Trump, US Deficit, market rally

Posted: November 22, 2016 in Uncategorized

During the campaign, Trump called for various expenses

US$1 trillion for infrastructure

US$5 trillion in tax cuts

Increase in military spending

Cut to Obamacare (presumed cost $350 billion over 10 years)

And he promised not to touch Social Security or Medicare.

The current US Debt stands just below USD19 Billion and by April will automatically arrive to the$20 trillion borrowing limit (so without implementing the Trump policies).

Plus, the inflationary policies make the cost of borrowing increase as the FED will have to keep a close watch  (every 25bps cost an extra USD50 billion a year!!).

And nobody (not even Clinton) talks about how to deal with this issue or where to contain expenses (welfare, pension, medicare entitlements).

And this is not a Trump or Clinton issue.

it is an Obama legacy issue – he doubled the US debt to USD20 trillion in a near zero per cent environment (it would had been close to 27 billion, if we were at normal interest levels).

And debt is financed by issuance of US Treasuries – but, since September, the three biggest buyers (China, Japan, Saudi Arabia) have become net sellers (by the way that is what spiked the yields in reality) for their own reason (debit issues and wars).

So you know, the “Market loves Trump”mantra will last at most until April 2017.

Unless the FED decides to monetize everything and go “negative rates”

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