The major averages enter the final hour with substantial gains on little news of substance. As last week’s drubbing starts to fade into a memory. The Treasury International Capital Flows report comes out after the close.
Industrial production increased .3% in September, a fourth consecutive advance. Capacity utilization was unchanged at a solid 78.1%.
The fiscal 2018 federal budget deficit rose 17% or 113 billion to 779 billion, a 6-year high. Massive gains in military spending and an unnecessary tax cut for the 10% and corporations led most of the advance. Per data from the Treasury and Office of Management and Budget. Revenues gained just 14 billion, or 2.1% after the tax cuts. On a percentage of Gross Domestic Product basis the deficit reached 3.9%. A footnote on various tariffs etc. The 35 billion received represented a 35% increase and likely reflects the recently applied tariffs.
Continuing on the subject of questionable financial engineering at our expense. The Saint Louis Fed recently noted in a report A Carry Trade in Liquidity, the following. The IOER, or interest on excess reserves, has been the effective ceiling of other short-term interest rates. As this figure has remained slightly above overnight rates on deposits and repos. It serves as free tax payer money for the banksters able to deposit at this rate and pocket the spread, or the difference between what they pay and what they get. Before you dismiss this as a meaningless tiny fraction of a percent, which in fact it is. The sums involved are anything but tiny, 1.7 trillion, at last count. Further this essentially risk-free spread was present from 2009 until quite recently when rates began to rise.
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