🤯🇺🇸 U.S. Debt Hits $33T
Happy Wednesday all,
We hope you enjoyed last week’s video on the wealth inequality situation in America! It was one of our bigger projects to date and we’re in the process of trying out some different formats for the YouTube channel! If you haven’t given it a watch yet, it’s linked at the bottom of the newsletter so definitely check it out after reading the newsletter.
Enjoy this week’s Hump Days!
- Humphrey, Rickie & Tim
👀 Eye-Catching Headlines
👨⚖️ FTX sues SBF’s parents to recover “misappropriated funds” (WSJ)
🐢 Global economy poised to slow as rate hikes bit, OECD says (Bloomberg)
🔍 Fed policy makers’ projections for inflation look as if they could be too high, while GDP estimates look too low (WSJ)
🧭 Google lost map traffic with Apple Maps switch on iPhones, executive says (Bloomberg)
🔙 Buybacks surge in one of the worst-performing stock markets (Bloomberg)
🛒 Sequoia and Andreessen take hit on 2021 Instacart investment, 75% plunge in valuation (CNBC)
😬 Justice department probe scrutinizes Elon’s perks at Tesla going back years (WSJ)
The Weekly Brief
U.S. national debt hits $33T for the first time (CNBC)
The federal government is less than two weeks away from facing a potential shutdown over a lack of funding authorization after the national debt surpassed $33T for the first time. Tax cuts, stimulus programs, and decreased tax revenue factored into the government’s decision to borrow at a rate never seen before. Republicans are pushing for less spending, while Democrats are backing President Biden’s programs, such as the Inflation Reduction Act, which could cost more than $1T over the next decade.
Hump Days Take
Republicans and Democrats are going back and forth mainly on the topic of who should be contributing more to tax revenue. The Democrats demand the wealthy and big corporations pay their fair share, while Republicans want to extend President Trump's tax cuts. Congress has until Sept. 30 to pass a spending bill.
Wall Street gearing up for the Fed’s “hawkish pause” (Bloomberg)
The Fed is widely expected to keep rates on hold this week. However, investors everywhere are going to try and glean as much information as they can about whether policymakers will retain their projections for one more 25bp hike by year-end as well as how much easing they are anticipating in 2024. Experts seem to believe that the Fed may not be done raising rates while also acknowledging the risk of an economic downturn that would trigger much more rapid easing.
Hump Days Take
The Fed signaled that one more rate hike would be coming - traders give it a 25% chance of happening at the next November FOMC Meeting. The markets were down ~1-1.5% on the news of rates holding steady for an extended period of time. While a pause is welcome, the extension of rates being high could put pressure on the economy and lead to recession according to Vanguard's chief global economist.
Student-loan restart threatens to pull $100B out of consumers’ pockets (WSJ)
Starting October 1st, student loan borrowers will need to begin to make payments on their debts which have been on pause since March 2020. The intention of the pause was to put money back in the hands of consumers to spur an economy forward that was at risk of seeing spending come to a standstill in the face of the Covid-19 pandemic. Retailers such as Target and Walmart are showing concerns that as student loan payments are set to resume, consumers will need to make concessions such as cutting back on discretionary spending.
Hump Days Take
It's important to note that economists are not as concerned as the major retailers are because many student loan borrowers have higher-than-average incomes, making them better able to shoulder the additional burden while still maintaining spending. Additionally, according to Wells Fargo, the money saved during the payment pause came out to around 0.4%-0.6% of all consumer spending.
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