The US Just Borrowed $488 Billion In One Quarter, The Most Since The Financial Crisis

For months, analysts have been warning that the US is set to borrow an unprecedented - for a non-recessionary period - amount of money...

... and on Monday afternoon this was confirmed, when the US Treasury announced that in the quarter ended March 31 (the fiscal year"s second), the US borrowed $47BN more than its had anticipated three months ago, or $488BN to be precise.

This was the single biggest quarterly amount of debt sold by the US Treasury since the record $569BN in debt borrowed in Q4 2008 when the financial system nearly collapsed, and Treasury had no choice but to raise a gargantuan amount of money during the biggest financial crisis in modern US history.

What makes the just passed quarter different, however, is that there was no crisis, not even a recession. In fact, in the first quarter US GDP rose by 2.3% according to the BEA amid what, until recently, the "experts" said was a global coordinated recovery.

In retrospect, it appears the "recovery" was only around long enough for the US and/or China to raise near record amounts of debt.

As a result of the near-record borrowing spree, the US ended the quarter with $290BN in cash, more than the $210BN budgeted.

What is scary is how fast the US is raking up the debt: as a reminder, just a few weeks ago we reported that in the first six months of the fiscal year, the US budget deficit rose to $600 billion as spending increased at three times the pace of revenue growth in the October-to-March period. At that run-rate, the US deficit will soar to $1.2 trillion for fiscal 2018, far above the $804BN projected budget gap and resulting in an even greater amount of debt borrowed.

Commenting on the debt splurge, the Treasury said tax changes are “poised to underpin near-term consumption and investment” and “the stage is set for a pick-up in growth over the near term."

They better, because if all we have to show for nearly a half a trillion in debt in one quarter is 2.3% GDP, then the US is in very serious trouble.

Looking ahead, the Treasury forecast a need to issue $75BN in net marketable debt in the current quarter, $101BN below the last forecast, and assumes the cash balance continues to rise by the end of June to $360 billion, the TSY said. The April-June borrowing estimate is $101 billion less than its previous forecast, which was partly driven by the higher cash flows.

As for the last quarter fo the fiscal year (calendar Q3), the Treasury plans to borrow a net $273 billion, assuming a cash balance of $350 billion by the end of that period.

It is safe to assume that the Treasury will be well "over" all its borrowing estimates.