Lets examine the projected GDP number of several countries and look at their projected government budget surpluses or deficits to see how their economies are fairing:
Country 2010 GDP 2010 Budget Est Implied Real Growth
United States 3.1% -8.8% -5.7%
Japan 3.1% -7.8% -4.7%
Britain 1.2% -10.3% -9.1%
Canada 3.5% -4.5% -1.0%
China 9.9% -2.6% 7.3%
Russia 4.8% -3.9% 0.9%
India 7.9% -5.5% 2.4%
Brazil 7.8% -1.8% 6.0%
Data for this table courtesy The Economist July 24, 2010
We begin with China:
9.9% recorded growth rate less 2.6% budget deficit still leaves growth after government spending at a very respectable 7.3%.
Brazil is another strong performer with 6.0% after government over spending.
India and Russia also are in positive territory.
When we look at the "developed" economies let's start with Canada since it claims to have a strong economy.
Results: 3.5% growth less 4.5% government deficit leaves -1.0% "growth"
Not a strong performance for a country that is supposed to be pulling out of a recession.
When we consider the US we see that the economy is expected to grow 3.1% which is a good growth rate for a mature economy. Once the government deficit is subtracted the picture changes. Deduct the nearly 9% annual government budget deficit and we see the economy shrinking at a rate of 5.7%.
The weak economic response after spending $1.3 Trillion more than tax revenues and only generating $400 billion or so in "growth" (to put it another way, 30 cents returned for every dollar invested) should be a serious deflationary warning to us.
How long will the bond market tolerate this?
It seems that the Chinese, our main creditors, are reaching their limits for additional US debt.
September could prove to be an interesting month if this continues.