Follow The Money

Money is what releases real resources like labour and commodities, and government spending is how money is added to the economy (private sector bank accounts). Treasury budget-deficits represent the money that was left in the economy (i.e., not taxed back and cancelled).

FEDERAL GOVERNMENT DEFICITS = PRIVATE SECTOR SURPLUSES

Treasury budget-deficits are good for the economy, yet nearly everyone on this planet has it backwards!

Biden is bragging that he has reduced the deficit. Imagine bragging that you have managed to reduce the amount of money that is transferred to private bank accounts. Luckily, the deficit is growing again. It is the only thing that will prevent a recession if the Fed insists on further raising the UBI (risk-free yield) for the bankers.

The two blue-columns (January and April) below, represent budget surpluses (private-deficits) and are the reason for the stock market weakness since the start of the year. The increasing deficits (private surplus) will support the stock market over the next month or two.

Government Budget

The blue dotted-line below is the slope (rate of change) of the SPX that results when net-transfers (budget-deficits) are between $0.6T — $1.0T/year. The red dotted-line shows the slope of the SPX during the pandemic when net-transfers were $3.0T/year. We are now back to the pre-pandemic net-transfer level and the SPX should trend higher in the same general direction as the blue line.

Our liquidity model is saying the market will rise for the next month or two. Investors can go long until mid-December (chart below).

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