Long-Term Budget Deficit Revised, Now $2 Trillion Dollars Worse

Tyler Durden's picture

Two days ago the market ripped a few hundred points after yapping heads couldn't shut up about how next year's budget deficit was going to be revised down by $260 billion, after a stellar financial system managed to ramp up 100% ever since State Street refused to lend any stocks for shorting... ever... and after the FDIC has somehow managed to maintain the bank failure rate at a stellar +/- 10 banks per week. Well, as is usually the case with CNBC, they jumped the shark early in keeping with the overall propaganda directive. The full report that will be released on August 25 will demonstrate that the budget deficit for the next ten years will be worse... by $2 trillion dollars. From Bloomberg:

White House budget review set for release Aug. 25 will show cumulative deficits over the next decade amounting to $9 trillion, up from $7.1 trillion that the administration predicted in May, the official said on condition of anonymity because the figures have not been made public.

And here is the reason for the better than expected performance for the current year:

The lower deficit projection for the fiscal year ending Sept. 30 is largely attributable to the administration dropping contingency plans to provide hundreds of billions in additional aid to the financial industry, the official said.

Next week expect to see downward revised projections for GDP growth and unemployment. Yet somehow the millions extra unemployed, and the additional $2 trillion in debt that will need to be issued to finance the extra deficits will nonetheless result in a market spike, especially in three months when the $9 trillion is actually revised down to $8,999,999,999, and the $1 in savings will translate into at least $1 trillion in additional market cap for the S&P.


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Project Mayhem's picture

Congress will need to raise the debt ceiling soon.   Add this to the ever-longer list of fatal triggers.

Icarus's picture

Can someone please explain how this works? (Data found on TreasuryDirect.gov)

09/30/2008 debt was:         10,024,724,896,912

08/20/2009 debt is:             11,720,828,555,380

Difference this fiscal year:       1,696,103,658,478


Reported by article to be:        1,580,000,000,000

and not:                                1,825,000,000,000


So is the US gov having a lawn sale?

Maybe made a few $$$ on their Citi shares?

The current debt ceiling is 12.104 trillion BTW.

Gordon_Gekko's picture

Debt ceiling is a f--king joke - period.

Rusty_Shackleford's picture

This, of course, will help our creditors remain confident that the United States will always meet its obligations.

ghostfaceinvestah's picture

Fuck our creditors.  What are they going to do about it?  They can't afford to let the dollar crash relative to their manipulated currencies.

At least not at this time.

Anonymous's picture

if they get mad and they wanted to play chicken
and take some losses
they could do all kinds of mischief...

1. they could dump dollars to precipitate a crisis
2. they could dump bonds to create a crisis
3. they could buy gold up to the moon and hand
gs, db, jpm, ms massive losses on their shorts

it might be cutting off their noses to spite
their faces but a mad bear might not think rationally
....in some ways the usa has more to lose in the
above scenarios than china and might well be
worth a calculated risk......

the above crises could easily be precipitated
and become self feeding rippling into equities...

i agree that the full story on the manipulated
yuan has not been told and i by no means believe
that the chinese are innocent bystanders...but
they are creditors and are in the driver's seat
and will be edging for more room at the table
especially g8....

dcb's picture

tHIS IS THE KIND OF JINGO PROPAGANDA THOSE IN POWER WANT YOU TO BELIEVE. SO TIME FOR A REALITY CHEACK. FROM THE ft 8/21/09. "china reportedly made its largest cut in us treasury hildings in nine years in June. " doing it slowly to avoid a stampede. " "This week PIMCO... and Warren Buffet warned of the dollars fragility". China is less concerned about driving up the prices of commodities than getting out of the dollar. Also today in the editorial section of the FT. "the fed's independence at risk" basicly says the fed has become an overleveraged hedge fund that has put the tax payer at huge risks. I have made the point for months now that looking at fed policy, and not public statements, their actions can have only one effect to drive down the dollar and cause future inflation. All of these things will destroy the savings of hundreds of millons of americans in order to give a behind closed doors bailout to wall street. The fed is in fact a consortium of private banks, so of course their primary concern is the intersts of bankers. Folks who are legit, like volker, marginalized by this administration, are unhappy with the feds actions of putting the entire feds balance sheet at risk. There is no other way to explain the sum total of these actions other than to say the fed is determined to bail out wall street no matter what the ultimate cost to american society. You need to stop listening to the propaganda and understand what the hell is going on. The fed is actively buying treasuries it has sold only a couple of weeks before, and doing so at a loss to itself, in order to ensure banks profits they are investing into he market each and every time it may drop. (see today). this ensures lower bond yeilds, drops the dollar futher and further inflates the markets, increasing commodity prices, dropping the dollar. Wake up, we are a rapidly declining former empire that is more concerned about letting the bankers loot the store than fixing what is wrong. "Yeah, were number one, fuck the world, we'll kick your asses". You sound like right wing, jingo propaganda, you can stay in dollars all you want, just don't ask me for a loan.

