The 4 week bill auction was again very strong, signaling no diminution of strong buying interest from FCBs and others. So the game can go on. It had better. The Treasury released its monthly statement for June late yesterday and it revealed that revenues covered only 70% of outlays, continuing a weakening trend that began early in 2008. Tax receipts dropped 17% from June 2008. While the trend of diminishing receipts has slowed a bit, there’s no sign of an increase in revenues.
For the past year, on average, tax receipts have covered roughly only 65% of outlays. The rest must be made up with borrowing. The game can only go on for as long as our foreign lenders are willing and able. No doubt the will will always be there. They have too much at stake to risk withdrawing their lending support. So the question becomes one of how long they will be able to continue to fund $100 billion a month in Federal Government borrowing. When they no longer have the wherewithal, all kinds of questions arise. How much will the Fed print at that point? Will the government cut spending. Will it default on debt service? Will the US become a ward of the IMF? Click here to download complete report in pdf format (Professional Edition Subscribers). Try the Professional Edition risk free for thirty days. If, within that time, you don’t find the information useful, I will give you a full refund. It’s that simple. Click here for more information.