Category: US Treasury Market and Tax Revenue Trends

The Federal deficit hit $1 trillion in April. That’s a cool 1,500% increase year to year. That’s for one month.

This is based on the April 30 Daily Treasury Statement month to date totals. It is an estimate based on my simple subtraction of outlays from revenues. It is not official, and the official number may differ when the Monthly Treasury Statement is released on May 13.

Still, a trillion, is a trillion. And the final, official number should be in this ballpark. This is an increase of $941 billion from the April 2019 deficit. Keep in mind that back in the “good old days, before the 2017 tax cut and spending increase, April typically saw a surplus. So even before the pandemic, these numbers were bad.

Obviously, this blowout is due to the Pandemic Pandemonium Panic Relief Programs spending. But it’s also partly due to the plunge in revenue, and embedded increases in regular budgetary spending.

Here are the current horrible numbers, along with the immediate outlook, and what it means for stocks and bonds.

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Federal tax collections are collapsing but the US Treasury now has $827 billion in cash in its bank account at the Fed. This is double the previous highest level ever. This money has all come via debt sales over the past week.

The Fed funded every single dollar of that expansion through its purchases of the Treasury debt. The Fed used Primary Dealers as middle men. The dealers collected a nice skim and the Fed monetized the debt, while being able to claim that it didn’t. But this is money that did not exist two weeks ago. Now it does.

This has frightening implications. Here’s why, and what you should do about it.

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Suddenly the trend of Federal Withholding tax collections is in critical condition.

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The February supply increase caused the bond rally to stop in its tracks. But that will change in March.

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Withholding tax collections are soaring. But despite that and the massive stimulus of skyrocketing government outlays and ever widening deficits, the ‘conomy is only so-so. Here’s why, what it means for liquidity and the markets. And of course, what you should do about it.

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