Despite the best efforts of the bulls to make history happen, they’ve been unable to ‘git-r-done.’ At the time of this writing, the Dow is facing another bout of arrested development; it has yet to notch 20,000 for the very first time.
The venerable Industrial Average has finally bubbled its way close to 20,000. No-one know as yet from whence the transition from comedy & farce to total horror-show will occur, but the eventual denouement of the post-GFC echo bubble promises to be quite a riveting experience as well – perhaps even more so than last time – click to enlarge.
What a feat it will be when this remarkable, but trivial, event comes to pass. After a near eight year run, the Dow will likely eclipse this exquisitely round numeric threshold in the very near future. Shouldn’t such an achievement – and the associated wealth effect – have made us all rich?
Apparently not. For on the other side of the ledger a distinct, yet somehow related milestone is imminently approaching. The U.S. National Debt is at $19.9 trillion. Soon it will surpass a round and rotund $20 trillion.
The reality, however, is that the national debt exceeded $20 trillion a long time ago. In fact, it’s really over 600 percent higher. Remember, unfunded liabilities, including Social Security and Medicare, currently total over $104.5 trillion.
Added together the national debt and current unfunded liabilities total $124.4 trillion. Verily, this number is so large it’s nigh impossible to comprehend. Thus, for simplicity and for the sake of numerological harmony, today’s reflections are limited in breadth and scope to Dow 20,000 and U.S. National Debt $20 trillion.
An Exercise in Numerology
Quite frankly, we don’t really know what the Dow and the national debt have to do with each other. We can’t quite put a finger on it. Nonetheless, we have a hunch both milestones are in some way emblematic of a great transformation that has taken place.
Is Dow 20,000 and U.S. National Debt $20 trillion merely a coincidence? Or is there a correlation? And if there is a correlation, does it imply causation?
No doubt, there are a variety of ways to explore these questions. However, here we opt for the path of least resistance. Hence, what follows is not a detailed desktop evaluation of the numbers; but, rather, one very simply deduced conclusion based on inference, guess work, and conjecture.
To begin, we peer back to the past in search of arbitrary data points that look as if they’re interrelated. For example, in the autumn of 1982 the Dow surpassed 1,000. This wasn’t the first time this happened. But 1982 is the last time the Dow rose above 1,000 without then dipping back below. Similarly, 1982 is when the U.S. National Debt topped the $1 trillion mark.
The federal public debt-berg of the UDSA (United Debt Slaves Association) in all its gory glory. Looking for growth? Look no further. It certainly looks like there will be enough of it to smother several generations in red ink up to their hairlines – click to enlarge.
From $1 trillion to $20 trillion, the U.S. National Debt generally followed an exponential growth curve. There was a slight pause in the late 1990s. But otherwise it has progressively concaved upward approaching a parabolic trajectory; particularly since 2009.
The Dow’s march from 1,000 toward 20,000, on the other hand, has been less direct. There have even been several brief, yet significant, sell-offs along the way. What to make of it?
Wreck the Halls
A statistician may run the numbers for the Dow and the U.S. National Debt and conclude that there’s a weak correlation, and certainly no causation. They may even graph a scatter plot to make their case.
A numerologist may look at the divinely round numbers and infer something much different. Maybe even that there’s a connection that can be projected into the future. Who’s right? Who’s wrong?
Along the road from Dow 1,000 to Dow 20,000 and from U.S. National Debt $1 trillion to U.S. National Debt $20 trillion one thing is quite clear. There have been episodes of significant divergence.
For instance, in March of 2009 the Dow touched down at about 6,700 while the U.S. National Debt was over $10 trillion. Perhaps we’re approaching another such divergence.
Namely, using a subjective combination of supposition, numerology, and crude statistics, it seems likely that we are entering a time where the U.S. National Debt continues its exponential trajectory while the Dow dives 8,000 points – or more – to below 12,000.
