Gov't deficit probably too small to ensure system stability

Matt Franko has been posting updates from the Daily Treasury Statement that show Dec and the current month running well shy of the deficit levels needed to ensure sufficient $NFA's to keep the system stable. In December, Treasury ran a $20 bln surplus and so far this month Treasury is running a meager -$29 bln deficit. This is far below the historical average of the past year of -$90 bln deficit per month. A surge in bank credit likely reflects people and firms grasping for some liquidity. Banks may continue to provide this, it's hard to say, but the longer we go like this the greater the likelihood of some "liquidation event" that brings the system back into equilibrium. Remember, too, that higher tax demands as of Jan 1, mean that the historic -$90 bln deficit per month is probably low.

Is the Treasury's HUGE surplus this month presaging a market selloff?

The Treasury is currently running a surplus of $123 bln. (See Daily Treasury Statement.) That is the largest monthly surplus since March 2010, when the figure was $173 bln.

The Dow was just above 11,000 back in April 2010. By June it was at 9614--a 14% decline.
There's no guarantee that it will happen again, however, we know from MMT that when the government runs a surplus the private sector runs a deficit (or sees its surplus reduced) by the same amount.