Thursday, December 4, 2014

YoY Federal Spending thru 1 December


Chart below depicting YoY federal spending thru 1 December.  We are up YoY by about $32B but that is an easy YoY comp as last year we had the effects of the "shutdown" so-called in October and November FY 2014.

Second chart below depicts the 3 year trend the comparison with is not as impressive.

We shouldn't expect this approximate $16B per month YoY improvement to continue as the comps will get more difficult going forward for the rest of months of the FY.

I assume we will resume towards a slightly positive YoY trend for the next few months; a fiscal policy associated with more 'muddle through' as Warren terms it.

We should get more meaningful economic support from the recent fall in prices in the petroleum complex which at a $30 per bbl price reduction, could result in up to a $30 x 18M bbl per day or $16B per month swing from savings to new consumption, to the extent that the previously paid additional $30 per bbl was saved by the oil sellers.







7 comments:

Dan Lynch said...

We should get more meaningful economic support from the recent fall in prices in the petroleum complex which at a $30 per bbl price reduction, could result in up to a $30 x 18M bbl per day or $16B per month swing from savings to new consumption, to the extent that the previously paid additional $30 per bbl was saved by the oil sellers.

Do frackers save a lot of money, do they? I thought they were up to their ears in debt?

If we buy more foreign oil and less domestic oil, how does that impact demand leakages?

If capex slows down because the fracking bubble bursts, how does that impact aggregate demand?

Thanks for posting the YoY data.

Matt Franko said...

Well Dan I'm just trying to gauge the effect on "growth" of intra non-govt sector flows of this oil collapse in comparison to the main leading flow of USDs into the system...

So we are running at about a 4.2T annual rate on leading flow into the system, 5% increase would be about $200B annual or 16B/mo. so if we look at sort of "best case" that the oil sellers would have just saved the extra USD balances they used to receive for their oil, (they are still pumping right? even though they are getting up to 30% less for their oil right? so they obviously didnt "need" it...) and consumers will spend 100% of their current petro cost reductions then albeit BEST CASE this may represent a $16B/mo swing...

It is probably going to be a % of this.

So if it is half say $8B/mo that is almost $100B annual swing from savings ("leakage") to consumption.... this YoY would be more than what the libertarian morons running fiscal have done to "help" since 2009... so should be pretty good for the economy in general as far as consumption...

(not going to help repair public infrastructure for instance but that is another story you have to take that up with the libertarian morons running policy...)

If it is $100B annual YoY that represents (in comparison) about what would be 2.3% of leading USD flow from govt to non govt... will be pretty helpful imo and as I say it would be more increase than what the morons in govt sector have provided YoY in over 5 years...

rsp.

Matt Franko said...

In an analogy to electrical systems theory, this could be thought of as a shunt capacitor (oil seller-savers) reaching a fully charged state (open circuit, ie "no more savings") and the resultant effect this has on the operation of rest of the circuit components from that moment on if the source (govt spending) stays in steady state...

Peter Pan said...

That's a rather abstract analogy, involving complex numbers.
Perhaps you meant a shunt resistor?

Matt Franko said...

Bob I'm thinking that because the capacitor is charged that non-govt savings is more akin to a cap than a resistor... the resistor (thermal loss) I'm thinking is perhaps more analogous to federal taxes (USDs lost to the system)...

http://www.hobbyprojects.com/the_diode/reservoir_capacitor.html

Bill M has termed savings as "a hedge against uncertainty over time..."

If you look at the diagram at the link the source function is perhaps "uncertain" to the load.... so the addition of the cap (and once it charges) can eliminate this "uncertainty" if you will...

rsp

Matt Franko said...

Bank loans may be like "switching in fully charged capacitor banks..."

Still a work in progress... ;)

mike norman said...

I'm just going to come out and say this...if you were to use the "orthodox" way of applying MMT to forecast the economy, that is, by looking at the trend in deficits, etc, then MMT has been useless as a forecasting tool.

If you looked at the deficit trend over the past several years, as Mosler has, you would have totally missed the growth in the economy. TOTALLY.

On the other hand, if you were to look at Matt's "gross spending" you would have not only been right on economic forecasts, but cleaned up in the stock market.