Tuesday, June 9, 2009
Treasury "net spending" slowing down
The blue line on the chart above shows the 5-day average of total Treasury deposits (recepits) minus withdrawals (expenditures), something that I call, "net spending." A declining blue line indicates that net spending is falling. Not only has it been falling, but it has been running negative for nearly the past three weeks, suggesting that deficit hawks at Treasury are firmly in control and are quietly "siphoning off" stimulus and private savings (taking in more than they are recycling back).
The pink line is the S&P 500 close. A policy of negative net spending will make it harder for the stock market and the economy to rise and improve, respectively. That's not to say they can't (there are record private savings of $620 billion, so plenty of fuel to run on), however, it will take a sustained upward trend in confidence. The government is quietly shifting the burden of recovery to the private sector because of sensitivity over deficits. It can work because as I said there are sufficient private savings to power it, however, as I said, the rally now has limits by definition.