As can be observed from the chart of annual debt increases, this gorging on debt is not abating. Halfway through its fiscal 2012, the US government has already increased its debt by $792 billion. This half-way mark rate of increase is the 3rd highest in history (the other 2 being the half-way marks for fiscal 2009 and 2010) and is already equivalent to 5.2% of last year's nominal GDP!

In fact, the average increase in debt for the last 4 years was 10.3% of each year's nominal GDP!

If increase in debt is 10% of GDP and GDP only grows 4%, the difference of 6% is exactly the percentage point increase in the ratio of total outstanding debt to GDP. This simple arithmetic suggests that the US has now reached an inflexion point where its total outstanding debt to GDP ratio will accelerate because there is simply no way for its nominal GDP growth rate to catch up with the rate of growth in its debt.

At the current pace, within 8 years, the US debt to GDP ratio will reach 150%. These are the debt to GDP ratios that make Greece and Japan unsolvable basket cases.

In the US, it now takes about $3 of additional debt (by government, households and corporations) to generate $1 of additional nominal GDP. As it accounted for 78% of total additional debt in 2011, the US government cannot cut back because GDP growth would collapse. Households cannot borrow if house prices don't turn up and corporations are cash rich.

It's a death spiral.

David Fuller's view There are several important themes here: 1) it is by no means certain that the US economy can gain sufficient traction to achieve a self-sustaining economic expansion in the next few years, without further steroids in the form of more QE, although November's election result is likely to affect the outlook, in my opinion; 2) the long-term outlook for US government long-dated bonds is distinctly unattractive although there is limited upward pressure while the Fed remains the main buyer; 3) those cash-rich corporate balance sheets mentioned above are a good reason to invest in the leading Autonomies, preferably on pullbacks towards their 200-day MAs, provided they can resist government pressure to repatriate those funds; 4) gold's secular uptrend is not over although it remains in a lengthy consolidation.

The three different trends referred to and illustrated by Bernard Tan merge into one when shown on a semi-log scale, as you can see from this 20-year monthly chart. The important point here, I maintain, is that accelerations relative to the MA have been followed by lengthy corrections and additional support building, lasting approximately 18 months, before the next medium-term upward leg commences.

Gold has only just entered the 8th month of this corrective phase since its late-August peak. Therefore it could range through yearend 2012 and possibly longer. However, this time duration is likely to be more technical / behavioural than fundamental and could also be coincidental. Therefore it is only an indication of timing which may or may not be repeated.

If I had to guess whether gold resumes its overall upward trend sooner rather than later, I would say it could be later because of the considerably longer 3-year up-leg before the August / September 2011 peak. However, that persistent strength could also indicate that the overall bull market is speeding up, in which case this pause could be of shorter duration. In other words, we simply do not know, although the charts will show us. Gold needs to establish a higher low within its current range, followed by a sustained push above $1800 before we will have technical evidence that the consolidation is nearing completion.