Best of the Week
Most Popular
1. The Trump Stock Market Trap May Be Triggered - Barry_M_Ferguson
2.Why are Central Banks Buying Gold and Dumping Dollars? - Richard_Mills
3.US China War - Thucydides Trap and gold - Richard_Mills
4.Gold Price Trend Forcast to End September 2019 - Nadeem_Walayat
5.Money Saving Kids Gardening Growing Giant Sunflowers Summer Fun - Anika_Walayat
6.US Dollar Breakdown Begins, Gold Price to Bolt Higher - Jim_Willie_CB
7.INTEL (INTC) Stock Investing to Profit From AI Machine Learning Boom - Nadeem_Walayat
8.Will Google AI Kill Us? Man vs Machine Intelligence - N_Walayat
9.US Prepares for Currency War with China - Richard_Mills
10.Gold Price Epochal Breakout Will Not Be Negated by a Correction - Clive Maund
Last 7 days
How to Protect Your Site from Bots & Spam? - 21st Aug 19
Fed Too Late To Prevent A US Housing Market Crash? - 21st Aug 19
Gold and the Cracks in the U.S., Japan and Germany’s Economic Data - 21st Aug 19
The Gold Rush of 2019 - 21st Aug 19
How to Play Interest Rates in US Real Estate - 21st Aug 19
Stocks Likely to Breakout Instead of Gold - 21st Aug 19
Top 6 Tips to Attract Followers On SoundCloud - 21st Aug 19
Holiday Nightmares - Your Caravan is Missing! - 21st Aug 19
UK House Building and House Prices Trend Forecast - 20th Aug 19
The Next Stock Market Breakdown And The Setup - 20th Aug 19
5 Ways to Save by Using a Mortgage Broker - 20th Aug 19
Is This Time Different? Predictive Power of the Yield Curve and Gold - 19th Aug 19
New Dawn for the iGaming Industry in the United States - 19th Aug 19
Gold Set to Correct but Internals Remain Bullish - 19th Aug 19
Stock Market Correction Continues - 19th Aug 19
The Number One Gold Stock Of 2019 - 19th Aug 19
The State of the Financial Union - 18th Aug 19
The Nuts and Bolts: Yield Inversion Says Recession is Coming But it May take 24 months - 18th Aug 19
Markets August 19 Turn Date is Tomorrow – Are You Ready? - 18th Aug 19
JOHNSON AND JOHNSON - JNJ for Life Extension Pharma Stocks Investing - 17th Aug 19
Negative Bond Market Yields Tell A Story Of Shifting Economic Stock Market Leadership - 17th Aug 19
Is Stock Market About to Crash? Three Charts That Suggest It’s Possible - 17th Aug 19
It’s Time For Colombia To Dump The Peso - 17th Aug 19
Gold & Silver Stand Strong amid Stock Volatility & Falling Rates - 16th Aug 19
Gold Mining Stocks Q2’19 Fundamentals - 16th Aug 19
Silver, Transports, and Dow Jones Index At Targets – What Direct Next? - 16th Aug 19
When the US Bond Market Bubble Blows Up! - 16th Aug 19
Dark days are closing in on Apple - 16th Aug 19
Precious Metals Gone Wild! Reaching Initial Targets – Now What’s Next - 16th Aug 19
US Government Is Beholden To The Fed; And Vice-Versa - 15th Aug 19
GBP vs USD Forex Pair Swings Into Focus Amid Brexit Chaos - 15th Aug 19
US Negative Interest Rates Go Mainstream - With Some Glaring Omissions - 15th Aug 19
US Stock Market Could Fall 12% to 25% - 15th Aug 19
A Level Exam Results School Live Reaction Shock 2019! - 15th Aug 19
It's Time to Get Serious about Silver - 15th Aug 19
The EagleFX Beginners Guide – Financial Markets - 15th Aug 19
Central Banks Move To Keep The Global Markets Party Rolling – Part III - 14th Aug 19
You Have to Buy Bonds Even When Interest Rates Are Low - 14th Aug 19
Gold Near Term Risk is Increasing - 14th Aug 19
Installment Loans vs Personal Bank Loans - 14th Aug 19
ROCHE - RHHBY Life Extension Pharma Stocks Investing - 14th Aug 19
Gold Bulls Must Love the Hong Kong Protests - 14th Aug 19
Gold, Markets and Invasive Species - 14th Aug 19
Cannabis Stocks With Millennial Appeal - 14th Aug 19
August 19 (Crazy Ivan) Stock Market Event Only A Few Days Away - 13th Aug 19
This is the real move in gold and silver… it’s going to be multiyear - 13th Aug 19
Global Central Banks Kick Can Down The Road Again - 13th Aug 19
US Dollar Finally the Achillles Heel - 13th Aug 19
Financial Success Formula Failure - 13th Aug 19
How to Test Your Car Alternator with a Multimeter - 13th Aug 19
London Under Attack! Victoria Embankment Gardens Statues and Monuments - 13th Aug 19

