Doug Hornig, senior prognosticator at The Casey Report, analyzes the alarming trend of U.S. federal debt and its future implications.

“I have always depended on the kindness of strangers,” said Blanche DuBois, in the final words of the play A Streetcar Named Desire. Well, don’t we all.

Many citizens probably still cling to the old saw that public debt doesn’t matter because “we owe it to ourselves.” Wrong. Debt always matters. And as for whom we owe it to, it is a lot of kind (or, at least, not yet unkind) strangers.

As recently as 1970, foreign holders of U.S. debt were essentially non-existent. But their slice of our obligation pie has steadily increased, especially over the past two decades, until now foreign governments and international investors hold about 35% of Treasuries, as the following chart reveals.

...

David Einhorn, highly respected hedge fund manager of Greenlight Capital and author of “Fooling some of the people all of the time” yesterday delivered the keynote address at the Value Investing Congress. His full speech can be accessed here, but Rolfe Winkler of Reuters has very handily published the highlights, as posted below.

On Bernanke and Geithner: Presently, Ben Bernanke and Tim Geithner have become the quintessential short-term decision makers. They explicitly “do whatever it takes” to “solve one problem at a time” and deal with the unintended consequences later. It is too soon for history to evaluate their work, because there hasn’t been time for the unintended consequences of the “do whatever it takes” decision-making to materialize.

On too big to fail and the true lesson of Lehman: The proper way to deal with too-big-to-fail, or too inter-connected to fail, is to make sure

...

Non-dollar currencies give back very little…The Unemployed are remaining unemployed… FOMC puts away the board games today… China invokes a “Public Morals” defense…

...

Currencies trade in a tight range…Pesos, loonies and reals in the spotlight…The Mogambo on a Thursday!YAHOO!…Jobs reports dominate today & tomorrow…And Now… Today’s Pfennig!

Good day… And a Tub Thumpin’ Thursday to you! Once again yesterday, we traded all day in a very tight range with the currencies. The ADP/Challenger data didn’t give anyone a warm and fuzzy about the labor picture, and tax receipts are in the news… So, let’s go to the tape!

OK, front and center this morning, I have to talk about this deal with tax receipts in this country. So, I’ve chronicled the April and June debacles for tax receipts, but just in case someone is new to class, and missed that, let’s review… The U.S. used to count on the months of April and June for HUGE cash receipts from tax returns, but this year, both April and June’s tax receipts were so bad, the expenditures

...

At Casey Research, they have been watching the actions of foreign holders of U.S. dollars as closely as a Las Vegas pit boss watches a card player on a $1 million winning streak. Many of those in the deflation camp largely, or entirely, ignore the potential role these foreign holders may play in the drama now unfolding. But in fact, foreigners have, over the last decade, been by far the single most important source of buying for U.S. Treasuries.

Given the Treasury’s need to flog on the order of $3 trillion worth of its unbacked paper this year just to keep the government’s doors open – and that is a four- or fivefold increase over 2008 – the foreign buyers not only have to show up for the Treasury auctions, they have to show up in droves.

In mid-July, the Associated Press reported that “Foreign demand for long-term U.S. financial assets dropped

...

With the global economy on the mend, could gold be gearing up for another record-setting run? It sure looks that way. 

After peaking north of the $1,000 per ounce price level last year, gold hit a stumbling block when deflationary fears in the world’s largest economy sucked the air out of commodities prices and sent hoards of investors stampeding into the safe-haven of U.S. Treasuries, and helped spawn a rebound in the U.S. dollar.

Since that time, the global economic outlook - especially beyond U.S. borders - has improved, and gold prices have stabilized.

The next step - many gold bulls say - is for the yellow metal to make a run for new highs.

Whipsaw Trading Patterns

Gold started 2009 at about $870 an ounce - down substantially from early 2008 when prices hit a record-high $1033.90, but significantly higher than the $712.30 an ounce it was trading at in mid-November.

Then, when talk of inflation

...

[Editor's Note: If you're new to the commodities-investing arena, and are uncertain about the landscape - or even if you're an "old hand" at natural-resource stocks, but want some insights into the new profit plays and new players - consider hiring a guide: Money Morning Contributing Editor Peter Krauth, a recognized expert in metals, mining and energy stocks, is also the editor of the Global Resource Alert trading service, which ferrets out companies poised to profit from the so-called “Secular Bull Market” in commodities. A former portfolio advisor, Krauth continues to work out of resource-rich Canada, which keeps him close to most of the companies he researches. Against the growing global financial malaise, Krauth says that commodities are among the most-profitable and least-risky investments available, and notes that this may well be the most powerful bull market for commodities we’ll see in our lifetimes. He …

The Friedman Effect: Is Another Bear Market Around the Corner?

by Dr. Mark Skousen, Advisory Panelist

In 1961, the great free-market economist Milton Friedman wrote a paper called “The Lag in Effect of Monetary Policy,” wherein he discovered a six- to nine-month delay in how long it would take for a change in monetary policy to be felt in the economy and the stock market.

Since then, it has been known as “The Friedman Effect.”

It’s important to understand the Friedman Effect because it can have dramatic impact on your investment decisions and your portfolio…

Milton Friedman & The Friedman Effect

Basically, Milton Friedman found that if the Fed switched from tight money to easy money, or vice versa, it would take about six months before you would see any change in the direction of the economy or Wall Street.

The Friedman Effect worked like clockwork during the financial

...

Fed’s Beige Book disappoints…Dollar rebounds on the day…Currencies come back on the night…RBNZ leaves rates unchanged…And Now… Today’s Pfennig!

Good day… And a Thunderin’ Thursday to you! It’s a Thunderin’ and lightenin’ here in St. Louis. It all began last night, went through the night, and still hangin’ round this mornin’! Yes, I’m into dropping “g’s” today! HA!

Well… We had “Turn Around Tuesday”, and that was fallowed by “Whipsawed Wednesday”! The euphoria of the dollar bears, turned quickly yesterday, with the dollar bouncing back… I’ll tell you this dollar has more lives than a cat! But that’s OK… I certainly don’t want to see a dollar collapse, as some have called for… I just want to see it at a “fair” level, given the fundamentals of exploding deficit spending… That seems fair, eh? Trends… Weak dollar, strong dollar, alternating throughout time… Well, at least since Nixon closed the Gold window in

...

Another Treasury auction today…  Spending habits come back to haunt reps…  Some healing in the currencies…  10 Banks to repay TARP today… And Now… Today’s Pfennig! Good day… And a Terrific Tuesday to you! Well… I sure stirred up the hornet’s nest yesterday… Some people didn’t think I should express my opinion… But that’s OK… Here’s the skinny… I wrote yesterday about the farce that the jobs report was, and what a feeble job the media did in reporting the “real numbers”… I then threw something in the Pfennig that I don’t normally do, just to see what was more important to people… The fact that their Gov’t lies to them, or the fact that they don’t see eye-to-eye with me on the President…

Given the response, I’d say that most had their eye on the ball with the jobs farce… And that’s all I’m going to say from here on out…

One person did ask

...