Best of the Week
Most Popular
1.UK House Prices BrExit Crash NOT Likely Despite London Property Market Weakness - Nadeem_Walayat
2.BrExit Morning - New Dawn for Britain, Independence Day! - Nadeem_Walayat
3.LEAVE Wins EU Referendum - Sterling and FTSE Hit Hard, Pollsters, Bookies and Markets All WRONG! - Nadeem_Walayat
4.BrExit Implications for UK Stock Market, Sterling GBP, House Prices and UK Politics... - Nadeem_Walayat
5.Trading BrExit - Stocks, Bonds, Sterling, Opinion Polls, Bookmaker Odds and My Forecast - Nadeem_Walayat
6.FTSE and Sterling Brexit Trading, Deconstruction of the EU Referendum Result - Nadeem_Walayat
7.UK Interest Rate Cut to 0.25% Imminent and More QE Money Printing - Nadeem_Walayat
8.Trading BrExit - British Pound Plunges, FTSE Stock Futures Slump on LEAVE Shock Referendum Win - Nadeem_Walayat
9.The Stock Market is Reading it Wrong! - Chris_Vermeulen
10.Breakouts Galore in Gold and Silver - Jordan_Roy_Byrne
Free Silver
Last 7 days
Asset Bubbles Tend to Crash with a Vengeance - 29th July 16
Retirees Are Risking Their Life Savings on Junk Bonds - 29th July 16
The Next Recession is Coming - Expect Around 0% Returns for the Next 7 Years - 29th July 16
SPX is Shaking and Rolling - 29th July 16
Stock Market Insiders Are Secretly Selling, Cycle Top Next Month - 28th July 16
FOMC Interest Rates and Their Impact on the US Economy - 28th July 16
The State Of The Economy - 28th July 16
Elliott Wave Crash Course - 3 Ways the Elliott Wave Principle Enhances Your Trading - 28th July 16
Japan's "Helicopter Money" Play: Road to Hyperinflation or Cure Debt Deflation? - 27th July 16
Monetary Zika - The Insidious Nature of Credit Expansion - 27th July 16
Gold and Pork Bellies - 27th July 16
Silver Is Insurance Against The Worst Part Of This Depression - 27th July 16
Don’t Buy The SPX Hope Stock Market Rally! - 27th July 16
Bitcoin $650 Still in Play - 26th July 16
Deutche Bank Stock Price Crash - The EU Has Problems Far Beyond the Brexit - 26th July 16
The Forex Markets Are Getting Exciting! - 26th July 16
Underpriced Silver Is the “Rip Van Winkle” Metal - 25th July 16
Declines in Multiple Market Indexes - 25th July 16
Retailers Are Doomed as Most Americans Are Too Poor to Shop - 25th July 16
Here’s One Currency That Could Go to Zero - 25th July 16
Stock Market Top is Expanding - 25th July 16
Silver Manipulation – Because They Needed the Eggs - 25th July 16
Silver Market COT Stuns: What's Going On Here? - 24th July 16
Gold Demand Remains Stable During Sector Weakness - 24th July 16
Sernova, Diabetes and Haemophilia - 24th July 16
Russia: Tensions, Turmoil, and Western Hubris - 24th July 16
Soybean Commodity Price to Soar Again - 23rd July 16
SPX Stock Market Uptrend Continues - 23rd July 16
Gold And Silver – Debt Addiction Will Carry Precious Metals Higher, Guaranteed - 23rd July 16
Pokemon Go - How to Play, First Use, Balls, Stops, Catching Pokemon's... Great Excercise! - 23rd July 16
7 Signs That the Gold Market Remains Resilient - 23rd July 16
Basic Income in The Time of Crisis - 23rd July 16
Silver Bull Faces Correction - 22nd July 16
The Serious Warning No One’s Talking About - 22nd July 16
Stock Market Insight from Greed, Volatility, and Put/Call Ratio - 22nd July 16
What Will Happen To the Stock Market When Interest Rates Rise? - 22nd July 16
How to Escape the World’s Biggest Ponzi Scheme - 22nd July 16
Addicted to Debt - We Can’t Borrow from the Future Anymore - 21st July 16
Not Everything Is Bullish for Gold - 21st July 16
Don’t Get Sucked Back Into the Stock Market - The Big Picture Hasn’t Changed - 21st July 16
Silver – Caught Inside - 21st July 16
Forex: "The Markets Are Getting Exciting!" - 20th July 16
China Economic Troubles - Is Kyle Bass Finally Getting His Revenge? - 20th July 16
Why Lithium Will See Another Price Spike This Fall - 20th July 16