Market Oracle FREE Newsletter

The No 1 Gold Stock for 2019

Is There Really a Debt Crisis?

Interest-Rates / Global Debt Crisis Jun 13, 2010 - 01:40 AM GMT

By: Clif_Droke

Interest-Rates Best Financial Markets Analysis ArticleOne of the most debated topics today concerns the level of debt as it concerns consumers, corporations and governments. Government debt has commanded a particularly large share of the limelight in recent weeks. Among those who are concerned that debt levels have reached "crisis" proportions, there's seems to be a consensus that the debt balloon has reached well night the bursting point, and further, we have reached the point of no return when it comes to the servicing of the debt.

In this installment we'll examine the issue of debt and will address the particular issue of whether in fact we've reached the "point of no return" in terms of being able to pay off the debt. From the standpoint of arithmetic, one could easily construct a one-sided case against today's high levels ever being paid off. The mathematical approach, however, is too narrowly hyper-literal to be admitted to any reasonable assessment of the debt situation. For a true picture of how the present debt problem is likely to end, we must consult the history books. One would be hard pressed in surveying history to find a single instance of an empire or great nation that ever completely extinguished its debt in the honest sense of the word. Indeed, most debt is ultimately serviced through either one of two ways. Regardless of the chosen path, debt is always eventually "serviced," as we shall see.

The mainstream media has had an extended field day in stoking the public's fear over the debt "crisis." At some point a few years ago, the media gatekeepers decided that debt levels were "too high" and that something must be done to combat this problem before it carried everyone away to economic perdition. Specifically, we're told that existing debt must be completely amortized before America can see anything in the way of economic recovery. Like most of the ideas propagated by the mainstream press, this is a fallacy.

Another fallacy that enjoys currency is that today's must be extinguished, else the burden upon posterity will prove to be crushing. In his classic treatment of the pathological aspects of debt, Freeman Tilden ably answered the question, "Does posterity pay for our debts?" Presenting the question as a syllogism, he wrote:

1. We are posterity.
2. We do not pay.
:. Posterity does not pay.

"It is obvious that we, the present generation, are somebody's posterity. Our progenitors left us a rather burdensome debt, a public debt composed of national, state, country and municipal obligations," wrote Tilden in "A World in Debt." "And it is interesting to note that those who create great public debts, on the grounds that posterity will enjoy the fruits of the expenditure, never thinks it necessary to wait until posterity can exercise its own choice as to what benefits it prefers to enjoy."

As Tilden said, we are posterity and while we do pay in an extremely limited way, we clearly don't bear most of the previous generation's burdens. "What we do," says Tilden, "is to keep the service upon the debts from default -- and this, most fortunately, we are sometimes able to do by reason of the constantly increasing facilities of modern production, and by modern deftness in the use of credit in commerce. But, further than that, we are naturally intent upon spending a little money ourselves....We borrow against the payment by our posterity. You may be utterly certain that if our posterity are not stopped in some singular way, they will rely upon their posterity to settle. And so it goes."

Much lip service is given to the "day of reckoning" which looms over the debt-plagued U.S. like the Sword of Damocles. What most debt alarmists seem not to realize, though, is that the day of reckoning never arrives. Debt has a peculiar way of being extinguished without the due fulfillment of the obligations on the part of debtors. As the French writer Maurice Vion wrote in 1932, "The State, a debtor of private always armed with the prerogatives of public power. It can, whatever its creditor, call upon the limits of its capacity of payment, or simply choose not to pay. In the final analysis, the execution of force [in calling upon the State to pay] has little effectiveness against the State." [Source: Dettes Politiques et Dettes Commerciales, translation mine]

As Freeman Tilden wrote in commenting on the government's prerogative of debt cancellation, "Every government borrowing, therefore, carries with it the political germ from which a repudiation may more easily develop than in loans to individuals." This is an extremely important point that seems to be overlooked by debt crisis commentators.

