Two Kinds Of Deficits
Issue: 12/20/07 Thursday
The entire market went sideways today. No major moves.
Did you catch President Bush’s question and answer session today? He said exactly what I have been saying over the past months. He wants the financial institutions to declare exactly what their position is with regard to their sub-prime loan investments. He is tired of those institutions playing around with the exposure they have on their books. He mentioned “off balance sheet” investments specifically, and that had to be a direct pointer to CitiBank.
Yesterday’s passage by the Congress of an expenditure bill was a good measure from them. The total amount of expenditure was kept at what the President asked it to be – thereby holding the fiscal line. The ruling party in the Congress wanted to spend an extra $22B, but they weren’t allowed to do it. Congress got to decide what the money would be spent on, but not the total amount of spending.
There are two deficit spending balances that you should be aware of. The Fiscal Deficit – the excess money that the US Government spends over the taxes coming in –and the Balance of Trade Deficit – the amount of exports minus the amount of imports including investment money. Both of these are negative today, and are creating a crisis in the long term. I’ve talked a lot about the Balance of Trade and the danger it poses by the foreign nations who hold our bonds.
The Fiscal deficit on the other hand is a hold over from the 1940’s when it was believed that a country could spend its way out of a depression or recession. This is called Keynesian thinking where an economist from
Here are Thursday’s closing details:
DJ30 – 13,246 (Up 38 points)
10 year US Treasury Bond – 4.03% (Down 0.04%)
Euro $1.4333
Gold closed at $803 per ounce. (Down $2)
Oil Closed at $91.06 (Up $0.18)
Gasoline is $2.33 no change
