The Budget Deficit has Ballooned 🎈

The Budget Deficit has Ballooned 

This year, US economists predict a budget deficit that will eclipse one-trillion-dollars, the biggest since World War Two. This sort of economic headline strikes fear into investors. It’s $1 trillion in national debt, but debt is a good thing. It’s financing.

It lets you do things; build bridges, pave roads, open schools, kit out hospitals. If you do this stuff, you put more people to work, and if you put more people to work, you collect more taxes to service the $1 trillion debt. The US has an immortal lifespan to repay, right?

It’s startling to see the figures, but investors have declared government bonds as being one-hundred percent safe for over a century. It’s almost the same as declaring the deficit as being one-hundred percent safe, although there is a darker side to this.

You sometimes run a deficit for the wrong reasons. If no one is in work, for example, or too-big-to-fail businesses are failing, a nation will borrow money from enemy nations just to keep things together. This gives the enemy more control over you.

President Trump’s tax cuts in 2017 meant fewer means to service the deficit, so it widened. The coronavirus shutdowns struck earlier this year, so bailouts and aid needed to be airdropped, so it widened again.

The point of all of this is that if we don’t reign in the deficit, international stocks will outperform those harbored in the United States. Investors could rethink that one-hundred percent safe government paper.

Rating agencies could rethink it, downgrade the United States credit rating, and the last time that happened, stocks around the world crashed so hard that circuit-breakers were triggered. This won’t happen when the bell goes today, we hope, but it’s something to be mindful of!

I am not a financial advisor and my comments should never be taken as financial advice. Investments come with risk, so always do your research and analysis beforehand.

Share:

More Posts

What is a kids brokerage account?

A kid’s brokerage account is more accurately called a custodial account. This is a brokerage account that parents or legal guardians can open on behalf of their child.

Get your daily Invstr Crunch

Get the market news and updates you need, delivered to your inbox or available on our daily podcast.

Risk Disclosure:

Invstr is not a bank and banking services are provided by Vast Bank, N.A.

Brokerage and Banking services are currently only available to U.S. residents.

Invstr app and web services are provided by Invstr Ltd. Advisory services are provided by Invstr Financial LLC, an investment adviser registered with the Securities Exchange Commission (SEC) details of which can be obtained here. Securities brokerage and custody services are provided by Apex Clearing, a broker dealer registered with the SEC and a member of FINRA and SIPC. There is no bank guarantee on securities and securities may lose value.

Investing involves risk and can lead to losses. Past performance does not guarantee future results.

Invstr app and web services are provided by Invstr Ltd. Invstr+ advisory services are provided by Invstr Financial LLC, an investment adviser registered with the Securities Exchange Commission (SEC). Securities brokerage and custody services are provided by Apex Clearing, a broker dealer registered with the SEC and a member of FINRA and SIPC. There is no bank guarantee on securities and securities may lose value. Vast Bank N.A. a nationally chartered bank and member of the FDIC, provides the banking products, including the products and services related to digital asset accounts. As with any asset, the value of Digital assets can go up or down and there can be a substantial risk that you lose money buying or holding digital assets. You should carefully consider whether trading or holding Digital assets is suitable for you in light of your financial condition. Your digital account does not support wallet to wallet transferring of your digital assets (i.e. cryptocurrencies) outside the platform. Any Digital Assets in your digital asset account are not insured by any government entities, including but not limited to FDIC or SIPC. The Invstr Visa® Debit Card is issued by Vast Bank, N.A. pursuant to a license from Visa U.S.A Inc and may be used everywhere Visa debit cards are accepted. Invstr Ltd, Invstr Financial LLC and Invstr Securities Ltd are subsidiaries of Marketspringpad Holdings (collectively “Invstr”) and Invstr is solely responsible for the application services and website content.

Watchlists provided when users first access the service are not a recommendation to invest. Instead they are provided to help users better navigate the service. Users are free to edit and create their own watchlists. From time to time, Invstr will suggest instruments solely based on an individual’s interest and the interest levels of the Invstr community.The statistical and portfolio builder models generated by Invstr do not reflect actual investment results and are not guarantees of future results.Comments provided by Invstr leaders, influencers or members of the Invstr Community are not recommendations and should not be construed as such.Invstr does not endorse the content or the positions posted by them. Their investment approach, and that of the models provided by Invstr, may be different from yours and may not be appropriate for you.