Market and public debt


Full time employment: Posting here.
Aug 20, 2004
The other day I was kinda bored, and decided to play around with some market data, and some public debt data.

If you want to see something scary, try this... it'll take about 30min (or you can just see the results in an image...URL below), but for you excel nuts, it's "fun"

Download two sets of data: historical market closings from yahoo finance (or your fav source), and the federal debt numbers from the treasury departmet (last i checked, they had data up to 2000 avail for bulk download). Create a graph using the market numbers, create a model for this graph and plot the residuals (a linear model has a nice R value). Now plot the residuals and compare the resulting graph to a graph of the national debt.

This is what I came up with:

One thing worth nothing is that as the debt leveled out in 2000 (and I ran out of debt data points), the stock market began to take a nose dive.... when Bush ramped up debt spending again (not shown in the dataset), the market began to take back off. I know this probably isn't a causal relationship, but it did disturb me a little bit when I saw this.... It makes me wonder if debt spending is what has really been fueling the market since the early 80s.... something I just noticed.... if you derive the slope of the debt curve in 82, debt spending slowed down a bit.... and there was also a corresponding downturn in the market.

Anyone want to offer up any hypothesis? Bad data analysis on my part? I really hope it is since it would seem to indicate that the recent growth in the market is unsustainable, and also that the market is artifically higher than it should be.
My guess would be that the stock market, the debt, and tax revenue are all proportional to the GNP.
There is a certain correlation between the "strength of the economy" and spending since 2/3 of the GDP is measured by spending.

The only problem is both government and personal spending have been fueled on credit cards, home equity lines of credit and "deficit spending".

At some point you run out of credit limit and the bills come due. I think we're pretty close to that point.

ECRI's leading economic indicators suggest that we're about to start seeing an economic decline, hitting a recessionary position in about 6-9 months.

Strap on your protective headgear...
Those damn leading indicators  :mad:

Let's face it... too much of growth has been on credit, whether our own, or the gubbament's. It cannot continue. It's just not feasible that our creditors will think we're good for it for perpetuity.
Hello bow-tie! You are wrong, wrong, wrong.
All of our creditors think we are good for it in
"perpetuity". Thus, it will continue. You are way off on this post.

John Galt
It's just not feasible that our creditors will think we're good for it for perpetuity.

Not to worry, the fed simply prints money, and loans the new money to banks who buy treasury bills with it. This causes inflation, but the government never has to worry about trying to find people to lend it money this way.
The fed gets graded by the world currency markets along with all the other governments trying to do their thing - currency wise that is.

Heh,heh,heh - stay tuned.

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