The fiscal scale of Bidenomics is larger than Roosevelt’s New Deal in the 1930s
It is larger than Johnson’s guns and butter in the 1960s, or Reagan’s military rearmament in the 1980s.
We are witnessing an extraordinary experiment in US economic policy.
The Biden administration is financing this with a high-risk expansion of federal borrowing at the top of the economic cycle, when unemployment is hovering near half-century lows at 3.8pc and the economy is operating near full capacity.
It has been a textbook supply-side response, just as the Biden White House always argued. But unlike Reagan’s variant of tax cuts and deregulation, Biden is conjuring supply by drawing people into the labour market. He is scattering state largesse to “derisk” investments in order to pull in private capital and revive the US manufacturing base.
There is nothing leftwing about it. Profits are privatised: losses are socialised.
The debt accumulation over the last 15 years alone has been comparable to the cost of two world wars and the Great Depression combined.
Torsten Slok from Apollo Global says the US government must refinance $7.6 trillion of debt over the next year, amounting to 31pc of total outstanding issuance.
Ballooning debt issuance is already crowding out the US bond market. Yields on 10-year Treasuries have punched to levels unseen since mid-2007 over recent weeks, even as inflation plummets
Torsten Slok from Apollo Global says the US government must refinance $7.6 trillion of debt over the next year, amounting to 31pc of total outstanding issuance.
The Global South holds three-quarters of the world’s $12 trillion of foreign exchange reserves (59pc held in dollars).
Stephen Jen from Eurizon SLJ Capital says these countries were stunned by the US decision to freeze Russia’s dollar reserves and have taken the lesson to heart.
“The reaction was a mix of shock and fury. They couldn’t believe that it could happen to the official reserves of a major country,” he said.
Mr Jen thinks the US Federal Reserve will be forced to abandon quantitative tightening and relaunch QE in order to soak up the debt and hold down borrowing costs. “I don’t see how the market is going to absorb the sheer volume of supply without the Fed,” he said.
Ambrose Evans-Pritchard Telegraph 12 September 2023
There is nothing like inflation to expose the generation gap between those who lead the US and most of those who live in it.
The median American, who is not even 40, had no direct experience of high inflation until 2021. Their lives had coincided with the era of cheap Chinese imports and relative peace.
Biden, in contrast, like other Washington eminences of a certain vintage, saw the oil shocks of the 1970s come and go. He might not fathom what a psychic trauma it is for the middle-aged and the young to see basic goods jump in price, and savings deplete in value.
Even mild US progressives now say, as though reading from some Hegelian flowc
hart, that we have come to the end of a stage called Neoliberalism, and are now proceeding neatly to the dialectical counterblast.
Janan Ganesh FT 12 September 2023
https://www.ft.com/content/1cf982bd-e40c-46bf-8c51-ea348edf1557
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