The Daily Treasury Statement data for the end of month August showed some improvement in total tax collections, including a slight uptick in withholding taxes and an even bigger increase in excise taxes.
The numbers suggest that an early summer slowdown has ended. After the expected downward revisions in June and July jobs data, the August uptick in jobs was not a fluke. And the excise tax data suggests strong retail sales.
So, not an altogether bad summer – if you happen to be a politician or government taxman. But what about for investors?
Well surprise, surprise, surprise! Good news is bad news, which is what we’ve been talking about here all along.
Good economic news, as presaged by the uptick in tax receipts, will encourage the Fed to keep tightening.
And tighten they shall, in two ways: Most importantly, most destructively, they will drain more money from the banking system. Secondarily, they’ll continue to rubber-stamp tightening money markets by raising the Fed funds rate.
And that, as I have been shaking my fist at the sky about for months, is really bearish.
The stuff has not hit the fan yet, but it is coming…
Coming Up: More Senseless Capital Destruction
All the good-bad news about jobs and soaring GDP was the impetus for some outright bad-bad news.
On Monday, Boston Fed-head, and former staunch policy dove, Eric “The Red” Rosengren, suggested that the central may need to do even more slashing, burning, and pillaging of the money in the banking system.
OK, so he didn’t use exactly those words. But here’s what he did say in interviews with Reuters, and, later, on CNBC, where he would be sure that professional investors would see or at least hear about it loud and clear:
“If things work out well for the economy, and that’s what I expect and hope, then we’ll be in a situation where we need to have a somewhat restrictive policy over time”.
