"This is what change looks like," Obama said later in televised remarks that stirred memories of his 2008 campaign promise of "change we can believe in."
Certainly this statement will be debated for some time. Our job as investors and traders is to remain objective and act with discipline towards the trends in place.
The reality is that spending of all sorts (not including health care overhaul and the inevitable programs to come) has increased well beyond domestic income and saving pools. America, as a result, has increasingly turned to foreign savings to fund our spending programs. Federal debt held by foreign and international investors has not only rapidly increased since 2006 but also soared to 25% of GDP as of the fourth quarter 2009. Another way of looking at the severity of the problem is to look at equilibrium price gold relative to net foreign obligations. This price has jumped from $3,753/oz in 2001 to $13,794/oz in 2009.
These trends have not gone unnoticed by those lending the money. The rising price of gold across the global suggests that the world believes that the above trends are becoming unstable.
Federal Debt Held by Foreign & International Investors As a % of GDP (FDHBFINGDPR) and the London P.M. Fixed Price of Gold (GOLD):
Federal Debt Held by Foreign & International Investors (FDHBFIN) and the Equilibrium Price (FDHBFIN/OZ)
Source: finance.yahoo.com
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