Posted on 04/24/2010 6:19:02 PM PDT by blam
EXTEND and PRETEND, Is The U.S. Facing A Cash Crunch?
Interest-Rates / Credit Crisis 2010
Apr 24, 2010 - 12:49 AM
By: Gordon T Long
The US Government is caught in a cash vise and is being squeezed between too slow a rebound in tax revenues and the limitations on how quickly it can realistically take its funding requirements to the US Treasury auction. The US Treasury was saved in March by what the government reports as “proprietary receipts”. Those receipts require an explanation that is not well publicized since it begs the question of what happens next month without the $117 BILLION journal entry.
The March cash management numbers from the US Treasury’s Financial Management Service are alarming and in my estimation have become perilous. The economy is simply taking much too long to recover which is affecting urgently required tax receipts.
If the US Treasury issues even higher debt supply to the market too fast, it threatens driving up interest rates prematurely and thereby elevating already strained government financing costs despite already increased supply. Since the US government has steadily reduced maturity duration over the last few years to obfuscate a growing debt problem, the issue is compounded by the rapidly increasing levels of roll-over funding now additionally being required.
It is a tricky balance between gauging how fast tax receipts will return and what supply the monthly treasury auction is able to absorb. Cash flow is the primary reason small businesses fail unexpectedly. This is also why sovereign governments fail abruptly.
We witnessed in Greece what happens when investors get nervous. Yields not only spike but typically move to even higher levels than most originally thought possible.
US TREASURY CASH REQUIREMENTS
On April 14th the Financial Management Service, a bureau of the US Department of the Treasury released its Monthly Treasury Statement for March 2010. I was waiting for it because of what I saw in February - the gap between receipts and outlays was widening disturbingly.
[snip]
How can their be a cash SUPPLY problem? The government can print as much cash as they want.
[/sarc]
Who are they kidding? "Too slow a rebound in tax revenues"?! Dude, there is no rebound; revenues are cratering. Our government is already spending TWICE as much as they take in in revenue.
Our government is in imminent danger of a funding crisis, and everyone is whistling past the graveyard. The day will come, and soon, where just the service on the national debt plus social security and medicare will consume the entire federal budget.
How do they say....austerity measures?
Hmm. Interesting.
I’m kind of expecting that next Tuesday may be an apt time to buy precious metals shares, if the markets act as seems likely. And the Fed announcement will come the next day, on Wednesday.
The buy signal is rather uncertain, and no one should play the market without doing their own due diligence. But it does seem as if a lot of factors will be coming together next week. In any case, FWIW, I’m all in.
They can print all they want but there is NO DEMAND. DC has f’d themselves BIG TIME. Everyone is holding out for higher interest rates. Payback is a biotch. I say again, the CAPITALISTS have DRUNK the Socialists milkshake. Socialism always FAILS, ALWAYS!
Silver above $18 and gold above $1138 were my lines in the sand. I myself was thinking Monday would be the day to buy (see here http://www.freerepublic.com/focus/news/2497038/posts?page=5#5), but it looks like yesterday was the day that the direction clearly asserted itself.
My guess is a fourth day up on Monday for the PM (precious metal) stocks, and then down on Tuesday for the buy.
There’s still another line of resistance to break through, but it certainly looks bullish at the moment for gold and silver.
That was my point. SUPPLY is not the problem. The lack of DEMAND is what is killing them.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.