America owes far more than it produces. With the debt balloon re-inflated to new extremes, how much greater will the next depression need to be to fulfill this business supercycle?

This chart is not an all-encompassing measure of U.S. debt. It ignores the big government debt that ballooned in World War II and grew in Vietnam and now. Many of the leveraged items of derivatives – not described as debt today – would qualify under a broader definition of debt, and don’t forget the $6 trillion of international debt built up through the trade deficit, none of which existed at the previous peak.  

This chart illustrates how a long-lasting depression was required to deflate the private debt built up in the 1920s and early 1930s, and that we should fear the consequences of the return to more sustainable levels of debt across our financial system.
 

The price of oil was detached from supply/demand dynamics at $148. The real value is probably in the $70 to $90 range, this still enables the oil companies to make a profit of at least $10-$20 a barrel. Above this range are some fairly obvious and not-so-visible factors driving the price up:

1) Iran and the bet that President Bush will take out its nuclear facilities before he retires
2) Hugo Chavez' saber-rattling
3) Nigerian strikes and violence
4) Increasing consumption in China and India
5) Declining production in mature fields in the North Sea and Alaska
6) Russian government controls in their oil production and supply contracts

GOLD HISTORY – and future thoughts on its direction  

An ounce of gold would buy the whole Dow in 1926...again in the 1930s...and once again in 1980. If gold stays where it is, the Dow would have to drop below 1,000 for the gold/Dow ratio to return to one. More likely, the Dow will drop and gold will rise to meet it. In 1999, gold bottomed out at around $260 an ounce. Since then it is up nearly 5 times. The U.S. money supply, however, has gone up 11 times. So, our guess is that there's plenty of upside left, if it were to equal the increase in M3, its price could rise to $2,700 or so. 

Peter Bernstein in THE POWER OF GOLD chronicles what happened in the period of 1970 to 1980.  “The soaring demand for gold as a safe haven for wealth and as a hedge against inflation drove the price from $46 an ounce at the beginning of 1972 to $64 an ounce at the end of that year. The price broke through $100 during 197; from 1974 to 1977, gold fluctuated between $130 and $180. A second OPEC oil price increase to $30 a barrel in 1978 created a frenzy; the price of gold hit $244 an ounce before the year was out and the doubled to $500 in 1979.” The Climax came in 1980 with gold hitting $850. Gold had gained about 30% a year over 12 years. 

So if this were to happen again, 30% a year growth, starting from $260, then  $388, $439, $571, $742, $956, $1254, $1631, $2120, $3584, $4659 and in 2012 $6057

However it will not go in a straight line our best estimate is the 65 week moving average

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