Anonymous's picture

"Yeah, were number one, fuck the world, we'll kick your asses". You sound like right wing, jingo propaganda"

Right wing? Was Hitler right wing?

speculator's picture

Actually, this is exactly what we should do. I would love for the govt to repudiate its debt and ruin its credit. Unable to borrow, it might actually shrink a little. And if it tried to print the difference, the inflationary disaster might lead to its collapse.

Ghettomedic's picture

Because everybody wins when a functioning government collapses. Somalia looks like a utopia.

Rex Crotch's picture

The shit is going to hit the fan eventually. Better now than later. Delaying the inevitable is going to only make matters worse. Raise rates, lower liquity, and get all the bad debt out of the system. It's going to be painful either way. Just sayin'.

goldbugg's picture

Wait till buys it and demands loss-sharing at loss for loss up to 5 billion, 99% loss for any loss exceeding billion.

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finance news & opinion updated daily

digalert's picture

My fave CNBC in the midst of fantastic market rallies kinda swept the half million new unemployment numbers under the rug this week.

TumblingDice's picture

...its all monopoly money anyway

to prove how twisted this sytem is just look at exhibit a: the cds contract for treasury debt. Who in their right mind would insure against the bankruptcy of the United States provided the value of this insurance and most likely the denomination of this insurance to be worthless once such an event happens. Just think about it.

One trend that these financial wizards and hapless politicians cannot prevent is the tendency for things of extrinsic value to show their true worth (closer to zero) and the value of things of intrinsic value to gain relative value (and in some cases people waking up and realizing that they have been undervaluing such things big time). This trend will manifest itself whether those who hold the electronic records of purely extrensic value like it or not. Question of "when" and not "if".

Green Sharts's picture

I've always wondered about CDS contracts on U.S. treasury debt, not as much as who writes it as how anybody who buys it expects to get paid in the event of a default. 

Ducky's picture

I remember reading Market Wizards when just out of college in the late 80's. One of the fund managers said that there wasn't a country in the world he would lend money to for 30 yrs and that's why he'd never buy anything over a 10 yr bond.

I always loved that quote. Words to live by.

Anonymous's picture

At this rate, the markets will rocket Zimbabwe-style in no time.

deadhead's picture

TD... a particularly excellent introductory commentary on your part for this one, especially for a late Friday; you take a nap this p.m.??

as usual, i love the late friday afternoon release of this shit. 


AnonymousMonetarist's picture

News breaks with the cycles.

Either this market is dead or my watch has stopped.

Printfaster's picture

When does this ridiculous debt disintermediate business credit and kill all US industry?


walküre's picture

This was released after markets closed today. Is hard to say whether or not the market has discounted this information, if it was worse or better than expected or if the ramp job today was necessary against this crucial information in advance of next Tuesdays ugly deficit numbers.

Thanks for finding this. There's so much info out there and its hard to gauge trading action against this or that. It's all one big concerted effort.

This site is awesome as a digest of important news, stats and opinions of other market observers and traders. Guys that don't sit in front of a camera to pump stocks from companies that pay the advertising dollars of the networks.

Keep up the good work!


e1even1's picture

how in the world do people manage to use fundamentals for anything other than entertainment purposes? the historical data is revised and the current data is a combination of conjecture and government data subject to future revision.


Anonymous's picture

This market disconnected from fundamentals months ago. The reconnect will be a disaster for somebody.

straightershooter's picture

Is there any straight shooter out there in Capitol, K-street, wall street, etc.,? Guess not.

Run,run, run-front run, Good Salmon

Spend, spend, spend-Bad Omon

Borrow, borrow, borrow-Thank God

Print, print, print- Big Banana

Idol, idol, idol-Ordinary Citizen

Hope, Hope, hope-idiot media

Default, default, default-Good Salesman Engineered

HFT, dark and darker pool,SLP,messenger v, message, etc-Timely Death (i.e., Death will find you, just watch final destination, final edition)


taraxias's picture

This is a green shoot, yes?

straightershooter's picture

No, green shoot is dead. Long live the green shoot.

