Submitted by QTR's Fringe Finance
Friend of Fringe Finance Lawrence Lepard released his most recent investor letter this week. He gets little coverage in the mainstream media, which, in my opinion, makes him someone worth listening to twice as closely.
Larry was kind enough to allow me to share his thoughts heading into Q3 2024. The letter has been edited ever-so-slightly for formatting, grammar and visuals.
This is Part 2 of his letter, part 1 can be found here.
FEDERAL GOVERNMENT FINANCES ARE A MESS
As we have discussed ad nauseum, the US Federal Government’s fiscal situation is in a “debt doom loop” with large and growing deficits, and the interest cost of servicing this debt growing the deficit even further. As a good macro analyst, Joe Consorti, recently pointed out:
“In June, the US spent $140 billion on debt interest, bringing the YTD total to $868 billion, on pace to hit $1.144 trillion by EOY. This was the single-biggest monthly outlay ever. How big, exactly? That's over 30% of all US revenue (mostly taxes) in June... just to cover debt interest.”
- Joe Consorti July 13, 2024
The Fed believes that the solution to inflation is higher interest rates to slow the economy. However, that only makes the cost of funding the government larger. Thus, the more they raise rates, the more debt they have to sell to cover the deficits. More debt generally leads to even higher rates. It is a vicious loop.
Compounding this problem, these deficits are occurring at a time when by most measures the economy is relatively healthy. The stock market and housing prices are at record highs and yet tax receipts are flat!
Looking at the Congressional Budget Office’s (CBO) recent economic projections: In Q1 FY 2024 (SeptDec 2023), the government recorded a deficit of $500B. In Q2 (Jan-Mar 2024), the government recorded a deficit of $600B. Then in June, the bi-partisan CBO gave the following update:
“The CBO estimates that if no new legislation affecting spending and revenues is enacted, the budget deficit for fiscal year 2024 will total $1.9T. That amount is $408B (or 27%) more than the $1.5T deficit that the agency estimated in February 2024”.
- Congressional Budget Office, June 2024
However, what’s even more astounding...(READ THIS FULL NOTE AND LARRY'S TAKE ON GOLD AND SILVER HERE).
