Socio-Economics History Blog

Socio-Economics & History Commentary

US Tax Revenues Tanking – Bond Bubble Bursting!

  • US Tax revenues are falling much faster than official figures are forecasting. US government will have to borrow a lot more money than what they let on. The treasury bond market is bursting right before our eyes. The USD is also falling dramatically. This looks like the beginning of the end for America.
  • David Galland reports :
    ….When you add in all revenue from all sources (including Social Security revenue, government fees, etc.), the fiscal year-to-date – October through April – revenue shortfall comes to 19%, vs. the 14.6% projected in Obama’s budget. If, however, the accelerating shortfall apparent year-to-date, and in April in particular, continues, the spread between projected and actual tax receipts will widen considerably.
    Tellingly, for the first time since 1983, the U.S. government posted a deficit in April. That’s a big swing in the wrong direction, as the bump in personal tax collections in April historically results in a big surplus – on average about $68 billion.
    What are the implications of this tanking tax revenue?
    For starters, it means the federal government deficit is going be as bad or worse than the $2.5 trillion Bud Conrad, chief economist of Casey Research, projected it to be last year.
    If the shortfall in individual and corporate tax revenue persists – and we expect it will – then the deep hole the government is already digging for itself will be that much deeper.
    Using the government’s own expense projections, the revenue shortfall, even if it doesn’t worsen further, would push the fiscal 2009 budget deficit up to about $1.958 trillion. For reasons we’ve discussed at some length in
    The Casey Report, those expense projections are likely to be significantly understated.
    Case in point, in January the government projected a $1.2 trillion deficit for fiscal year 2009 in March, just three months later, they upped the projection to $1.8 trillion. That $600 billion “adjustment” alone totaled more than any full-year budget deficit in the nation’s history.
    Yet, the real fly in the ointment is that the actual borrowing by the Treasury is likely to be at least half a trillion dollars more than the deficit.
    That’s because the Treasury is buying toxic paper (mortgage, credit card loans, etc.) and putting them on the books with a higher value than the market is willing to assign. While that makes the budget deficit appear smaller, it doesn’t negate the fact that the government still must borrow the money needed to buy the toxic paper in the first place. The additional revenue shortfall means they have to raise that much more money. Based on the struggle they had pushing the $14 billion in long-term notes at the latest auction, it becomes increasingly apparent that when push comes to shove, the only way the government is going to come up with the money needed to meet its aggressive spending is to print it up.
    In the absence of sizeable increases in tax revenues, it is quite clear that the lion’s share of the planned sales of Treasuries in 2009 cannot be met by demand from the market. Either the Treasury will have to raise interest rates significantly, or the Fed will need to step in very aggressively to support the planned auctions. Our expectation is that both will happen. Auctions will fail and the Fed will step in. The market will react to more printing by anticipating inflation and demanding higher interest rates. Once the cycle starts, it will be very hard to pull interest rates back.
    We continue to stand by our December forecast that the 2009 budget deficit is more likely to widen to levels between $2.5 and $3 trillion rather than the CBO’s $1.8 trillion forecast. We also believe that inflation could start setting in as early as Q3 of 2009 and will accelerate sharply by 2010. Treasury Rates will start climbing and the era of cheap money will end, making it harder for overleveraged consumers, businesses, and governments to service their debt.
    Olivier’s forecast of failed auctions and rising interest rates on Treasuries proved more prophetic as a May 7th story from Bloomberg reported:
    Treasury 30-year bonds fell the most in four months as investors demanded higher-than-forecasted yields at today’s auction of $14 billion of the securities with the U.S. slated to sell a record amount of debt this year.
    “This is a problem,” said Chris Ahrens, head interest-rate strategist at UBS AG in Stamford, Connecticut, one of 16 primary dealers required to bid in Treasury auctions. “The market required a fairly significant discount to buy the bonds.”
    Thirty-year bonds have lost investors 20.9 percent this year, Merrill Lynch & Co. indexes show, as the Treasury increases securities sales to help fund a swelling budget deficit. Yields climbed to a six-month high today as the auction drew a yield of 4.288 percent, higher than the 4.192 percent average forecast in a Bloomberg News survey of seven primary dealers. Demand was below average, judging by total bids.
    The benchmark 30-year bond yield climbed 23 basis points, or 0.23 percentage points, the most since Jan. 5, to 4.316 percent, at 5:25 p.m. in New York, according to BGCantor Market data. It was the highest yield since Nov. 14. The 3.5 percent security due in February 2039 dropped 3 15/32, or $34.69 per $1,000 face amount, to 86 3/8. The 10-year note yield increased 16 basis points to 3.345 percent, the highest since Nov. 24.
    Two-year notes yielded 1 percent for the first time since March 18, while the rate on the three-month Treasury bill was 0.18 percent.
    So, what does all this mean? As per above, the rock-and-the-hard-place scenario we have been predicting is unfolding before our eyes. At this point, other than sharply-changing course and letting the free market cope with the crisis through a brutal “survival of the fittest” scenario, the government is left with no other option than to accelerate its buying up of its own debt.
    Which is to say, it must push even harder on the levers of its printing presses, further setting the stage for the massive period of inflation we continue to see as inevitable and for the stunning rise in interest rates we are now positioning ourselves for ….


