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Nobody wants to hear that U.S. government and consumer debt aren’t sustainable. Not President Donald Trump. Not the financial markets.

Today, February 11, Federal Reserve Board Chair Jerome Powell told the House Financial Services Committee that it was important to put  “the federal budget on a sustainable path when the economy is strong” That “would help ensure that policymakers have the space to use fiscal policy to assist in stabilizing the economy during a downturn,” Powell said.

The implication, of course, is that the federal budget deficit isn’t sustainable. The budget deficit is expected to top $1 trillion in the fiscal year that ends on September 30. And the federal debt has increased by about $3 trillion since President Trump took office. The budget the president submitted this week would add another $5 trillion to the debt over the coming decade.

Powell’s point is that it’s important that fiscal policy plays a counter-cyclical role. Government spending and deficits should increase in times of recession–as they did under President Barack Obama as the U.S. saw tax receipts fall  and spending rise in an effort to halt the Great Recession. In times of economic growth–like now–deficits should fall so that in the short-run government spending doesn’t over stimulate the economy and push inflation higher and in the medium to long run so that the government can reduces current deficits so that it can run larger deficits when the next recession hits.

Federal Reserve interest rate policy should also keep one eye cast on the next recession. But with the Fed’s benchmark interest rate now below 1.75%, the Fed just doesn’t have much room to cut interest rates to fight the next slump, Powell has warned.

Powell’s testimony today unleashed a Twitter blast by President Trump who tweeted in the middle of the congressional hearing that the Fed chair was keeping interest rates too high. “When Jerome Powell started his testimony today, the Dow was up 125, & heading higher. As he spoke it drifted steadily downward, as usual, and is now at -15. Germany & other countries get paid to borrow money. We are more prime, but Fed Rate is too high, Dollar tough on exports.” We can expect Trump to keep the pressure on the Fed to lower interest rates–through tweets and the nomination of Judy Shelton to one of the two open seats on the Fed. Shelton, who was an advocate of the gold standard before she became an advisor to the president, now says interest rates should go to 0% or lower.

Today we also learned from the Federal Reserve Bank of New York that total U.S. household debt rose by $601 billion in the fourth quarter of 2019 from the fourth quarter of 2018. That was the 22 straight quarter of increased borrowing and pushed total household debt above $14 trillion for the first time ever. That is $1.5 trillion above the previous high set in the third quarter of 2008, just as the Subprime Mortgage Crash was morphing into the Global Financial Crisis. Overall household debt is now 26.8% above the low set in the second quarter 2013.

Student debt increased to $1.51 trillion from $1.46 trillion at the end of 2018.  Auto loans rose to $1.33 trillion, while credit card debt rose to a record $930 billion. Auto debt has risen for 35 consecutive quarters. Almost 5% of auto loans are 90 days or more delinquent. That is the highest percentage since the third quarter of 2011. Credit card delinquencies rose to 8.36%, an 18-month high. One in nine student borrowers were 90 days or more delinquent or in default. That’s an understatement since about half of student loans are currently in deferment, a grace periods and therefore temporarily not in the repayment cycle. Once these loans re-enter the payment cycle, delinquency rates are projected to double, the New York Fed noted.

To say that the markets don’t care would be an understatement. As of 1:30 p.m. New York time, the Standard & Poor’s 500 was up 0.44% and the Dow Jones Industrial Average had gained 0.15%. The NASDAQ Composite had climbed 0.64% and the Russell 2000 was higher by 0.86%. The iShares MSCI Emerging Markets ETF (EEM) was up 1.64%.

The CBOE S&P 500 Volatility Index (VIX), a measure of short-term (one month or so) fear in the market, was down 3.52% to 14.51.