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Daily Digest 9/10 - Venezuelan Rout Deepens, U.S. Deficit Increases From 2013

Wednesday, September 10, 2014, 8:52 AM

Economy

Spanish yields jump on fears Scotland vote may inspire Catalonia

Spanish bond yields spiked on Tuesday on investor worries that a strong showing for secessionists in Scotland's independence vote could strengthen other separatist bids in Europe such as that in Spain's wealthy Catalonia region.

Moody's lowers outlook on Brazil's government bond rating

"Moody's expects that Brazil's economy will continue to record low growth, and estimates that annual GDP increases are likely to remain below the country's potential of around 3 percent," the rating agency said on Tuesday.

US CBO Estimates $129b Aug Govt Deficit Vs $148b Defict Aug'13

The federal government ran a budget deficit of $589 billion for the first 11 months of fiscal year 2014, the Congressional Budget Office (CBO) estimates - $166 billion less than the shortfall recorded over the same period last year.

Russia, China agree to settle more trade in yuan and rouble

"We are not going to break old contracts, most of which were denominated in dollars," Shuvalov said through an interpreter.

"But, we're going to encourage companies from the two countries to settle more in local currencies, to avoid using a currency from a third country."

Venezuelan Rout Deepens as Default Specter Raised

The cost of insuring the country’s foreign-currency bonds against non-payment soared yesterday by the most since the aftermath of Lehman Brothers Holdings Inc.’s collapse in 2008 to 14.25 percentage points, the most expensive in the world.

UK pension deficit doubles in year to August

A funding shortfall in Britain's private sector defined benefit pension schemes has more than doubled over the past year to reach 170.6 billion pounds at the end of August, the Pension Protection Fund (PPF) said on Tuesday.

Britain faces storm as giant global investors awaken to break-up dangers

Japan’s biggest bank, Nomura, has advised clients to slash financial exposure to the UK and brace for a possible collapse of the pound after polls showed the independence campaign running neck and neck, warning that the separation of England and Scotland after more than 300 years would be a “cataclysmic shock”.

French budget deficit widens over year to July

France's budget deficit widened to 84.1 billion euros by the end of July from 80.8 billion a year earlier, the Finance Ministry said on Tuesday.

ECB's Constancio: Further policy tools available

Central banks in the U.S., U.K. and Japan have purchased large swaths of government bonds to reduce long-term interest rates and spur lending and spending. The ECB has largely resisted this policy, which is deeply unpopular in Germany where it stirs fears of inflation and a loss of central bank independence.

Mr. Constancio stressed the euro members must undertake structural economic reforms to boost the bloc's growth prospects.

Bank of Japan Buys Government Debt at Negative Yield

Tuesday marked another milestone in the topsy-turvy world of monetary easing in Japan: The Bank of Japan bought short-term Japanese government debt at a negative yield for the first time, according to market participants.

Gold & Silver

Click to read the PM Daily Market Commentary: 9/9/14

Provided daily by the Peak Prosperity Gold & Silver Group

Article suggestions for the Daily Digest can be sent to [email protected]. All suggestions are filtered by the Daily Digest team and preference is given to those that are in alignment with the message of the Crash Course and the "3 Es."

9 Comments

Arthur Robey's picture
Arthur Robey
Status: Diamond Member (Offline)
Joined: Feb 4 2010
Posts: 3936
The Good ol' Days.

I am rooting for Scottish independence, just to lance this boil.

And that is the most stupid thing I have ever written. Ebola could do it too.

These are the Good ol' days. Make hay while the sun shines.

saxplayer00o1's picture
saxplayer00o1
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Posts: 4066
pinecarr's picture
pinecarr
Status: Diamond Member (Offline)
Joined: Apr 13 2008
Posts: 2237
What Petrodollar: Russia, China To Create SWIFT Alternative

From Zerohedge, at http://www.zerohedge.com/news/2014-09-10/what-petrodollar-russia-china-create-swift-alternative

"According to Itar-Tass, Russia and China are discussing setting up a system of interbank transactions which will become an analogue to International banking transaction system SWIFT, First Deputy Prime Minister Igor Shuvalov told PRIME on Wednesday after negotiations in Beijing.

