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US Treasury Could Run Out of Cash Sooner than Expected

It’s starting. Headlines are swirling that the US Treasury could run out of cash sooner than originally forecast.

The Wall Street Journal featured a report today.

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Debt Limit Deadline Accelerates, Research Group Finds, Raising Pressure on Congress

Its sister publication, Marketwatch said yesterday, “The U.S. government could exhaust its ability to pay its bills in the first half of September…according to the Bipartisan Policy Center, a research group that released the estimate on Monday. In May, the same group had predicted the government would hit the limit in October or early November.”

I have been warning that the US Treasury could run out of cash in my twice monthly updates of real time Federal tax revenue data.

US Treasury Could Run Out of Cash

In those reports I collect, analyze, and chart both Federal revenues, spending levels, and the US Treasury cash account.  In the report posted for subscribers last week I warned:

The Treasury is depleting its cash at a rapid rate. If the current trend persists, it will run out of cash by mid August. That’s sooner than the official predictions of late September. The Treasury may have other accounting tricks it could use or other internal funds it can raid before the jig is up, but investors are likely to get  burned if they’re betting on the lifting of the debt ceiling to be bullish. And it could come sooner than the consensus expects.

Without a real basis for a timeline, we need to pay attention to the news for any reports that a deal to raise the debt ceiling is near.

I also gave an expanded peek at this work in Lee’s Free Thinking.

Now, you may  be wondering why this is important. Here’s why.

Once that happens, the Treasury will bury the markets under a mountain of supply. Both bond and stock prices should fall.

I’ve been telling subscribers that this is one of those rare instances we should pay attention to news media reports. That’s because an exact forecast of the timeline for when the US Treasury runs out of cash is tricky. An increase in  news stories will be a sign tha the pressure is rising.

Meanwhile, I’ll update the US Treasury’s cash balance trend and revenue and spending trends in Liquidity Trader. The next report will come later this week, based on the Monthly Treasury Statement data due out Thursday. That report will include an update of the Treasury’s cash balance  and real time withholding tax collections through this week.

There is simply no better barometer of the true state of the US economy. And that’s critical to know because it let’s us know whether the current economic narrative and stock market expectations are factually based, or mere wishful thinking.

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Lee Adler

I’ve been publishing The Wall Street Examiner and its predecessor since October 2000. I also publish LiquidityTrader.com, and was lead analyst for Sure Money Investor. I developed David Stockman's Contra Corner for Mr. Stockman. I’ve had a wide variety of finance related jobs since 1972, including a stint on Wall Street in both analytical and sales capacities. Prior to starting the Wall Street Examiner I worked as a commercial real estate appraiser in Florida for 15 years. I also worked in the residential mortgage and real estate businesses in parts of the 1970s and 80s. I have been charting stocks and markets and doing analytical work since I was a teenager. My perspective is not of the Ivory Tower. It is from having my boots on the ground and in the trenches of the industries that I analyze and write about today. 

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