Now, the jargon is "almost recovery". Long live the almost recovery.

goldbugg's picture
goldbugg (not verified) taraxias Aug 22, 2009 7:35 PM

LOL..Meet the new and improved Super Superior of government job cdo's...

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finance news & opinion updated daily

Green Sharts's picture

3 more banks go down, 2 in Georgia and 1 in Alabama with total deposits of just over $900 million.  That's a rounding error, hardly worth even reporting.

straightershooter's picture

See, how small the FDIC has become. Can't even handle a rounding error?

straightershooter's picture

Only 2 F*** trillion? Wow, better than expected. Upgrade, upgrade, upgrade, buy,  buy, buy. Bye.

taraxias's picture

CB is laying into Yves on her blog. She is lucky he hasn't slept for 60 hours otherwise he'd really be in a bad mood.

straightershooter's picture

What will happen if CB had slept nonstop for 60 hours? Inquiry mind is...............

Cheeky Bastard's picture

i would literally die; i function on insomnia; sleep is a disease to me

Apocalypse Now's picture

Are you on the DaVinci system, sleep 20 minutes every 4 hours?

SV's picture

Polyphasic sleep is hardcore...  doesn't work too well with young uns around.

cougar_w's picture

When you are cast into the sea and your ship is wrecked and going down in the storm and you are at immediate risk of drowning, having an extra plank to cling to looks pretty sweet. Sounds weird, unless you are the one in the water.

We are coded to survive, but it seems we are not coded to avoid destruction.


phaesed's picture

*sigh*  Can't fight the Fed.... that's why we need to bring it down.

SWRichmond's picture

This dovetails perfectly, of course, with this earlier ZH post:

Guest Post: The S&P500 After The Glowing July Existing Home Sales Report.

In that post the author notes on a chart how the 70's played out, and how the deficit fared; we all know about commodities.



deadhead's picture

TD said: "Well, as is usually the case with CNBC, they jumped the shark early in keeping with the overall propaganda directive."

They buried the story quickly and deeply on cnbc dot com.......

deadhead's picture

buried even further down the site this a.m.   glad that they have the "10 coolest beach houses", which has been on the site for several weeks, much higher above the fold than a major deficit story. 

Anonymous's picture

$7.1 trillion was a figure for which I was able to compensate through sage financial planning, but this!

Ah well, the unforeseen has a way of happening.

Anonymous's picture

Almost casually, on a Friday afternoon, they announce a 26 percent heavier load will be put on the taxpayers' back. No one else pays government debt.

Marla Singer's picture

I think you meant Friday, late-August. An amazing part is that someone thought that would help obscure the problem. More amazing? It probably will. No one ever lost money underestimating the intelligence of the American People, after all.

SWRichmond's picture

I remain hopeful.  I see a lot of anger, first hand.  This IS, after all, our last chance.

eggy123's picture

True. I am hearing more and more of "well, it looks like the worst is behind us". They say that the stock market is a "forward looking indicator" so it is always ahead of the average Joe, and the market, which is always 100% correct, somehow knows that things will be peachy in the near future, and that S&P P/E of 140 is "fairly valued" for the recovery.

OK, looking forward:

The CRE bomb is ticking waiting to blow a gaping hole in the USS Economy, employment is still fucked, rail traffic down 20%, tax reciepts down 30%, mortgages defaulting, home prices pancaked AND another 2 trillion snuck in there.

Yet I am short the market and it keeps up going straight UP in the face of these facts?

Most people who are paying attention KNOW how this movie ends, but most of us non-GS people are just trying to figure out when exactly the unholy trinitiy of Fed/Congress/GS have made enough money and gotten the big boys out of harms way. Once they are on high ground, they will let the dam burst and the American People will be on their own to deal with the flood/destruction.



Translational Lift's picture

I'm with you there....+1mm Bud....+1mm

berlinjames02's picture

In addition to CRE, let us not forget the $2.4 trillion in Alt-A mortgages that will be resetting in the coming 2 years. (Source: T2/Whitney Tilson).

I guess the SEC/FASB will have to think of more creative way than lumping all the debt into Level 3 assets? I propose Level 4 Assets: Mark-to-imagination. Pick your best case scenario, assign a value, and voila... billions in new capital.

Oh wait... that's already occurring.