Deficit to Outlay Ratio

This page is created to monitor the U.S. Deficit to Outlay Ratio.

It measures how much of the government spending (outlays), comes from borrowing of foreign money (deficit).

A deficit to outlay ratio above 40% indicates that there is a high probability of hyperinflation.

Today (2013) we have an unprecedented deficit to outlay ratio of 30%.

U.S. Deficit Spikes

As December and January were pretty good months (no deficit), February 2013 marked a record deficit of $204 billion. The deficit to outlay ratio spiked to 60%, way over the hyperinflation ceiling of 40%.

If the U.S. keeps going at this rate, we will see $2 trillion dollars in deficit soon.

Chart 1: Deficit to Outlay Ratio

No U.S. Deficit in December 2012

The U.S. has done a good job in the month of December 2012. Its outlays of $270 billion were fully absorbed by receipts of $270 billion which makes the December 2012 deficit zero (Chart 1).

I think most of this is due to the fact that the debt ceiling was reached in December, so the U.S. couldn’t spend as much money as it could.

Chart 1: Deficit to Outlay Ratio U.S.

James Turk: Why you should own gold

Interesting presentation from James Turk. What keeps me bullish is his Gold Money Index which still indicates that gold is way undervalued at this time.

Another item mentioned in the video (an item I’ve talked about many times) is the deficit to outlay ratio. The U.S. is spending money which is borrowed for 40% on average from foreigners.

The latest data on deficit to outlay ratio in August 2012 shows that we borrowed 52% from foreigners to spend on our U.S. programs (medicare, social security, defence, pensions, education…):

Chart 1: Deficit to Outlay Ratio

If we keep going this way, hyperinflation is a certainty.

The road to hyperinflation

Today president Obama disclosed the projected US budget deficit for 2012.

The projected deficit would reach $US 1.33 trillion in fiscal year 2012. While in December 2011 the trade deficit widened to $US 48.8 billion. For full year 2011 the deficit was $US 1.3 trillion.

Here’s what the government forecasted previously (Chart 1). They forecasted a smaller deficit in 2012 of only $US 1.1 trillion. Clearly they got it entirely wrong because the deficit in 2012 is projected to be larger than 2011, namely $US 1.33 trillion. To see what this means go to: The road to hyperinflation.