On Thursday, November 14, 2012, the US Treasury Department reported that the U.S. Government had a budget deficit of $120 billion for the month of October. With total outlays of $304B, this means the government had to borrow 39 cents for every dollar it spent!
This shows the information graphically. (click to enlarge)
Year-over-year, receipts for the month of October grew by 13% but spending rose even faster at 16.4%!
October Surplus (Deficit)
Data from http://www.fms.treas.gov/mts/index.html
October 2012 was the start of fiscal 2013 so the fiscal year only has one month of data.
Year-to-date Surplus (Deficit)
Deficit as percent of Outlays
All this borrowing by the government is supported by the Federal Reserve (Fed) holding interest rates extraordinary low. Add in the Fed's programs of quantitative easing to buy US debt and expand the Fed's balance sheet gave the Fed its intended effect of "reflating the economy" by pushing asset prices higher. Oddly, the exchange traded fund for Gold (NYSEARCA:GLD) is essentially flat over the past year while stocks in the S&P500, counting dividends reinvested with this chart of SPY, are up over 13.5%.
(SPY is the exchange traded fund for the S&P500)
Despite the recent sell-off in SPY, my decision to hold SPY over gold has been a good one this past year.
- SPY is the exchange traded fund for the S&P 500 Index.
- VTI is Vanguard's "Total Stock Market" exchange traded fund.
- VOO is Vanguard's new exchange traded fund that tracks the S&P 500 Index. It is a lower cost alternative to SPY. I own and write about SPY, as I have many years of data for it, but VOO could do slightly better than SPY over time because it has a lower expense ratio.
Disclosure: I am long SPY. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.