The DJIA again, only monthly. Is it ripe for another dive? Note the 1997/1998 Asian/Russian crisis double dips. Although these were accompanied by a more serious backdrop, there are certain parallels with the 2015/2016 China/EM scare – click to enlarge.
You can take this shrewd little nugget of insight for what it’s worth and set it aside for another day. It’s the Christmas season, after all. Now is the time for joy, good cheer, and merriment. Conversely, it’s not the time for party poopers, wet blankets, and killjoys.
Thus, like the stock market over the last eight years, now is the time to take the unique opportunity that’s been granted to you at this very moment, and overdo it. The stars may not be so amiably aligned come this time next year.
So wreck the halls, if you’re so inclined. Have another eggnog or peppermint bark. Give the bell ringing Salvation Army lady a wink and a crisp Benjamin… before Larry Summers outlaws them.
Of course, whatever you do, always do it in a ‘safe and sane’ manner. In short, sell bonds.
Santa Claus admonished Congress, threatening a boycott of presents – about 150 years ago. Evidently it was a good idea to preface “this will bring them to their senses” with “perhaps”.
Illustration by Thomas Nast
Charts by: StockCharts, St. Louis Federal Reserve Research
Chart and image captions by PT
MN Gordon is President and Founder of Direct Expressions LLC, an independent publishing company. He is the Editorial Director and Publisher of the Economic Prism – an E-Newsletter that tries to bring clarity to the muddy waters of economic policy and discusses interesting investment opportunities.
You may have noticed that our so-called “semiannual” funding drive, which started sometime in the summer if memory serves, has seamlessly segued into the winter. In fact, the year is almost over! We assure you this is not merely evidence of our chutzpa; rather, it is indicative of the fact that ad income still needs to be supplemented in order to support upkeep of the site. Naturally, the traditional benefits that can be spontaneously triggered by donations to this site remain operative regardless of the season - ranging from a boost to general well-being/happiness (inter alia featuring improved sleep & appetite), children including you in their songs, up to the likely allotment of privileges in the afterlife, etc., etc., but the Christmas season is probably an especially propitious time to cross our palms with silver. A special thank you to all readers who have already chipped in, your generosity is greatly appreciated. Regardless of that, we are honored by everybody's readership and hope we have managed to add a little value to your life.
Bitcoin address: 1DRkVzUmkGaz9xAP81us86zzxh5VMEhNke
One Response to “Wreck the Halls”
Most read in the last 20 days:
- Gold - Ready to Spring Another Surprise
Sentiment Extremes Below is an update of a number of interesting data points related to the gold market. Whether “interesting” will become “meaningful” remains to be seen, as most of gold's fundamental drivers aren't yet bullishly aligned. One must keep in mind though that gold is very sensitive with respect to anticipating future developments in market liquidity and the reaction these will elicit from central banks. Often this involves very long lead times. Blackbeard's...
- Modi’s Great Leap Forward
India’s Currency Ban – Part VIII India’s Prime Minister, Narendra Modi, announced on 8th November 2016 that Rs 500 (~$7.50) and Rs 1,000 (~$15) banknotes would no longer be legal tender. Linked are Part-I, Part-II, Part-III, Part-IV, Part-V, Part-VI and Part-VII, which provide updates on the demonetization saga and how Modi is acting as a catalyst to hasten the rapid degradation of India and what remains of its institutions. India’s Pride and Joy Indians are...
- Global Recession and Other Visions for 2017
Conjuring Up Visions Today’s a day for considering new hopes, new dreams, and new hallucinations. The New Year is here, after all. Now is the time to turn over a new leaf and start afresh. Naturally, 2017 will be the year you get exactly what’s coming to you. Both good and bad. But what else will happen? Image of a recently discarded vision... Image by Michael Del Mundo Here we begin by closing our eyes and slowing our breath. We let our mind...
