Tag Archives: CBO



The US debt at 9/30/00, excluding unfunded entitlements,  just before President Bush took office was $5.7 trillion. Eight years later, at 9/30/08, just before President Obama, the debt was $10.0 trillion. Eight years later, at 9/30/16, just before President Trump, the debt was $19.6 trillion. Four years later, at 9/30/20, just before President Biden, the debt was $26.9 trillion.


Quoting the most recent Congressional Budget Office (CBO) update :

“At 14.9 percent of gross domestic product (GDP), the deficit in 2020 was the largest it has been since the end of World War II. Much of that deficit stemmed from the 2020 coronavirus pandemic and the government’s actions in response—but the projected deficit was large by historical standards ($1.1 trillion, or 4.9 percent of GDP) even before the disruption caused by the pandemic. In the CBO projections, deficits as a percent of GDP fall between 2021 and 2027 (from 8.6 percent of GDP to 4.0 percent), and then increase to 5.3 percent of GDP by 2030—more than one-and-a-half times the average over the past 50 years.”

It is worth noting that the CBO has consistently overestimated the projected growth (and tax receipts), underestimated the spending and therefore substantially underestimated the deficit. With that in mind, the CBO projected 8.6% deficit in the current year,  as a percent of GDP would amount to about $2 trillion so the US will pass the $30 trillion round number in calendar 2022. No matter what Modern Monetary Theory tells you, the debt matters because it is a proven drag on growth. Even if interest rates continue to be suppressed, only 1% on $30 trillion is $300 billion so that’s a guarantee that the deficit will continue to be a problem. It’s also a guarantee that interest rates will not go up much if the Fed can control it. If and (as we believe) when that is no longer the case, it will indicate that the Fed has lost control, inflation is about to take off, and all bets are off in terms of the economy and capital markets.


New records are being set as $18.4 trillion of global debt is now priced to yield less than zero, up from less than $8 trillion in March and a five year average of $10.3 trillion. As noted monetary historian, Jim Grant, points out: “nominal negatIve yielding debt had never been seen in material size  in 4,000 years of interest rate history prior to the current cycle, and recent happenings suggest that upside-down debt may grow larger still”.

Negative “real” yields, which subtract the inflation rate from the stated “nominal” interest rate creates a strong incentive for investors to reach for yield in the capital markets, no matter what form that risk might take. This TINA (There Is No Alternative) approach to investing is why Tesla, Doordash and $60 or $70 billion worth of SPACs are trading where they are as stock market averages his new record highs. It also means that savers not willing to play the TINA game are being screwed (no better way to put it ), to the benefit of central bankers and politicians who are kicking the fiscal/monetary can down the road. Negative interest rates also improve gold as an investment because the absence of interest or dividends is better than the negative yield on government debt.

We have pointed out before that negative “real yields”, along with lots of other current indicators, have strongly supported higher gold prices. We are admittedly surprised that the gold price and gold mining stocks have given back over half of the mid-2020 gains, and we attribute this “consolidation” to (1) The group had become a little too popular in the middle of the year and technically needed a correction to  shake out the weak holders and set the stage for the next leg up (2) The stock market strength precluded a perceived need for a safe haven (3) The next trillion dollars of government fiscal stimulus was put on hold until after the election (4) The Federal Reserve balance sheet, above $7 trillion, is “only” growing by $150B/month, no longer a shock to the capital markets.

We do not believe that the current strength in cryptocurrencies such as Bitcoin is as much of a culprit as the factors above, since gold and gold mining stocks are far more of a long term “store of value” rather than the crypto currencies that are primarily trading vehicles.

We believe fiscal stimulus is coming shortly, to be followed by more fiscal/monetary support in just a few months and more after that, ad infinitum.

This point in time happens to coincide with gold bullion and the gold mining stocks trading just at the technical support price at the 200 day moving average. We are determined not to play it too cute with our holdings of gold mining stocks, trading out at a short term peak, and trying to time a re-entry. The long term potential is too compelling. The gold mining industry is the least expensive asset class we know of, not only protecting purchasing power over the long term, but a potentially very lucrative investment in nominal terms. We reiterate our belief that the gold price will increase by several times in value over the next three to five years and the gold mining stocks by a multiple of that. (Our investment partnership remains open to qualified investors.)

Roger Lipton



There are about 250 persons working at the Congressional Budget Office, according to their website. Their budget, according to Wikipedia was $46.8M annually, as of 2011, probably higher now. Their projections are widely quoted, and presumably relied upon by policy makers in our administration. The CBO updates their projections on an irregular basis, sometimes several times per year, sometimes only once per year. The last update was 5/2/19, only about six weeks ago. Considering how far off their past projections have been, and the questionable assumptions within their analyses, it is a wonder that anyone takes these numbers seriously, and the latest installment provides a good example why not.

Six weeks ago, on 5/2, based on relatively firm numbers through March, and presumably pretty reliable indications through April, the CBO predicted that the US operating deficit through the current fiscal year, ending 9/30/19, would be $897 Billion. April and May results are now reported, and the table below shows the monthly numbers for the last two fiscal years.

You can see that last year’s total operating deficit was $779B, and the total debt went up by $1,271B (due to “off budget” items, the largest of which is the social security shortfall). The projection, six weeks ago, was for the current year’s deficit to be $897B, up 15.1% from fiscal ’18. The total debt is not projected, and you can see that number frozen the last few months since our administrators have already exceeded the formal debt “limit”.

The April result, with tax receipts was a surplus of $160B, which was dower than the $214B surplus a year earlier, so the cumulative deficit through April (shown at the extreme right of the table) was up 37.6%. They May results showed a $206B deficit, up from $147B, so the cumulative deficit is up 38.6% year to  year. Last  year, the monthly deficits from June through September totaled  $246B. The current CBO projection of $897B for the ’19 year would allow for only $158B the rest of the year, down 36% from the last four months of fiscal ’18 – which is  ridiculous.

We don’t have 250 professionals pushing numbers here but this year to date: December’s YTY deficit reduction was on an  immaterially low base. March’s improvement was material, but March and April combined (tax season) showed a $13B surplus this year versus $5B in fiscal ’18, which is an immaterial change. May bounced back to a 40.1% increase YTY in the deficit. You can judge for yourself the likelihood that the last four months will give us a deficit 36% lower than last year.

Our projection, with 247 professionals fewer  than the CBO is for the following: The last four months will provide a deficit about  40% higher than a year ago ($247B), which would provide for $346B  on top of the current $739B, for a total of $1.08 Trillion. This is 20% higher than the $897B projection made by the CBO with only five months left in the fiscal year. We shouldn’t have to point out that: if the CBO is 20% off the mark with five months remaining, their projections ten years out don’t have a great deal of credibility.

Furthermore: the total debt, whether or not the debt ceiling has been formally raised, will have expanded by $1.3-$1.5 Trillion, bringing it close to $23 trillion.

This reality is unlikely to be comforting to the capital markets.

Roger Lipton