May 23, 2009 Posted by | Economics | , , , | Comments Off on US Tax Revenues Tanking – Bond Bubble Bursting!

Joseph Farrell: NAZI Hidden Science and Technology

  • Project Camelot  interviews Joseph Farrell on the hidden history of NAZI science achievements and what happened to many NAZIs after World War 2. 
    …. Nazi International, refers to Joseph Farrell’s most recent book, in which he details – as do Camelot witnesses Jim Marrs and Peter Levenda, and many other researchers (including Jim Keith, who died in unusual circumstances and to whom we pay tribute here) – how the Nazis were experimenting with technology extremely advanced for their time, and how many Nazi scientists, evaluated as being valuable resources for post-war America, were repatriated to the US under Project Paperclip.
    We first heard of Joseph Farrell from Richard Hoagland – and soon after from Nick Cook, the author of The Hunt for Zero Point. Farrell, like Peter Levenda, is essentially an academic: a document researcher who digs deep into historical detail and has become fascinated, as many others have, with the hidden history of the Third Reich. He has continued Igor Witkowski’s and Nick Cook’s research into the enigmatic Nazi Bell: an experimental device, classified at the highest level, that seems to have been used to investigate time distortion effects or antigravity – very possibly both – based on the beginnings of theoretical torsion physics that was being developed in the 1920s and 1930s by a number of brilliant European scientists, themselves very much ahead of their time.
    In this interview, Bill Ryan takes the lead and talks with Joseph Farrell in some depth about his work. The interview takes the viewer on a journey which starts before the Second World War, and explores just what German scientists may have been doing in great secret, with the full support of the SS. And, as the title of the video indicates, the story by no means ends there. This video may be of considerable interest to students of wartime advanced technology, and of the hidden history of the Third Reich.
  • See also:
    NASA, UFOs, NAZIs, FreeMasons and the Illuminati! Secret Space Video.
    The Rise of the 4th Reich On Coast to Coast AM   


May 23, 2009 Posted by | History | | 3 Comments

Failure of GCC Monetary Union Should Boost Gold Demand

  • The original plan of monetary union for Persian Gulf countries looks in trouble. Peter Cooper reports :
    Now that the UAE has decided not to participate in the monetary union of the GCC states. the way is cleared for increased gold buying by their central banks to diversify away from the US dollar.
    Gold purchases may have been on hold pending further progress on GCC monetary union, and a decision over what kind of currency basket – which was the most probable outcome – would prevail. Gold might, or might not have been included in this basket.
    Gold not on hold
    Now this uncertainty is removed and the six central banks of the GCC can get on with managing their own affairs. Saudi Arabia has amassed considerable gold reserves and could well decide to buy more to spread its risk now that it is most likely going to keep its dollar pegged currency.
    And the UAE which holds no gold might decide that this would be a very good time to get on and do so, before prices hit the roof, and the opportunity to diversify away from the dollar is lost.
    Certainly Gulf central bankers are suddenly freed from a policy straight-jacket that has inhibited their thinking for some years. The argument has always been that with a single currency around the corner that new ideas like stocking up on gold or silver could be postponed.
    Swift action
    The GCC central banks will need to move swiftly now if they want to diversify their reserves away from the US dollar which looks to be facing a structural decline due to mounting deficits, enormous new borrowings that need to be funded with bonds as well as quantitative easing or money printing and the threat of inflation.
    There are plenty of good reasons to exit the dollar at this moment, as commentators like Jim Rogers and Dr Marc Faber have elucidated recently. Gold is a way to do so quietly without having to sort out new currency baskets, which might take too much time and prove controversial.
    So expect to hear in future months that the Saudis and perhaps even the Emiratis have emerged as surprise buyers of gold. They will want to spread their risk away from the US dollar just like any other investor.

May 23, 2009 Posted by | Economics | | Comments Off on Failure of GCC Monetary Union Should Boost Gold Demand