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Long-Term Budget Deficit Revised, Now $2 Trillion Dollars Worse
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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Congress will need to raise the debt ceiling soon. Add this to the ever-longer list of fatal triggers.
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.
Debt ceiling is a f--king joke - period.
This, of course, will help our creditors remain confident that the United States will always meet its obligations.
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.
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....
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.
"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?
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.
Because everybody wins when a functioning government collapses. Somalia looks like a utopia.
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'.
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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My fave CNBC in the midst of fantastic market rallies kinda swept the half million new unemployment numbers under the rug this week.
...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".
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.
our monopoly money
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.
agree
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At this rate, the markets will rocket Zimbabwe-style in no time.
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.
News breaks with the cycles.
Either this market is dead or my watch has stopped.
When does this ridiculous debt disintermediate business credit and kill all US industry?
About 15 years ago.
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!
TGIF
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.
This market disconnected from fundamentals months ago. The reconnect will be a disaster for somebody.
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)
This is a green shoot, yes?
No, green shoot is dead. Long live the green shoot.
Now, the jargon is "almost recovery". Long live the almost recovery.
LOL..Meet the new and improved Super Superior of government job cdo's...
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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.
See, how small the FDIC has become. Can't even handle a rounding error?
Only 2 F*** trillion? Wow, better than expected. Upgrade, upgrade, upgrade, buy, buy, buy. Bye.
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.
What will happen if CB had slept nonstop for 60 hours? Inquiry mind is...............
i would literally die; i function on insomnia; sleep is a disease to me
Are you on the DaVinci system, sleep 20 minutes every 4 hours?
Polyphasic sleep is hardcore... doesn't work too well with young uns around.
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.
cougar
*sigh* Can't fight the Fed.... that's why we need to bring it down.
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.
Doubters?
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.......
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.
$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.
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.
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.
I remain hopeful. I see a lot of anger, first hand. This IS, after all, our last chance.
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.
I'm with you there....+1mm Bud....+1mm
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.
Good idea. What's the point of Mark-to-Market when the Market is a joke. It's like getting a bonus based upon your "Self Evaluation".
BTW-like the avatar.
Make it 4 banks, the fourth is a biggie.
Guarantee Bank in Austin TX, Cost to FDIC --> $3 billion
http://www.fdic.gov/news/news/press/2009/pr09150.html
*Guaranty, not Guarantee
TGIBFF: Thank God it's Bank Fail Friday!
Okay FDIC definitely tapped that $100bn line of credit with Treasury
yep, methinx you are correct mayhem.
how do you think cheat street will react to the deficit news? in the "old" days, I know what would have happened but what about now?
edit add on: isn't the loc 500Billion?
Ah yes , you are right. It depends -- it's initially $100bn with possibility of expanding to $500bn. Good catch.
"
Next year there will be an additional expansion of $500 Billion into 2011 and so on, ad infintum...
But the revised budget deficit projection 2 days ago said there was savings from lower than expected bank failures. How can this possibly be?!?!?!
It's sort of the opposite of Cash for Clunkers. Pull future auto sales forward, push dealing with insolvent banks out further.
wasn't the line of credit supposed to be for PPIP?
Other banks total $260 million hit to the DIF. But hey, it isn't even five out here on the west coast yet. Keep em coming.
Is it just me, or have Georgia banks been going down left and right?
The South is riddled with bad real estate debt, while the West and East coasts were already established, the South was just getting started in the last 15 years building all those condo communities. I guess that is the lesson you learn when condo rights outside Atlanta were trading hands 10 to 15 times before they ended up in the hands of the people going to live in them, and that is assuming the construction actually got underweigh.
This is too much accurate information.
I want to be stupid and be fed inaccurate information so I can make money.
Tyler,
Been reading your site for the past 4 or 5 months and have to say that is the best financial/economic site on the web. Fantastic job ! Keep up the good work. Would be interested in your opinion as to how this big charade will end and how long it will take...
TD,
we bees all wee weed up...:)
Is wee weed up kinda opposite deep doo doo or more like the same? I don't get it.
by the way, i fear that karl denninger will blow his final gasket when he sees this one!
Yeah, I read Karl daily, but I almost expect to hear one of these days that he's cracked and shot up a McDonalds or something.
Yes , especially if Jim Willie turns out to be right. I fear for the Internets.
If that dollar keeps doing a header, then Karl will be wondering about his metals call.