In his book, "Jubilee on Wall Street," David Knox Barker details the Roman debt crisis of A.D. 33 as chronicled by Lightner. The crisis began by a series of money panics attended by a number of runs on Roman banking houses. The crisis was solved by the emperor Tiberius, who "suspended temporarily the process of debt and distributed 100 million sesterces from the imperial treasury to the solvent bankers to be loaned without interest for three years. Following this action, the panic in Alexandria, Carthage and Corinth quieted." Indeed, history is rife with instances of the "temporary" suspension of the process of debt. Debt suspension is in fact one of the primary tools by which debt crises are alleviated.

Citing the experience of the Roman Empire in attempting to outlaw usury, Tilden comes to the conclusion that "if a man could have the longevity of Methuselah, it would pay him to be never out of debt, for he could count on a political upheaval which would relieve him of his burden every so many years." In the final analysis, as Tilden concluded, debt will likely never be prohibited and there will always be "credit crises" followed by debt cancellations in which the creditor class is mulcted.

If history teaches us any lesson it is that debt levels at any given epoch are always "too high." The contraction of debts on the part of individuals, corporations and governments beyond their ability to pay them is an unfortunate tendency of human nature and will most likely always continue to plague the human race until the end of time. Even more unfortunate, there will always be a tendency for the creditor class to continue to loan their capital to unworthy borrowers (including governments) under the fallacious assumption that others know best how to return a profit on money that they themselves accumulated through their superior efforts. In consequence of this, there will always be the established tendency for debtors of all classes to find ways of not paying their debts due their creditors.

As Tilden would say, "And so it goes."

Gold Price Trend

Turning our attention to the yellow metal, the gold ETF price was down for three straight trading sessions this past week before finally bouncing higher on Friday, June 11. The lack of buying interest was attributed to a diminution of fear and safe haven buying on the part of investors, particularly as the euro currency has been rallying of its recent lows. But the trend for the euro remains down as defined by the relationship of the price to the 15-day moving average; conversely, the gold price trend remains up. The SPDR Gold Trust ETF (GLD, 120.01), our proxy for the gold price, remains above its 15-day and 30-day moving averages (which correspond to the 6-week cycle) and successfully tested these important trend lines as you can see in the chart here. The uptrend remains intact for the gold price.

How to Trade the Most Profitable Chart Pattern

One of the most profitable chart patterns is also one that receives virtually no recognition from market technicians. The pattern I’m referring to is the “channel buster,” which can be either a bullish or a bearish pattern depending on how it manifests in the charts of actively traded stocks and commodities. This highly profitable pattern was aptly named by stock market veteran Don Worden, editor of Worden’s Weekly Reports. As its name implies, the channel buster involves a price breakout (or breakdown) either above or below the outer extremity of a trading channel.

The channel buster can be highly profitable if you know how to spot it. It’s a chart pattern that is commonly seen in bull markets and bear markets alike and is the ultimate “all weather” money maker for short-term oriented traders. In my book, “Channel Buster” How to Trade the Most Profitable Chart Pattern,” I explain the mechanics of this amazing chart pattern and how you can spot it an almost any actively traded stock or commodity. The book also provides rules for entering and exiting a trade based on the channel buster method. This is the only book available that deals exclusively with the channel buster. The channel buster is a breakthrough in the trend analysis of stocks and commodities.

The book was written so that retail traders might be able to understand and practically apply these useful methods of market analysis. The book is now available for sale at:

By Clif Droke

Clif Droke is the editor of the daily Gold & Silver Stock Report. Published daily since 2002, the report provides forecasts and analysis of the leading gold, silver, uranium and energy stocks from a short-term technical standpoint. He is also the author of numerous books, including 'How to Read Chart Patterns for Greater Profits.' For more information visit

Clif Droke Archive

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


christian pickett
13 Jun 10, 07:13
creditors have the political power

in this finanicial crisis was it not clear to you where the political and thus economical power was held.....with CREDITORS

Post Comment

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

6 Critical Money Making Rules