Most Popular
1. THE INFLATION MONSTER is Forecasting RECESSION - Nadeem_Walayat
2.Why APPLE Could CRASH the Stock Market! - Nadeem_Walayat
3.The Stocks Stealth BEAR Market - Nadeem_Walayat
4.Inflation, Commodities and Interest Rates : Paradigm Shifts in Macrotrends - Rambus_Chartology
5.Stock Market in the Eye of the Storm, Visualising AI Tech Stocks Buying Levels - Nadeem_Walayat
6.AI Tech Stocks Earnings BloodBath Buying Opportunity - Nadeem_Walayat
7.PPT HALTS STOCK MARKET CRASH ahead of Fed May Interest Rate Hike Meeting - Nadeem_Walayat
8.50 Small Cap Growth Stocks Analysis to CAPITALISE on the Stock Market Inflation -Nadeem_Walayat
10.Apple and Microsoft Nuts Are About to CRACK and Send Stock Market Sharply Lower - Nadeem_Walayat
Last 7 days
UK Housing Market Analysis, Trend Forecast 2022 to 2025 - Part 2 - 30th June 22
Stock Market Turning the Screws - 30th June 22
How to Ignore Stocks (and why you should) - 30th June 22
Top Tips For Getting The Correct Insurance Option For Your Needs - 30th June 22
Central Banks Plan To Buy More Gold In 2022 - 30th June 22
AI Tech Stock PORTFOLIO NAME OF THE GAME - 29th June 22
Rebounding Crude Oil Gets Far Away from the Bearish Side - 29th June 22
UK House Prices - Lets Get Jiggy With UK INTEREST RATES - 28th June 22
This “Bizarre” Chart is Wrecking the Stock Market - 28th June 22
Recession Question Answered - 28th June 22
Technical Analysis: Why You Should Expect a Popularity Surge - 28th June 22
Have US Bonds Bottomed? - 27th June 22
Gold Junior Miners: A Bearish Push Is Coming to Move Them Lower - 27th June 22
Stock Market Watching Out - 27th June 22
The NEXT BIG EMPIRE WILL BE..... CANZUK - 25th June 22
Who (or What) Is Really in Charge of Bitcoin's Price Swings? - 25th June 22
Crude Oil Price Forecast - Trend Breaks Downward – Rejecting The $120 Level - 25th June 22
Everyone and their Grandma is Expecting a Big Stocks Bear Market Rally - 23rd June 22
The Fed’s Hawkish Bite Left Its Mark on the S&P 500 Stocks - 23rd June 22
No Dodging the Stock Market Bullet - 23rd June 22
How To Set Up A Business To Better Manage In The Free Market - 23rd June 22
Why Are Precious Metals Considered A Good Investment? Find Out Here - 23rd June 22
UK House Prices and the Inflation Mega-trend - 22nd June 22
Sportsbook Betting Reviews: How to Choose a Sportsbook- 22nd June 22
Looking to buy Cannabis Stocks? - 22nd June 22
UK House Prices Momentum Forecast - 21st June 22
The Fed is Incompetent - Beware the Dancing Market Puppet - 21st June 22
US Economy Headed for a Hard Landing - 21st June 22
How to Invest in EU - New Opportunities Uncovered - 21st June 22
How To Protect Your Assets During Inflation - 21st June 22

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Keynesian Death By Debt Continues

Economics / Global Debt Crisis 2012 Jan 13, 2012 - 12:42 PM GMT

By: Ned_W_Schmidt


Best Financial Markets Analysis ArticleDebt constrains one's enjoyment of life. Without debt to repay, we could use our incomes solely for the pursuit of the good life. You get to define of what that consists, be it food and wine, debauchery or charitable deeds. With debt, life is miserable. Greece has learned that lesson. Spain and Portugal now know that. Those that lost their homes due to the bursting of the Federal Reserve's housing bubble know that. Seems just about everyone but Keynesian economists hiding in their academic cloisters, free of the real world, are fully aware of economic death through debt.

Only condition worse than having debt is having one's debt burden growing. Each day brings one closer to the time when one will not be able to spend money as one wishes because of debt payments. Any kind of enjoyable life will be unaffordable, much less the good life.Seems everyone knows that, with the exception of the Obama Regime and their moribund Keynesian advisors.

Chart above is the trailing twelve month true U.S. deficit on a weekly basis. This value must be calculated from the current and prior debt levels as the unified budget deficit reported by the U.S. government is believed only by the Mad Hatter. As is painfully obvious, that deficit continues to run at slightly more than $1,200 billion. So much for deficit reduction.

In economics courses one listens to day after day of Keynesian drivel. For example, a common teaching was that the government's debt is no problem as it was owed to the citizens, or ourselves. For that reason, the government mortgaging the future of our grandchildren so that politicians have money with which to buy votes has been deemed acceptable behavior. Well known now is that we no longer owe the money just to ourselves. The U.S. owes money to every conceivable gullible investor in the world.

Above chart is one of our favorites. Plotted in black, using the left axis, are the holdings of U.S. government debt by foreign central banks which are held at the Federal Reserve. This data is reported weekly. Line of red circles, using the right axis, is the rate of change in the size of those holdings.

As we have been reporting and as indicated by the red line, these institutions have become essentially net liquidators of U.S. government debt.

Recently, several of the presidents of the district banks of the Federal Reserve have been talking publicly of another round of quantitative easing. Never mind that both of the previous rounds were failures. Keynesians do not deem the lack of success with their policies to be failure, but rather as a reason to do it one more time. Mentally mired in an ideology of the past, they are slow learners.

With foreign institutions becoming absent from the buying of U.S. government debt, someone else must be found to fund that $1.2 trillion of new debt in the coming year. Is the Federal Reserve to simply hand the Obama Regime $23 billion of cash each week with which to buy votes? If so, we certainly have a reason to own Gold. We also see good reasons for the Senate to reject the two latest nominees by the Obama Regime to fill vacant seats on the board of the Federal Reserve. Our economy cannot afford any more debt monetizers at the Federal Reserve.

Just as in polite society certain accepted modes of conduct exist, in markets there also exists a correct behavior. In a bear market, which currently exists in both Gold and Silver, one does not buy. Bear markets generate lower prices that penalize buyers. When bear market rallies occur one must restrain the emotional response of missing a move. When markets dominated by children at hedge funds, using computers without parental controls, push $Gold up ~9% in 10 days and $Silver up ~17% in ten days, try watching the weather channel to calm your emotions. And remember, all bear markets end, just as do bull markets. We should simply retain our long term Gold positions while building cash with which to buy when the bear is exhausted.

By Ned W Schmidt CFA, CEBS

Copyright © 2011 Ned W. Schmidt - All Rights Reserved

GOLD THOUGHTS come from Ned W. Schmidt,CFA,CEBS, publisher of The Value View Gold Report , monthly, and Trading Thoughts , weekly. To receive copies of recent reports, go to

Ned W Schmidt Archive

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in