Out of curiosity---
Would people rather have Nancy Pelosi/Barney Frank in control of our monetary policy or Ben Bernanke? This would be an unofficial referendum by ZH commentors.
*Neither is not an option*
Yes, I would rather have Maxine Waters in charge of the currency.
Barney, he looks like he's one ham sandwich away
from a major coronary.
I find your debate to be falsely framed and choose not to participate in it.
I didn't propose a debate. I proposed a really meaningless poll to gauge where a group of intelligent individuals place a preponderance of their confidence (congress vs.fed).....hence "out of curiosity"
I appologize if the comment was apoplectic.
I vote fuck it, put HAL9000 in charge, give skynet complete and total control, let's watch the fud rucker burn...
I pwefur Bawney Fwank
Ah, to pick a bowl haircut Bernanke or an anti-American nut Pelosi and an easily bought homosexual Barney Frank. You know, I would have to go with the devil I don't know for $500 Alex. Here is why. Barney Frank managed to get OneUnited Bank 12 million dollars in a TARP grant. The guy is for sale. Once someone crosses the line, it is easy to do it again and again.
I just have to vote for any side that has the most corrupt politician there ever was, Barney Frank. In case anyone in Massachusetts actually reads this, please remember this, "Just because someone is a crook does not mean you have to vote for them."
We need homo-disclosure laws. How many "wives" are getting fat on frankie-pankie?
It's kind of a pisser because real wives get the audit but BF buddies are "out there" getting much bango for the the buck.
homos don't have to disclose
Barnies BF is Faniie Bay.. err fannie boy
Pisani says it's a positive for the bulls.
What was Art Cashin babbling about all week about Ramadan and it being a concern?
the last thing he spoke about was "it's going to be an interesting 6 to 8 weeks." In CNBCspeak that means, hold on to your ass, correction coming and I can't come out and say it.
He had a pretty solid run for quite a while on support levels, but I think he's been off as of the last few weeks.
Ramadan? Is Muslim prohibited from buying stocks/bonds/debts/options/commondities/ during the Ramadan?
P.S. I love Art Cashin by the way.
i didn't get art on that one either....maybe he was marinating a wee bit early in the a.m.
I saw the clip on Jesse's site and I used to like Art as well - but I think he's lost his mojo - the Ramadan thing was bizarre (a throw back to terror alert levels)
TD....i love you man.... like in you're my bro.... wanna buy you unlimited rounds at the bar, hit on chicks and just get tottally silly sort of way...
re CNBC
I stopped watching some months ago - I think it was during one of Erin's Crocus moments - I switched to Bloomberg only to discover that Betty Liu is an Asian version of Erin only worse - e.g. Erin fills dead air with goofy grins whilst Betty has the production crew slow the teleprompter.
But the other day I think I found the solution (partial) -- Bloomberg radio has a great program from 7-10am and then simulcasts some mid day stuff from Bloomberg TV (their mid day anchors are okay as long as Betty's alter ego Carol Massar is on vacation). It is the best out there in a sea of extreme mediocrity. Except of course for Kathleen Hayes who is a cross between Dennis Kneale and Dr. Liesman.
The FDIC is out of money and I doubt the credit line will help that much in the near future.
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There is no doubt the market is being manipulated. Fundementals are being totally ignored. Paid-off talking heads are talking things up despite no consumer confidence, no consumer spending, increasing residential and commercial foreclosures, no real increases in real estate sales, no retail sales increases, no real increase in productivity, faked profit reports resulting only from layoffs and not increased productivity or sales - the list goes on and on. We are heading for a blowout bigger than experienced earlier this year. The same people who couldn't see the last problems coming are now talking people into another sure cataclysm.
Like the Boy Scouts always say: Be prepared!
If enough people say it over and over again, is it real? If a major player(USG) in the market is willing to lose billions of dollars doing the exact opposite to logic, then what can you do? My boss used to trade currencies at citi. After making his required $, he sold a currency lower than the bid. As in," You want to buy for 1.20? I give to you for 1.10." That countermarket movement trashed the currency for the entire day. One DUDE drove down one country's currency because he was BORED out of his skull trading dumb money with keyboards. This is what is happening on a huge scale. Employment numbers terrible? Market gaps down 200? Fuck it! It's RALLY TIME. We buys all your sheet ! Sells me your sheet?
