing more and the Fed buying more; not unless we increase taxes. So where do we go from here?

    • Wolf Richter says:

      Powell discussed this topic at the last presser. The Treasury Dept. has its checking account at the Fed. That’s what you’re talking about here. The Treasury Dept. makes sure that its checking account carries a big balance before debt ceiling fights start so it has some liquidity to pay bills. Also, balances swell as corporations and individuals make quarterly tax payments. Balances swell as new Treasury securities are sold and the balances fall as old ones are redeemed. This happens throughout the month. And it depends on the various issuances. And when the government has to make big payments, such as tax refunds, the balance falls. There are many factors why the checking account of the Treasury Dept has varying balances.

  33. Tom says:

    Nope. The big firms have made it almost impossible for us small fry to bid on public sector projects.

  34. Mean Chicken says:

    Back out government (inc. deficit) spending (military industrial complex, etc.), what would GDP look like?

  35. Mike says:

    I must ask the question here…because it is never been asked and would be more than a logical conclusion:

    Why do we get still up in the morning and try to EARN some dolars somehow? Why we donde just GET them from somewhere or even more simple: Why dont we print them at home?

    And why does the goverment still collect taxes? Thats even more strange….as the goverment prints already as much as it wants and can?

    I mean….acc to MMT…size doesnt matter….

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