Karim writes:

  • Weak number but has to be put into context of prior strength and m/m volatility
  • Orders less aircraft and defense (proxy for future private sector capex) down 8%; prior 2mths were up 3.6% and 4.7%
  • Weakness led by machinery orders; down 15% after up 15.4% prior 2mths
  • Shipments ex-aircraft and defense (proxy for current qtr capex) down 1.5% after 5 straight gains

Yes and upward revision for prior month as well

7 Responses

  1. The elephant in the room, with regard to why the depression will continue with a second dip, is that fiscal stimulus is not even on the table. Continued stimulus is needed, but Republicans seem to think the problem is too much stimulus. How can this not end in economic contraction?

    1. Dan,
      As of last Friday the MTD Treasury data is:

      Withdrawals: 685,657
      Redemptions: 436,658
      Net Withdrls: 248,999

      Deposits: 702,877
      Sec Issued: 564,956
      Net Depos: 137,921

      So it looks like MTD net deficit is 111,078 (Adjusting for Treasury sales/redemptions) so that looks like the approx 110B/mo. of NFA provided that has been average over last last year or two, but the external deficit has now reached about 50B/mo (was 40B or less for a long time)….stocks are weak this month but looks like bonds are a bit stronger.

      Domestic sector left with less so stocks go down, external sector left with more and of course it goes into bonds and they go up?


      1. more buying of imports shows domestic desired savings is being achieved while foreign demand for dollar savings continues to grow.

        growth may be slower than it could be with a payroll tax holiday, but seems enough to muddle through at modestly positive levels

    2. deficit is already more than high enough for a modest recovery that can turn more robust should private sector credit expansion resume, which it will as private balance sheets continue to improve from the current deficit

  2. Thanks Matt Franko!

    I could use some explanation with regard to the 4 figures given (withdrawals, deposits, redemptions, securities issued). A withdrawal is a cash disbursement by U.S. government (or Fed)? A redemption is a bond that has been removed from circulation by the U.S. government (or Fed)?

    So the govt is adding $1.4T or so per year (net financial assets) to the economy via the federal deficit, while $600B or so is being removed due to the external deficit? The $800B stimulus seems like a lot, but since credit is shrinking, that may not be enough to sustain demand. On top of this, the deficit will probably start falling as much of it was temporary as part of the ARRA which was passed in January 2009?

  3. Morgan Stanley Says Government Defaults Inevitable

    One interesting line from this piece is :
    “Rather than miss principal and interest payments, governments may choose a “soft” default in which they pay back debts with devalued currencies resulting from faster inflation or force creditors to take lower returns, Mares said in an interview.”
    We’ve seen the run up in debt. But where is the inflation?

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