Don't look now, but just weeks after it passed the biggest fiscal stimulus in US history, Congress passed an additional round of fiscal measures totaling $484bn. This raises Goldman's estimated 2020 US deficit financing need to ~$3.5 trillion. But there's more: the bank does not think the latest measure is the final word here, and its economists expect another round totaling $550bn to pay for items such as aid to state and local governments, that haven’t been fully addressed thus far.
On the whole, this would translate to between $3.8-$4 trillion in financing needs for 2020, almost a trillion dollar increment Goldman's prior deficit estimate, and 300% more than the US sold in calendar 2019. Financing such a massive gap, amounting to 20% of GDP, will require a broad-based increase across maturities and product types.
So how will the US pay for this massive financing hole. Below Goldman lays out what it believes to be a "sensible strategy" to raise these funds. In the subsequent two years, Goldman turns optimistic and sees the deficit declining to $2.4tn in FY2021 and $1.65tn in FY2022, and reversing some of this year’s increases. We doubt it: once you go helicopter money, you never go back, just look at Japan.
Exhibit 1 shows Goldman's latest split for CY2020 funding. Bills are still the dominant venue for raising funds, with net supply from April to year-end coming in at around $2.1tn (and about $2.3tn for the calendar year), a magnitude large enough to mean that the bills market will have nearly doubled in size this year. That projection isn’t as far-fetched as it might seem—just in the month of April, Treasury has issued roughly $1.26tn of bills.
http://www.zerohedge.com/markets/us-will-sell-4-trillion-debt-year-300-increase-what-it-will-look?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+zerohedge%2Ffeed+%28zero+hedge+-+on+a+long+enough+timeline%2C+the+survival+rate+for+everyone+drops+to+zero%29
Realist - Everybody in America is soft, and hates conflict. The cure for this, both in politics and social life, is the same -- hardihood. Give them raw truth.
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