Monday, July 30, 2018

Charts of the Day: Do Not Blame the Fed!

This is stuff the White House needs to pay very close attention to:

As we've stressed over and over, and over, again herein, when you cut taxes and raise spending the last thing in the world you want to do is disincentivize the world from buying your debt!

Remember, the money we spend on foreign stuff that doesn't buy U.S. stuff comes back in the form of savings and investment. The simple fact that, for example, Chinese folks save a higher percentage of their income than U.S. folks (see last chart below) goes a long ways toward explaining the "trade deficit", and the "investment surplus" the U.S. has with China.

The three month T-bill auction went off this morning at the highest rate in 10-years! Sure, higher rates are a given, given the Fed's (doing as it should under present conditions) current stance, but the situation, alas, is becoming exacerbated by politics: emphasis mine...

Short-end U.S. rates have been buoyed by a tightening of Federal Reserve policy and an increase in issuance, and the U.S. Treasury on Monday sold $51 billion of three-month bills at 2 percent, the highest rate for an auction of the tenor since June 2008. Three-month bills in the secondary market already cracked 2 percent earlier this month, but this is the first government auction to be sold at that rate in a decade and bidding from both direct and indirect buyers fell

Gross savings rate by country:

From the Wall Street Journal this February:

Foreign purchases of U.S. financial assets are also, in part, a byproduct of trade deficits stemming from strong consumer activity, analysts said. Foreign exporters often use the dollars they accumulate through trade to buy Treasurys.

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