Friday Aug 21 NEWS
1. Long-Term Budget Deficit Revised, Now $2 Trillion Dollars Worse.
2. President Barack Obama left the White House on Friday for a 10-day vacation, taking with him the beloved family dog.
Maybe that's bamas cover....."Don't blame me for the market crash ...I was on Martha's Vineyard......."
FYI-
Goldman Sachs gave Obama 4x McCain in 2008. About 1 mill. Goldman was the 2nd highest contributor to Obama. 'Nuff said?
http://www.thepowerhour.com/news/items_disappearfirst.htm
The GDP/ National Debt ratio for US is 60.8%.
The GDP/ National Debt ratio for Japan is 170%.
The GDP/ National Debt ratio for Canada is 62.3%
The GDP/ National Debt ratio for Germany is 62.6%.
I'm not advocating a "you started it.. policy," but surely by comparison, the US could print many billions more USD (in fact, the US would need to triple its debt to create a worse ratio than Japan) and still manage a relatively strong GDP/ debt ratio.
Of course, the ratio changes if US GDP decreases, but a decreasing dollar results in an increasing S&P and thus an increasing GDP, thus maintaining the status quo.
In conclusion, there is a lot of hoopla regarding the US debt mountain and the inevitable decline of the USD. But when you compare this to data from other countries, the US could be considered to have a positively rosy outlook!
Oh and for the record, I'm British and the British GDP/ National Debt ratio is only 47.2%, so we have a comparitively low GDP/debt ratio.
The information that I cite can be found at http://www.visualeconomics.com/gdp-vs-national-debt-by-country/
The debt percentage you quoted for the US just quadrupled times two in a nanasecond: Unfunded US Debt Obligations to itself.
Viva la Banana Republic Americana!
Awesome, HFT has moved into trading our debt now that the equities are at a top. The fed must have brought them in to provide "liquidity" for his upcoming auctions...
You know there's a filing cabinet with about another $40 trillion of unfunded IOUs for SS and medicare right?
We are depending on hot chinese factory girls and british dentists to turn this into welfare payments for obese hillbillys.
Well US industrial jobs are accounting for less than 9% now. That is precarious! A country which economy relies on consumption can't survive with this kind of "advanced" financial maneuvers, tricks, scams and call it what ever.
R.I.P. US.
The national debt won't matter. Easy solution: partial default on all debt not owed to foreign governments. Bye bye bond investors.
"$1 in savings will translate into at least $1 trillion in additional market cap for the S&P" - Anything's possible with fractional reserve banking to the nth degree! By then the multiplier effect would have to be somewhere in the vicinity of a trillion in order to keep up with things...
Watched McLaughlin group last.
To a man/woman they stated that protectionism while working in Ecuador, and China would not work in the USA because we had a "modern economy".
What on earth is a modern economy? Is that anything like the "new economy"?
Where is it written that a country can keep importing and not offset its purchases with exports? What does the US offer in return for importing goods? Do we offer second mortgages on our homes to Chinese so we can buy dinner out at a Chinese restaurant and a plasma TV?
It's giant lie.
I read somewhere that our good buddy Karl 'Mad' Marx predicted this (to paraphrase):
-- Structural imbalances between countries can be hidden by a series of speculative bubbles for a limited time, but will destroy the country once the speculation fails --
We are desperately trying to prop up the speculation, but the real problem is we just don't earn enough for our outgoings.
"Help we need a bigger rug!!"
"Help we need a bigger rug!!" - It's not called a rug anymore, the pc term is TARP. A rug is not big enough or sturdy enough to cover up the unsightly junk you cant fit in the house anymore, so you use a TARP instead
"$2 Trillion Dollars Worse"
Duhhhhhhhhh.....
Let's see, current interest expenses somewhere around $340B. If that doubles and interest rates double, that is about another $8T over ten years. Ugh.
To put things in perspective and how QE is helping, interest on Federal debt was $451B last year. QE has saved US taxpayers $111B this last year, and likely more if you figure the total increased.
Print more, print faster.
Course if interest rates triple, that could be over $13T over ten years.
Let's see how much fun this can be.
I'm getting a headache, I'm going back to CNBC till I feel better.
every dog has it's day.france went with napoleon and spain before that.the british empire well that fought for freedom which don't work when you've subjugated the bits the sun never sets on.the american century lasted 10 years ,figure that.whether you live in a house or a country you have to pay your bills and the usa of a can't.it will have to fiddle but biils like bats have to come home to roost.eat lees drink more learn mandarin.