As many are hopeful that we are finally leaving the financial crisis behind, sometime in the not too distant future the government is going to have to start unwinding the major stimulus that it has provided to the economy through fiscal deficits and monetary expansion since the crisis began.
Below is a cumulative tally of how much stimulus has come from the Fed and Treasury over the last four years. The total is now about $7T ($5T worth of deficits plus another $2T worth of monetary expansion). Amazingly, to the extent that one believes that the crisis was primarily housing market related, the $7T total represents ~70% of all the mortgage debt outstanding in 2008.
|Cumulative deficit plus change in size of Fed balance sheet since 9/2008
Alexis de Tocqueville is often misquoted as saying that “the American Republic will endure until the day Congress discovers that it can bribe the public with the public’s money.” Whether you agree with that sentiment or think that it’s best that the government does provide social benefits to its people, below is the current price tag for Federal government services per capita. CPI adjusted we spend more today per person than we have at any time in the post-war period.
Last week I posted a chart comparing “fiscal cliff” on google trends to “green shoots” and “moral hazard.” Since then, I thought of two other good terms for comparison: “BRIC” and “PIIGS.” Below is a chart comparing these. Somewhat surprisingly, fiscal cliff has overtaken references to PIIGS and BRIC in news reference volume.