Tuesday, September 1, 2009
Yesterday they balanced the budget for August; today the stock market tanks
The numbers are in from the Treasury. A huge debt sale in the amount of $112 billion yesterday, a day that saw only $23 billion in redemptions, basically put the budget into balance for August. (Outlays for August: $943 billion; Receipts for August: $943 billion). A day before we had an $85 billion deficit.
This shows you how deathly afraid the Administration is of the deficit. Politically, they fear this more than 10% or higher unemployment.
Well, the debt sale constitutes a huge reserve drain, so you can bet the Fed is going to be very busy with monetary operations to offset this. They have to maintain their target rate. Expect strong purchases of MBS next week.