What is the relationship between the budget deficits, the national debt, and the stock market?
The budget deficit (which is computed annually) is the difference between the amount of receipts and expenditures of our federal budget. (By the way, the sum of the annual budget deficits since this country was founded equals the total national debt of our nation today.)
As the debt service (interest payments to bond holders) of our national debt increases (representing a bigger drain on our economy), the stock market suffers. Currently, one out of six dollars raised in taxes is used to pay interest on our national debt. As this debt increases, we will have less money to pay for capital investment and to rebuild the infrastructure of our country. That threatens to reduce our standard of living, and will certainly depress the stock market.
The budget deficit (which is computed annually) is the difference between the amount of receipts and expenditures of our federal budget. (By the way, the sum of the annual budget deficits since this country was founded equals the total national debt of our nation today.)
As the debt service (interest payments to bond holders) of our national debt increases (representing a bigger drain on our economy), the stock market suffers. Currently, one out of six dollars raised in taxes is used to pay interest on our national debt. As this debt increases, we will have less money to pay for capital investment and to rebuild the infrastructure of our country. That threatens to reduce our standard of living, and will certainly depress the stock market.
No comments:
Post a Comment