"Yes, we have discussed and we have approved this idea," he said.

But wait: wasn't it the UK's desire to force Russia out of SWIFT just two weeks ago?  Why yes, and the fact that Russia is happy to do so, and on its own terms, once again shows just who has all the leverage, and who really needs, or rather doesn't, the US Dollar."

sand_puppy's picture
sand_puppy
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davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5072
US deficit SMALLER, not larger vs 2013

The federal government ran a budget deficit of $589 billion for the first 11 months of fiscal year 2014, the Congressional Budget Office (CBO) estimates - $166 billion less than the shortfall recorded over the same period last year.

This reduction in deficit year-over-year aligns with my calculations from the US MTS (monthly treasury statements).

If you imagine I'm pimping for the Man (or the status quo, or whatever), I'm not.  Unless our facts are accurate, we cannot possibly understand what is going on.

A lot of people have this idea the deficit is increasing, or its a trillion dollars a year, etc.  It used to be, but it isn't anymore.

Arthur Robey's picture
Arthur Robey
Status: Diamond Member (Offline)
Joined: Feb 4 2010
Posts: 3936
Solar Tantrum

And even this could do it. A solar flare is due to hit later this week. I did mention sunshine- I did not intend this much.

And collaborations here.

cmartenson's picture
cmartenson
Status: Diamond Member (Offline)
Joined: Jun 7 2007
Posts: 5570
Deficit numbers are bogus
davefairtex wrote:

The federal government ran a budget deficit of $589 billion for the first 11 months of fiscal year 2014, the Congressional Budget Office (CBO) estimates - $166 billion less than the shortfall recorded over the same period last year.

This reduction in deficit year-over-year aligns with my calculations from the US MTS (monthly treasury statements).

If you imagine I'm pimping for the Man (or the status quo, or whatever), I'm not.  Unless our facts are accurate, we cannot possibly understand what is going on.

A lot of people have this idea the deficit is increasing, or its a trillion dollars a year, etc.  It used to be, but it isn't anymore.

The idea that the federal government ran a budget deficit of just $589 for the first 11 months of FY 14 does not align with what we find on the Treasury's own website under the debt-to-the-penny section.

There we find that on Sept 30/2013 the debt stood at $16.738 trillion and that on Aug 30/2014 it stood at $17.749 trillion.

That's a bit over $1 trillion.

Okay, you're thinking, some of that is the so-called intragovernmental debt and even though it represents government deficit spending it's not counted because the government uses a cash based accounting method.

Good point.

So let's just use the 'debt held by the public' classification.  There we find that using the same dates as before that the debt grew from $11.976 trillion to $12.732 trillion, a change of $756 billion.

I'm not sure what sorts of new accounting shenanigans are being applied to create such a gross discrepancy between the growth of public debt and the reported deficit (they used to align very closely), but I am 100% confident that the deficit of the US government is not the $589 billion being reported.

It is higher than that.

My suspicion is that the US government is now using the sorts of accounting tricks that would land a private company CFO in jail.

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5072
the PP article headline was wrong

So the "Daily Digest" article summary said:

The federal government ran a budget deficit of $589 billion for the first 11 months of fiscal year 2014, the Congressional Budget Office (CBO) estimates - $166 billion less than the shortfall recorded over the same period last year.

But the PP headline said:

U.S. Deficit Increases From 2013

Is the PP headline correct, or is the body of the article correct?  They both can't be right.

The article body aligns with the MTS statement.

While I understand the reflex to automatically call into question everything the government says, I don't think they are outright lying on the MTS.  The discrepency you saw likely had something to do with the debt limit shenanigans from summer/fall 2013.  In fact, I recall having a discussion with you months ago on this very subject in which I made some incredibly good points.  Which, of course, escape me right now.  :-)

Alas for my ability to regenerate these good points, I'm on an island right now communicating over two tin cans and a string, away from my Big Timeseries Database, so I can't quote chapter and verse.  But I'll be back tomorrow and I'll get to the bottom of this puzzle...

 

Stan Robertson's picture
Stan Robertson
Status: Platinum Member (Offline)
Joined: Oct 7 2008
Posts: 651
Debt vs deficit

The debt increased. The deficit did not. Simple mistake - slip of the typing.

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