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

The Power of the Wave Principle

US Budget Deficit Soars in October; Do You Trust the Politicians to Solve This Looming Crisis?

Interest-Rates / US Debt Nov 15, 2012 - 12:49 PM GMT

By: InvestmentContrarian

Interest-Rates

Sasha Cekerevac writes: The U.S. Treasury Department recently released the budget deficit numbers for October, reporting a massive $120 billion deficit. This compares to a budget deficit in October 2011 of “only” $98.0 billion. While the U.S. economy is not growing at a rapid rate, it’s certainly not shrinking. So in the span of one year, with some growth in the U.S. economy, albeit slow growth, we’ve seen an approximate $20.0-billion monthly year-over-year increase in the budget deficit. I think this shows the true ineptitude of our political leaders.


One sign that the U.S. economy has shown some improvement is that receipts increased to $184 billion, compared to $163 billion this time last year. However, expenditures increased at a much faster rate. The monthly expenditures for October 2012 were $304 billion, a huge jump from approximately $262 billion in October 2011, which caused the rise in the budget deficit. Does anyone know where this money went?

While President Obama can talk about increasing taxes to generate more revenue, the truth is that receipts to the government are increasing. The government is taking in higher levels of revenue, as the U.S. economy has slightly improved. However, the spending side is growing at a far greater rate. I don’t believe Obama’s tax hikes can pay for the massive increases in expenditures. More likely, raising taxes to try and reduce the budget deficit will kill what little growth the U.S. economy is experiencing.

October is the first month of the fiscal 2013 year. The fiscal 2012 year has ended with another budget deficit in excess of $1.0 trillion. One trillion dollars is larger than the entire gross domestic product (GDP) levels of many countries, and we’re throwing around this money year after year, with no end in sight. Even as politicians talk about reining in the budget deficit, the evidence shows that spending continues to grow massively.

Now, there are some specific times during a financial crisis within the U.S. economy when there can be some justification over the very short term to run a budget deficit to try to prevent a systematic collapse. However, this does not mean that the budget deficit should be continuously run for years on end to try to artificially inflate the U.S. economy. That has never worked before, and it will never work in the future. For those who believe running a budget deficit is crucial to a successful U.S. economy, I would point to the economic records of other countries running a large budget deficit, such as Greece, Spain, and Italy.

The U.S. economy cannot continue down the path of running a large budget deficit forever. At some point, someone has to pay the bill. While no one wants to see the extreme cuts of the fiscal cliff enacted all at once, as that type of shock would be very severe to the fragile U.S. economy, a gradual implementation of reduced spending over time can work without having adverse effects. Either we rein in the budget deficit over the next couple of years or, eventually, the international markets will force us to do so.

Talk is cheap. All I see in the data from the government itself is that it is continuing to spend massively, but we are getting little in return. Politicians are just pandering to potential voters, and our children will be the ones to pay the price.

Source: http://www.investmentcontrarians.com....

By Sasha Cekerevac, BA
www.investmentcontrarians.com

Investment Contrarians is our daily financial e-letter dedicated to helping investors make money by going against the “herd mentality.”

Copyright © 2012 Investment Contrarians- All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2016 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Catching a Falling Financial Knife