Let’s look at the US national debt level, which is roughly $20 trillion.
The debt load doubled under the Obama Administration as economic growth was stifled, while spending soared to quell the growing unemployment levels beginning in 2009.
The $10 trillion added to the debt level does not include the nearly $4 trillion on the balance sheet of the Federal Reserve, which basically went to bolster Wall Street banks. So basically you had $14 trillion in monetary action over the last eight years without any of the economic growth you would expect to see from that type of monetary intervention.
So as candidate Trump spoke about spending a $1 trillion on infrastructure projects, I was on board, since this would put billions of dollars directly into the hands of the American people. This pittance — compared to the debt taken on by Washington — would benefit the economy since those billions would have velocity in the form of wages that would be spent by consumers.
However, now we are not hearing much on the infrastructure spending. We are not hearing about how if we put money directly in the hands of the American people so that perhaps we could get a GDP growth of 3%. This is how the White House was going to jump-start the economy.
But that spending talk has been muted. Not sure why, but it’s probably the same forces that quelled the banks from lending.
The $4 trillion that Janet Yellen & Co. injected into the banks through bond purchases and then told the banks if you have profits from the bond sales (to the Federal Reserve) then put those funds in an account here at the Fed called “excess reserves” — not profits — and we will pay you interest on those funds. A higher interest rate than Americans were getting on their savings.
The Fed did not want the bank profits to have velocity. Yellen & Co. did not want banks to increase lending to people for homes and business start-ups. Auto loans and education loans were fine — I’m assuming these loans carry less inflationary fears — and now we see that car and student loans are defaulting at higher and higher rates.
I have so much more on this, that I will pick it up tomorrow, but safe to say, that Washington is putting up unnecessary barriers to grow this economy.