Why Bernanke Was Upset: Federal Debt vs GDP

This blog is not about chart technical analysis (that's mostly for my other blog) but I make an exception once in a while when the chart in question concerns a macro economic picture. The US dollar long-term chart the other day was one, so were several charts of Treasury yields.

Here's another that I found on Yahoo Finance Teck Ticker (6/4/09): Bernanke Freaks Out About Obama's Spending and Debt Plans

The article and the accompanying video is about Ben Bernanke's testimony on Wednesday before the House Budget Committee, where the Fed chairman warned against ballooning federal deficit.

The page has a chart of Gross Federal Debt as percentage of GDP, and that's what caught my attention. It is a very bullish chart. Which means it is very, very ominous for the country.

The chart shows a cup and handle breakout with the target value of 100 (the vertical distance from the bottom of the cup to the right side of the cup). Besides, the flat-top formation from year 2010 onward is considered one of the most powerful, bullish formation; i.e. explosive growth from there.

The Fed chairman is right to be freaking out. After all, Federal Reserve is an independent entity, and he would want to protect his institution and its member banks from the destructive force of the federal deficit his institution is obliged to monetize.

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