Daily Gains Letter

U.S. Deficit

A deficit occurs when the U.S. government spends more than it brings in from taxes. To make up the difference the government borrows money from the Federal Reserve.

In an effort to stem the economic slide of the U.S. housing collapse that first surfaced in 2005, the Federal Reserve initiated the first round of Qualitative Easing in November 2008.  Since that time, it has printed off trillions of dollars; and continues to add to its balance sheet at an alarming rate.

Despite the influx of money, the U.S. government has run a deficit of over $1.0 trillion in each of the past four years. And in 2013, the national debt will increase well above $17.0 trillion.

What’s keeping the U.S. economy afloat?  The Federal Reserve is artificially propping up the entire U.S. economy by buying a majority the government debt issued by the Treasury Department.  As a result, the U.S. government has become dependent on borrowing (creating money) to finance itself.

Sadly, deficit spending and a growing dependence on the Federal Reserve to buy the government’s excess debt has yet to produce real results.