An economics, investment, trading and policy blog with a focus on Modern Monetary Theory (MMT). We seek the truth, avoid the mainstream and are virulently anti-neoliberalism.
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Saturday, March 2, 2013
February Fiscal Wrap up
Numbers are in for February.
Lets review the financial record of what we did last month.
Net withdrawals for the month were $443B while we took in net deposits of $215B, resulting in an ex post deficit of $228B for the month.
Both this monthly 443B net withdrawal number and the monthly fiscal delta of -228B are quite large on a relative basis and should result in adequate short term provision of our monetary system and avoidance of any short term economic system instability and malfunction/failure.
A seasonal feature for February was the refunding of Personal Income Taxes of $107B which accounted for 24% of net withdrawals for the month and should be supportive of demand over at least the next few weeks as these refunds will also now continue into March although projected to be accomplished at a reduced rate.
We are looking ahead with caution towards the effect upon these flows of the so-called fiscal "sequestration" which allegedly may reduce these critical flows within the monetary system in March; and will monitor these flows MOM to see if there is any detectable change in them.
We are also looking ahead with caution to April when this situation will be reversed and any liabilities for income taxes NOT withheld throughout CY 2012 will then be payable by April 15th.
Doesn't the outcome depend on household expectations? If people think things are going to get worse (and my own interactions suggest they do) we might see consumers save those refunds and nullify any stimulatory effect.
ReplyDeletePersonal savings rate data for February from the St. Louis Fed will be, I think, an important indicator for the public mood.
Ben yes... not all of the refunds will be spent and they could also be used to pay down existing debts, etc...
ReplyDeleteBut in any regard this flow is substantial as monthly retail sales are around $300b (ex-autos)... so this is like dumping one third of this monthly amount on the non-government.... ie this is not "bad news" per se...
rsp,
ps also you have the EITC effecting these tax rebates... "automatic appropriation"... it helps...
ReplyDeletersp,
This might explain why the stock market has been so strong.
ReplyDeleteAgreed on April, this could be where things break down as taxes are due. Back in 2000 it was right around tax time that nasdaq 5000 broke. Think people sold there tech stocks to pay their taxes.
If someone from the mainstream stumbled onto this site and found us cheering about more budget "red ink", they probably would think the fell down the rabbit hole :)
ReplyDeleteGeoff said...
ReplyDeleteIf someone from the mainstream stumbled onto this site and found us cheering about more budget "red ink", they probably would think the fell down the rabbit hole :)
Not if they read the post on 7DIF being free on Amazon in Kindle format this weekend and took the opportunity to read it.
Right, Tom! I already have a hard copy but I still downloaded the e-version so I can keep it on my person (on my phone) at all times :)
ReplyDeleteMatt, I'm looking at the Daily Treasury Statement at 2/28/13 and I can't come back to your numbers.
ReplyDeleteHow are you calculating the $443B in net withdrawals and the $215B in net deposits?
JC, yes short term stock sell off not seeming likely based on this data...
ReplyDeleteJoker,
Take total withdrawals minus UST redemptions, and total deposits minus UST issuance... For 'net' numbers...
Geoff,
Correct they probably think this is the moron view.... Too bad! ;)
Rsp
Matt, you might be interested in reading Art Shipman's latest observations on Roman Finance
ReplyDeleteWhen in Rome...
in Rome (2): The Two Economies
C,
ReplyDelete10-4 thx