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Friday, November 21, 2008

Federal Receipts and Outlays: The New Scary Chart?

I will begin tracking Federal Receipts and Outlays as displayed in the above chart. My theory is that receipts are going to absolutely crater going forward as corporate, personal and property taxes implode despite possible tax increases by Obama. Federal Outlays are going to go parabolic from here as the government begins to spend money faster than a ninja gone apeshit.

The most dangerous developments will become visible through the behavior of Interest outlays on the federal debt (red line). I fully expect that somewhere a tipping point will be tripped and real interest rates will blow out, despite deflationary pressures, as foreign appetite for US debt disappears. The worst will come when that appetite not only wanes, but turns to revulsion and that debt is puked back up as confidence in the ability to pay is finally lost.

This will then become the new Scary Chart.

My scary charts series here.


Anonymous said...

Uh-Huh and the popping of the last Greenspan bubble.

Anonymous said...

great post. Most people are not foucused onthe revenue the gov to collect as being seen now in local sales tax receipts. Muni bonds are cheap for a reason. Lots of safe stuff is going to get destroyed!

Excellent post. people are totally missing this. People like krugman who think money grows on trees.

Also FT editorial today by the crankly old dude saying it is keynesianism that is required to keep economy at level. But nobody ever stops to ask if the level of the past is sustainable or healthy?

Tord Steiro said...

If Keynesianism = spending borrowed money, then Clinton is the only non-Keynesian administration since the Second World War.

Ironic, isn't it?

And, considering that the Obama administration will be the one handling this enormous debt, it HAS TO, one way or the other, to increase the government income as a portion of GDP. So the un-escapable consequence of this long-time Keynesian spending is big government. Tough Luck...

Anonymous said...

Happy Birthday Ninja

Anonymous said...

You are describing an Iceland of 310,000,000 instead of 320,000. Deflation of all asset classes while the basics of life go parabolic because nobody will ship us jackshit.

Anonymous said...

The PTB will describe it as tough love instead of tough luck.

Anonymous said...

C'mon ben, put it in chained dollars, or % of gdp. This makes WWII look like a fart.

Anonymous said...

Agree with you re: less tax revenue.

Talk of foreigners not buying our treasuries is pre-mature. The oil sheikdoms are protected through their capital flows to us. Do you think with a soon to be nuclear armed Iran on their doorstep that they would change this relationship?

As for the Chinese? They're about to find religion.

Add to this prolific demand from U.S. and European banks.

No, treasuries will not be selling off anytime soon. Mish Shedlock is right on this, but he doesn't articulate it enough.

SG said...

So Ben, when that tipping point comes will you be heavily in TBT? GLD? taking 100oz physical delivery? Back to long commodities and oil/short USD (but against what cross)?

Gold is up big today. Still a short (against opex) or is revulsion getting off the ground already?

Roubini says we're going to have stag-deflation. Seems like you disagree as currency destruction is inflationary, no? If we and most other major countries kill their respective currency value with massive public debt...where is the safe harbor?

Anonymous said...

SilverDollar said...
Agree with you re: less tax revenue.

This reminds me of real estate doesn't go down. its a relative world right up until it is not.

Tord Steiro said...

"where is the safe harbor?"

I think that is the most important aspect of this whole mess. There is no safe harbour. This will inevitably give very high volatility, and not only in economic terms, but perhaps also in international politics?

I hope not, but last time we had a stuation with no safe harbour was the 1914-1945 era.