2023 United States debt-ceiling crisis: Difference between revisions

2023 United States debt-ceiling crisis (view source)

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 === Differences 2011 and 2023 ===
+* With respect to the fixed-income markets, in 2011 the Fed had rates in the range between 0-0.25%, and was conducting quantitative easing (QE). Zero rates likely prevented much of a rally in short-term rates while QE may have encouraged the flight to quality into longer-term bonds.
+* Equity valuations are much higher today than they were in 2011. When the market peaked on April 29, 2011, the S&P 500 market cap was 79% of GDP. By October 3, 2011, it had fallen to 62%. As of April 14, 2023, the S&P 500 market cap amounted to 141% of GDP, roughly twice its 2011 levels.
+* In 2011, inflation was low and stable at around 2%, while unemployment was very high at around 9%. Today, unemployment is at 3.5% while core inflation is 5.6%, still significantly above the Fed’s target. This could make it very difficult for the Fed to cut rates.
+* Public debt now amounts to 113% of GDP compared to 87% of GDP in 2011.
+* Going into the 2011 budget debate, the Federal budget deficit was around 9.3% of GDP and was in the process of shrinking towards 8% by year’s end. As of March 31, 2023, the Federal budget deficit was 7.1% of GDP.
 == References ==