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Below is a chart and brief excerpt from today’s Market Situation Report written by Tier 1 Alpha. If you’re interested in learning more about the Hedgeye-Tier 1 Alpha partnership, there’s more information here. |
In our recent observations, we've noted a significant shift in financial dynamics. Government spending has largely supplanted the Federal Reserve's balance sheet contraction. We will show you that chart (Fed liquidity vs. SP500) tomorrow; it's getting more interesting by the day. However, the impact of deficits can be elusive until they suddenly matter profoundly. We began the year with federal interest payments on government debt constituting 2.5% of GDP, a figure that's on track to hit 4% within a mere 9-month span.
During the fiscal year (FY) 2022, the federal government generated 5.0 trillion in revenue, equating to 15,098 per capita, while it spent 6.5 trillion or 19,434 per person. This outlay included funds channeled to the states. Federal revenue saw a 14.3% hike in FY 2022, bolstered by an increase in personal income taxes, social security taxes, and revenue from the auctioning of spectrum for commercial wireless and broadcast use.
Meanwhile, federal spending dipped by 12.4% in FY 2022, after stagnating in FY 2021. However, the government still spent 28.7% more than it collected in FY 2022, which led to a 1.45 trillion deficit. As a result, the national debt soared to 30.9 trillion by the close of the last fiscal year.
We try to be as apolitical as humanly possible. Still, the latest surge in government spending was an effort to ward off an imminent recession within sight of a presidential campaign. Whoever the next president of the US will be, they will face a debt mountain to rival developing economies. This is obviously coinciding with the refinancing debt crises facing commercial real estate over the next 24 months. Roughly 2 trillion dollars that needs to be refinanced from interest rates as low as 1% or even lower to 8% and above.
But never fear. As always, we will have a stiff drink and follow the flows.
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Learn more about the Market Situation Report written by Tier 1 Alpha. |
