Goldman Sachs' Economics weekend note on US spending

In brief (... some hair-raising projections from GS):

  • The US fiscal outlook is not good
  • We project the federal deficit will increase from $825bn (4.1% of GDP) to $1,250bn (5.5% of GDP) by 2021. By 2028, we expect it to rise to $2.05 trillion (7.0% of GDP) in our baseline scenario
  • we believe the risks are tilted in the direction of larger deficits than projected
  • A recession would widen the deficit and boost the debt/GDP ratio
  • An expanding deficit and debt level is likely to put upward pressure on interest rates, expanding the deficit further
  • a chronic deficit in the range of 6-7% of GDP in the next decade would imply a cumulative boost of around 70bp over time

I guess a bigger deficit and rising rates are USD supportive, until they aren't

ifyouknowwhatImean?

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