U.S. Fiscal Fundamentals

This chapter asserts how a credible argument can be made that there is a direct correlation between government deficit spending and growth in trade, consumption, and output. In the U.S., periods of expanding deficits have been associated with paper wealth reflation, rising consumption, and expanding imports. Conversely, periods where deficits are shrinking or where surpluses are being generated by the government can be linked to times of retrenchment extending into consumers, businesses, and even into global trade. Simply stated, U.S. government spending is soaring and reaching record heights, with the most recent quarterly pace posted above +150 percent annualized. And, the last time that U.S. government spending actually contracted on a quarter‐to‐quarter basis was in the mid‐1960s, just prior to the escalation of the Vietnam War and the abandonment of the USD gold standard.