We often talk of the deficit being this critical issue, yet when we look at it over the course of the past 100 years we discover on a logarithmic scale that the deficit is not all too large at $585 billion in 2016. It isn't the deficit which is the fundamental problem of the United States economy, but rather the type of debt the government is borrowing. The majority of the deficit isn't used to build or spawn new assets, but rather to finance further liabilities already owed to citizens, to expand the military, police state, and to service the already accumulated national debt.
Every investor understands good debt is used to acquire or create assets, and bad debt is used to purchase or finance liabilities. Of course an asset generates positive cash-flow, and a liability generates negative cash-flow. The government cannot properly manage its risk because the Federal Reserve's fixed interest rates block the market from holding the government accountable. Even if government could assess risk we know while occasionally hitting a lucky strike the state bureaucracy is essentially useless in choosing profitable investments.
Does the budget deficit matter? Leave your thoughts below!
Sources:
Bud Conrad, Profiting From the World's Financial Crises
The Government Publishing Office
Anna Louie Sussman, U.S. Budget Deficit Rose in Fiscal Year 2016, First Time in Five Years