Depression or stagflation

 Federal outlays are likely to exceed receipts by around $500bn (2.2% of annual GDP) in total over October and November. If Congress fails to raise the limit, the Treasury would need to reduce outlays by that amount, a reduction of more than 40%. Absent an immediate resolution, the US - already addicted to trillions in government transfer payments - would quickly spiral into a consumer-led depression. https://www.zerohedge.com/markets/goldman-sounds-red-alert-over-debt-ceiling-upcoming-deadline-looks-risky-2011-debt-limit

Assuming that this scenario is avoided by the Democrats passing a massive stimulus bill, then stagflation phase 1 will kick in, similar to the period of 1965-1968.  https://www.zerohedge.com/markets/stagflation-phase-1-begins-democrats-scramble-pass-largest-fiscal-stimulus-all-time

I like trying to find historical analogies.  Is Biden like Johnson?  Not in the sense of mental acuity, but in the sense of what he is doing to the economy by causing stagflation, which cursed this country from the late 1960 until 1980 when Paul Volcker killed it with shock therapy, which caused a depression.

This seems on point: "How bad was the period of the Great Inflation? The inflation rate, a mere 1 percent in 1965, hit 14 percent by 1980. Unemployment trended up from a low of 3.5 percent (annual average) in 1969 to 9.7 percent in 1982. The stock market was in the dumps. Oil prices jumped off the charts. Presidents Richard Nixon and Jimmy Carter became desperate enough to tinker with price controls, the results being disastrous." https://www.stlouisfed.org/publications/regional-economist/january-2005/volckers-handling-of-the-great-inflation-taught-us-much

We can’t go bankrupt

 “We are not broke as a nation. We are not bankrupt. We can’t go bankrupt. We absolutely cannot go bankrupt because we have the power to create as much money as we need to spend to serve the American people,” Chairman of the Budget Committee Rep. John Yarmuth (D-KY) said during Thursday’s [9/9/2021] Budget Reconciliation markup.

https://www.breitbart.com/politics/2021/09/10/democrat-budget-committee-chairman-we-have-power-to-create-as-much-as-we-need-to-spend/

The Budget Deficit in August 2021 was $173 Billion

 The federal government incurred a deficit of $173 billion in August 2021, CBO estimates— $27 billion less than the shortfall in August 2020. The federal budget deficit was $2.7 trillion [actually 2.713 trillion\ in the first 11 months of fiscal year 2021, the Congressional Budget Office estimates—$295 billion less than the deficit recorded during the same period last year. 

https://www.cbo.gov/system/files/2021-09/57419-MBR.pdf

Note that outlays fiscal ytd are $6.299 trillion, which is higher than last year at this point, $6.054 trillion.

The CBO projects that in FY 2022 that revenues will sharply increase and outlays will sharply decrease (to $5.544 trillion), to the point where the deficit in 2022 will drop to only $1.153 trillion.  This is impossible because when the government gets used to spending lots of money, it is very unlikely for the amount to decrease.  Unless the government defaults in October, and we don't want to talk about that.

2021 Social Security Trustees Report

 Read it here: https://www.ssa.gov/oact/TRSUM/

Here is the most important quote from it: 

The OASI and DI funds are separate entities under law. The report also presents information that combines the reserves of these two funds in order to illustrate the actuarial status of the Social Security program as a whole. The hypothetical combined OASI and DI funds would be able to pay scheduled benefits on a timely basis until 2034, one year earlier than reported last year. At that time, the combined funds' reserves will become depleted and continuing tax income will be sufficient to pay 78 percent of scheduled benefits.

What is likely to happen is that all of the benefits will continue to be paid, and the extra 22% will just increase the deficit.  I don't see SS benefits being cut.  They will continue to be paid 100%, at least until the whole system collapses, or more likely explodes like a supernova.

M5 as of August 31 2021

 M5 is my measure of money that includes M2, plus debt held by the public, less Treasuries owned by the Fed. Here is the current measure:

As of August 31, 2021

M2 (as of 7/1/21): 20,534.6

Public Debt (as of 8/30/21): 22,246.9

Fed Held (as of 8/25/21): -5,346.3

 --------------------------

Total 37,435.2

This is lower than last month, which was at 37,552.9.

I think there is too much liquidity in the system and the Fed should sell off some of its Treasury bond holdings.  Anyways this number doesn't look bad.  But it should soar in the new fiscal year beginning on October 1, when $5 trillion of new stimulus bills will flood the system.  That is, if the government doesn't default on its existing debt.