Many #investors will be focusing on the #PresidentialDebates, which begin tonight, but while there are quite meaningful #policy differences between the parties, ongoing structural #deficits are likely to exist regardless of who wins in November.
Further, to the extent that these #deficits are #monetized by the @federalreserve, then significant increases in #money supply could drive nominal #GDP growth for a time, even in the absence of new fiscal initiatives.
Also, we’re skeptical of the arguments that fret over a #FiscalCliff, since the @USCBO estimates that even with no further #stimulus measures, the U.S. will have a #deficit of 8.5% of #GDP for fiscal 2021.
That would be the largest deficit in modern history, other than in 2020 and the #GFC, and if the #Fed #monetizes all of that projected #deficit, U.S. money supply will have expanded at an astounding 35% over eight quarters!
Thus, we think that it’s likely that even in the absence of a rebound in #money velocity from depressed crisis levels, the overt money supply growth should overwhelm cyclical and #Covid-related headwinds that may persist into next year.
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