- The Great El Monte Public Pension Swindle
Nowhere City California There are places in Southern California where, although the sun always shines, they haven’t seen a ray of light for over 50-years. There’s a no man’s land of urban blight along Interstate 10, from East Los Angeles through the San Gabriel Valley, where cities you’ve never heard of and would never go to, are jumbled together like shipping containers on Terminal Island. El Monte, California, is one of those places. Advice dispensed on Interstate...
- A Trade Deal Trump Cannot Improve
Worst in Class BALTIMORE – People can believe whatever they want. But sooner or later, real life intervenes. We just like to see the looks on their faces when it does. By that measure, 2017 may be our best year ever. Rarely have so many people believed so many impossible things. Alice laughed. "There's no use trying," she said: "one can't believe impossible things." "I daresay you haven't had much practice," said the Queen. "When I was your age, I always did it for...
- Pope Francis Now International Monetary Guru
Neo-Marxist Pope Francis Argues for Global Central Bank As the new year dawns, it seems the current occupant of St. Peter’s Chair will take on a new function which is outside the purview of the office that the Divine Founder of his institution had clearly mandated. Neo-Papist transmogrification. We highly recommend the economic thought of one of Francis' storied predecessors, John Paul II, which we have written about on previous occasions. In “A Tale of Two Popes” and...
- Trump’s Trade Catastrophe?
“Trade Cheaters” It is worse than “voodoo economics,” says former Treasury Secretary Larry Summers. It is the “economic equivalent of creationism.” Wait a minute - Larry Summers is wrong about almost everything. Could he be right about this? Larry Summers, the man who is usually wrong about almost everything. As we have always argued, the economy is much safer when he sleeps, so his tendency to fall asleep on all sorts of occasions should definitely be welcomed....
- Where’s the Outrage?
Blind to Crony Socialism Whenever a failed CEO is fired with a cushy payoff, the outrage is swift and voluminous. The liberal press usually misrepresents this as a hypocritical “jobs for the boys” program within the capitalist class. In reality, the payoffs are almost always contractual obligations, often for deferred compensation, that the companies vigorously try to avoid. Believe me. I’ve been on both sides of this kind of dispute (except, of course, for the “failed”...
- Money Creation and the Boom-Bust Cycle
A Difference of Opinions In his various writings, Murray Rothbard argued that in a free market economy that operates on a gold standard, the creation of credit that is not fully backed up by gold (fractional-reserve banking) sets in motion the menace of the boom-bust cycle. In his The Case for 100 Percent Gold Dollar Rothbard wrote: I therefore advocate as the soundest monetary system and the only one fully compatible with the free market and with the absence of force or fraud...
- Silver’s Got Fundamentals - Precious Metals Supply-Demand Report
Supply-Demand Fundamentals Improve Noticeably Last week was another short week, due to the New Year holiday. We look forward to getting back to our regularly scheduled market action. Photo via thedailycoin.org The prices of both metals moved up again this week. Something very noticeable is occurring in the supply and demand fundamentals. We will give an update on that, but first, here’s the graph of the metals’ prices. Prices of gold and silver...
- Trump’s Plan to Close the Trade Deficit with China
Rags to Riches Jack Ma is an amiable fellow. Back in 1994, while visiting the United States he decided to give that newfangled internet thing a whirl. At a moment of peak inspiration, he executed his first search engine request by typing in the word beer. Jack Ma, founder and CEO of Alibaba, China's largest e-commerce firm. Once he was a school teacher, but it turned out that he had enormous entrepreneurial talent and that the world of wheelers, dealers, movers and...
- Side Notes, January 14 - Red Flags Over Goldman Sachs
Red Flags Over Goldman Sachs Just to prove that I am an even-handed insulter, here is a rant about my former employer, Goldman Sachs. The scandal at 1MDB, the Malaysian sovereign wealth fund from which it appears that billions were stolen by politicians all the way up to the Prime Minister, continues to unfold. The main players in the 1MDB scandal. Irony alert: apparently money siphoned off from 1MDB was used to inter alia finance Martin Scorcese's movie “The Wolf of...