Yet another sign America is bankrupt

Discussion in 'Wall St. News' started by cgtrader, Jun 20, 2008.

  1. 50_Bip


    You back on the drink, Shooter?
  2. I don't follow.

    Yes I drink wine occasionally to try and forget all of this for a few hours.
  3. Its from the movie "Basic instinct" if my memory serves correctly.
  4. Budget has blown out by 53% or $59B and we need another $171B this quarter alone. "Holy atomic pile, Batman!" - Robin

    Seriously though at the macro level the economy has a massive problem ahead of it. The US will have to increase taxation, cut government expenditure drastically and will also need to raise treasury rates to attract foreign investment. Sorry to say but 2009 will be even worse for the economy, pay back for years of loose spending in the good times.

    U.S. Borrowing to Rise to $171 Billion This Quarter (Update1)

    By John Brinsley and Rebecca Christie

    July 28 (Bloomberg) -- The U.S. Treasury predicted it would borrow 53 percent more this quarter than initially forecast as increases in spending and sluggish economic growth swell the budget deficit.

    Borrowing needs will rise to $171 billion in the three months to Sept. 30, $59 billion more than predicted in April, the Treasury said in a statement in Washington. That total, if realized, would be the second-largest ever after a record $244 billion was borrowed in the first three months of this year.

    After improving for three straight years, the U.S. budget is deteriorating as a slowing economy hurts tax revenue and spending increases. The Bush administration, which entered office in 2001 with a $127 billion budget surplus, earlier today predicted the next president faces a record deficit totaling $482 billion in 2009.

    ``The economic slowdown and increased expenditures associated with slower growth and with the stimulus has had an effect on the federal budget,'' Phillip Swagel, the Treasury's assistant secretary for economic policy, said in a statement.

    In the final three months of the year, the Treasury said borrowing would reach $142 billion.

    The Treasury predicted three months ago it would pay down $35 billion in marketable debt in the April-June quarter and have a cash balance June 30 of $45 billion. While the government often runs a surplus in the second quarter as individuals pay annual income taxes by the April 15 deadline, that didn't happen this year.

    Tax Rebates

    The Treasury said the reasons for more borrowing were the $168 billion fiscal stimulus program enacted earlier this year, the redemption of $151 billion in securities by the Federal Reserve, and a decline in debt issued by state and local governments.

    ``Treasury is going to have revisit their borrowing needs,'' said Joseph Brusuelas, chief economist at Merk Investments LLC in Palo Alto, California. ``They are definitely going to have to borrow more.''

    Today, the department said it borrowed $13 billion in the second quarter and the cash balance at the end of the period was $53 billion. ``The increase in borrowing was primarily the result of lower receipts, higher outlays, redemptions of portfolio holdings by the Federal Reserve System and adjustments to cash balances,'' the Treasury said.

    Lower Forecasts

    Three months ago, the department predicted a cash balance of $45 billion Sept. 30 -- the last month of the government's fiscal year -- and today left that estimate unchanged. The cash balance will be $40 billion on Dec. 31, the Treasury said.

    The department estimated total marketable borrowing in fiscal 2008 would total $555 billion. So far this fiscal year, the Fed has redeemed $151 billion in U.S. government securities from its System Open Market Account, which the Treasury said were excluded from the marketable borrowing estimates.

    In a series of charts accompanying the announcement, the Treasury said ``credit market conditions and ongoing liquidity initiatives add uncertainty to borrowing requirements.'' In addition, ``volatility in projected receipts and outlays as well as reduced non-marketable debt issuance could also lead to increased near-term marketable financing needs.''

    The White House earlier this year said the budget shortfall would rise to $389 billion for fiscal 2008 from $163 billion in 2007 and $482 billion in 2009.

    Debt Issuance

    Before Treasury's announcement, analysts were already predicting the government would need to brace for more red ink. The borrowing needs are likely to show the first signs of the shortfall to come, said Louis Crandall, chief economist at Wrightson ICAP LLC, a Jersey City, New Jersey-based research firm.

    ``Those will be very large,'' Crandall said. ``I'm looking for $165 billion in the current quarter and something not much smaller in the October to December quarter.''

    The Treasury's borrowing forecast comes two days before details on the size of the Treasury's quarterly refunding of longer-term debt. The department will announce July 30 the amount of 10- and 30-year debt it plans to auction next week, and any other changes to financing plans.

    The U.S. will likely sell $16 billion in 10-year notes and $9 billion in 30-year bonds in August, according to the median estimate of five economists.

    Bond dealers also are watching to see if the Treasury indicates plans to bring back the three-year note or increase the number of 10 year note auctions. The department announced in May 2007 that it was suspending sales of three-year notes, when tax receipts were rising and the deficit was shrinking.

    Rising Deficit

    Even if there are no changes this quarter, there may be a borrowing expansion in the months ahead.

    ``We do not believe the Treasury needs to reintroduce the three-year or seven-year note at this time, and think that there is still room for increases in short-term debt issuance in fiscal year 2009,'' said Lehman Brothers economist Zach Pandl, in an interview before today's announcement. ``However, the medium-term budget outlook is deteriorating quickly, and risks to our supply forecasts are likely to the upside.''
  5. So I forgot mention that when you increase taxation and reduce government expenditure which will be required to overcome the debt the economy will be hit hard. Growth will slow dramatically and companies in the service industry will be hit hardest.

    So if you are trading fast or trading slow (investing) then you need to look at the macro conditions as they will impact the trend in your daily activities.
  6. piezoe


    Likelihood of the US Treasury issuing bonds denominated in a basket of currencies is increasing.
  7. macro-economic reality such DEBT and War if pro-longed enough will bring down the dollar down.

    A weak dollar versus other currencies is a strong indicator of the strenghth of the country.

    i.e. many countries in Africa have currencies that aren't even traded cause their currencies are worthless outside their border.

    any retailer who imports products like oil, will experience 100% inflation..while descretionary income falls even further.===resulting in the decline of the consumer spending power or lower standards of living or wage cuts.

    US economy could be like Mexico where there is wide descrepencies between the poor and ultra rich

    the rich don't pay any taxes from tax loopholes while the poor don't have any money to pay tax or welfare.

    the gov't can't tax the people because ther is no money to tax.