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Saturday, January 20, 2018

The US government has shut down on Friday!

https://sg.news.yahoo.com/ap-explains-why-government-close-shutdown-233759096--politics.html

The federal government has no money to pay its government employees anymore.  Therefore, it is shutting down its offices, leaving the essential services still operating with limited manpower.

On the other hand, Trump is reducing the tax revenues despite running out of money to please his supporters.  Trump's tax policies will add USD$1.5T to the national debt within a decade.

When a government has no money from its coffer to pay its employees, do you think it has the money to repay its national debts?  There is no way the USA is able to repay its national debt of more than USD$20T but no media will report this publicly.  The day of reckoning will come as it is just a matter of time.

Instead of focusing on increasing its government coffer, the US government is diverting the attention away from its debt problem to China by getting the media to do fearmongering and smearing campaign against China, be it militarily or economically.  China's crash story has been spinning around for more than a decade but China has not collapsed yet and its economic growth has been around 7% insofar.

With an ever-increasing colossal debt and economic growth of around 3%, the USA economic health is definitely declining.  There will come a time when the death cross appears on the chart.


5 comments:

Eric Ho said...

Trump is touting that his tax policies will boost the economic growth and this will make up for the tax revenue losses.

However, many economists are skeptical about it because history has shown that the real economy won't grow like that. The more realistic projection will be around 0.5% addition to the economic growth which pales in comparison to the addition of USD$1.5T to the national debt.

Why is this so? Many corporations will repatriate their overseas monies but most of the monies will be used to boost up their share prices through share buybacks and dividend payouts. Then, some will use their monies to upgrade and purchase new equipment.

Therefore, the multiplier effects to the economy won't be as great as what Trump claimed to be.

Eric Ho said...

Let's do a simple calculation to show the outcome.

The USA GDP was about USD$19.5T in 2017.

$19.5 * (1.005^10) = 20.5

In simplicity, GDP will grow an extra (20.5 - 19.5) = 1T after implementation of Trump's tax policites.

However, the tax revenue losses will result in a (1.5T-1T) = 500B deficit.

Therefore, the ensuing outcome is the government coffer will lose $500B in the future.

Great job, Trump!

Eric Ho said...

Do take note that our simple calculation has the assumption that the extra economic growth of 0.5% won't be affected by any recession within the next 10 years.

Eric Ho said...

https://sg.finance.yahoo.com/news/us-firms-now-focus-stock-052400358.html

Our assessments of what the firms will do with the repatriated cash have been affirmed in the WEF.

Eric Ho said...

https://www.marketwatch.com/story/tax-overhaul-will-have-a-limited-effect-on-us-economy-moodys-says-2018-01-25?siteid=yhoof2&yptr=yahoo

Moody's shares the same view as us on the economic effects of the Trump's tax policies.