If you’re wondering what that horrible smell is in the room, two significant stink bombs were dropped by high-ranking government officials this week.
On Tuesday, U.S. Treasury Secretary (and former Fed Head) Janet Yellen actually said she’s ‘very optimistic’ about the outlook for the economy. Shortly thereafter, Chicago Federal Reserve Bank President Austan Goolsbee actually said he sees no clear signals that the U.S. economy is veering off the "golden path" toward the Fed's 2% inflation goal and at the same time averting a recession, despite the recent rocket surge in long-term Treasury yields.
Mmm-okay.
Despite the relentless barrage of rose-colored narratives from Government officials and Establishment Media lackeys, the economic reality is far different.
For example, after adding $275 Billion to the balance sheet (just last weekend), the U.S. federal debt now stands at a staggering $33 Trillion.
$33,000,000,000,000
In this clip from “The Macro Show” today, Keith McCullough explained how the U.S. government will spend whatever it takes to delay an economic recession, at great costs in the months and years to come.
As we’ve pointed out numerous times, the most recent headline 2.4% Q2 GDP number is highly misleading. Look beneath the surface. The Consumption component continues to decelerate as real spending growth remains in Trend deceleration and on a path to converge with zero growth. Meanwhile, the Government spending component has shot through the moon, as McCullough shows in this clip. In the last two quarters, on a year-over-year basis, Government spending has accelerated from 0.9% to 2.7% (in Q1) then from 2.7% to 3.8% in Q2.
“Everything is great!” McCullough says sarcastically. “Joe [Biden] is going to wake up at 11am and do his presser at 11:30am and say America is great again. Are you out of your f-----g mind?”
“If you sign off on Big G (government spending), then you know going into the presidential election you’re going to slow against those Big G base effects,” McCullough explains. “You don’t just get that for free. For all of 2023, you can say, ‘Look, there’s no recession, the job market’s great,’ because you bought the numbers.”
“The other thing alongside all of this is the interest expense that the government is spending,” add Hedgeye Director of Research Daryl Jones. “Based on Q2 numbers, it comes to about $10,000 per person per year in the U.S. That’s just government interest expense. This whole thing is unsustainable.”
“Why would bond yields go up?” says McCullough. “Because there is sovereign credit risk associated with that. Forever and a day, people have said that didn’t matter. But at this point, you can’t say that.”
Watch the full clip above.
