"An article I was waiting for a long time.

"Who will finance the US debt when the Fed Ponzi scheme is over? From the very mouth of Geithner this morning, AND WITH NEW TAXES AND WITH BUDGET CUTS, the deficit is planned to be between 6and 6.5%.

"And everybody is up in arms in Europe with an equal deficit in Spain which give a bad note on their debt over 5%!!"

David Fuller's view Governments are hoping that they can grow their way out from under ballooning deficits. But since this is a tall order, they are also intentionally eroding the purchasing power of their currencies which reduced the debt somewhat in real terms. Meanwhile, austerity programmes and tax increases will test the patience of voters and are hardly a recipe for GDP growth.

It is an unsettling situation, to put it mildly, but as investors one of our most important challenges is to identify and follow the money flows to safer areas.

Fullermoney has long emphasised the importance of monetary policy. Low interest rates and accommodative central banks provide powerful tailwinds for equities and sometimes commodities. Mr Bernanke has targeted equities since 2008 and still is judging from his answer to Ron Paul a few weeks ago.


Mr Bernanke has repeatedly said that he will keep US rates low for an extended period and he can do this if inflation does not flare up too much. He should succeed in this effort for a while longer as unemployment is still high and therefore capping wages. Also, the gold (weekly & daily) price remains subdued following its accelerated peak last August which has been followed by a predictably lengthy medium-term correction. Also, the Continuous Commodity Index (Old CRB) (weekly & daily) which peaked a year ago has retreated from its declining 200-day MA over the last five weeks. It is approaching probable support from the December low but an upward dynamic will be required to check this month's slide.

Meanwhile, leading equities and indices remain overextended and due for some mean reversion towards their MAs, as Eoin pointed out in his review of Autonomies yesterday. Some weaker stock markets have fallen back more quickly recently. It is a mixed picture but our overall impression is that a temporary corrective phase is more likely than not, before accommodative monetary policy extends the cyclical bull market in shares.

I will include a chart review tomorrow.