The Science of Asset-Debt Saturation Macroeconomics interprets the system’s evolution in terms of the inevitable long term and short term self assembly asset valuation saturation curves of the Asset Debt System’s countervailing elements: hegemonic (US) sovereign debt futures valuation curves verses equity, commodity, and lesser quantitative but more substantive real estate valuation curves.

The Asset Debt system evolves in a self assembly fashion as it causally must. The system sustains itself as is teleologically optimal for continuation. Bad debt that cannot be repaid in the financial and private sector undergoing default from overvalued assets and greed based leverage is counterbalanced by rapid debt accumulation in the public governmental sector, without which, rapid deflation and system implosion would occur.

This is a forward based consumption global US hegemonic macroeconomy where at the base, the citizen consumer, mostly living at the point of nonlinearity, i.e., paycheck to paycheck, trades today’s labor against debt for past, present, and future debt for consumption of real estate, transportation, education, basic necessities, and luxury items.

A debt saturated citizen population, an overproduced asset saturated system, and an overhanging overvalued asset system which is out of kilter with citizen consumer demand and citizen wages are the dry kindling needed for deterministic nonlinear spontaneous combustion.

This system has been deterministically pushed on a string. Europe and the Euro, Japan and it’s governmental-GDP deficit, China and its empty cities and recipient demandless nonconsumer US Citizens, and the US and its accumulated nonrepayable private debt and wages and benefits out of balance with the world citizen’s community …all of these are near the point of collective bad debt liquidation.

In this time period of nonlinear spontaneous combustion, it is the Asset-Debt system’s valued asset that is the driving and observable dependent variable for the system. That dependent variable for the global 21st century Macroeconomic System is US sovereign debt (futures).

The debt ceiling discussions between the representatives of the Haves and Have-Nots are but epiphenomena to the deterministic progression of the quadrillion dollar Asset-Debt system’s countervailing asset valuation curves.

As empirical data from the countervailing evolving curves produces the deterministic valuations pathways, its is now clear that US Ten Year Note Futures will reach about 130 and US Ten year Note interest rates 2.35-2.45 percent before nonlinearity occurs and rates of less than one percent transpire.

US hegemonic sovereign debt is denominated in the world reserve currency US dollar and is the countervailing quality asset
in the Asset-Debt macroeconomic at the time of Macroeconomic Saturation of Bad Debt, Asset Overproduction, and
Asset overvaluation. US sovereign debt will be repaid.

Since 2008 Most of the growth in US debt has occurred in US notes ranging from 2 to 7 years.
Public holdings have increased by over 4 trillion in US Notes which represents nearly 80 percent of new total debt.

This preponderance of US Note sovereign debt is important to appreciate in the quantitative fractal analysis of the Asset-Debt
Macroeconomic system’s countervailing asset valuation saturation curves. It is in the intermediate year US Notes whose underlying slope lines defining fractal units are less likely to be caricatured than the smaller percentage of US Debt longer term US Bonds.

The Asset-Debt System’s: 15 November 14 Day Equity Base
Decay Fractal

During private, corporate, financial industry, municipal, state, county and PIFIGS equivalent bad debt liquidation and default, US sovereign debt futures are the Global Asset-Debt system’s countervailing least worst asset.

Equity and commodity and real estate valuations are dependent on interest rate levels.

US interest rates are historically low as both market forces and central bank self purchases have yielded recent ten year rates below 1930 depression levels. This is a natural occurence in a forward based consumer and elected representative sociomacroeconomic system where the wages of future labor is traded for today’s use of goods. This system grows better with trending lower and lower interest rates with inflation of asset valuations and relative reduction of consumer debt. Because of recurrent reelection political pressure every two years in the US, the bias in this Asset Debt sociomacroeconomic system is to continuously stimulate the system thru lower and lower interest rates.

What would the value of the Wilshire be, for example, with a hypothetical 4 percent, 6 percent, or 8 percent competing US Ten Year note in a system where borrowing could only be from surplus money created through the trading of real goods and services?

The US as the current Hegemonic nation and the US dollar as the world’s reserve currency provides the US Central Bank with the unusual degrees of latitudes.

But the Asset Debt self assembly macroeconomic system does have its limits with periodical saturation involving malinvestment and bad debt accumulative load, overvaluations of assets, and overproduction of assets with regular periodic liquidation and retrenchment of all saturated elements. Smaller time based cycles are incorporated into larger cycles which are yet incorporated into larger cycles.

The US Asset Debt sociomacroeconomic system is currently at the terminal portion of a 155 year major saturation cycle incorporating smaller cycles of all of the above elements. Because of the cost of US labor relative to global prices, the US has had decitrillion dollar trading deficits with foreign countries for 20 years. Only thru lower and lower trending interest rates has the US system grown. That growth reached an asymptote in 2008.

The remarkable activity over the last 4 years by the US and European central banks to self purchase sovereign debt and underwrite large financial institutions which would have otherwise collapsed is what was necessary to occur for the current Asset Debt system to continue.

The de facto goal of this central bank activity was and is to allow an orderly process of accumulated bad debt default, asset price depreciation, and concomitant reduction in the relative surplus of assets.

By the nonlinear observed patterns of Asset debt Saturation Macroeconomics, a moderated linear bad debt default is not probable. The nonlinear collapse will be orderly in terms of quantum fractal patterns.

In the end – even with the 150 year historically low US ten year note ultimately falling below 1 % – nonlinear collapse of asset valuations are integratively dependent on the Asset-Debt’s system total bad debt accumulation, the lack of demand in the real economy, asset over supply and asset overvaluation relative to the basic unit of system, hourly wages of the employed worker, which is the start process of forward based consumption, new borrowing, and asset valuation.

Quantum Countervailing Asset Fractal Analysis: Growth Verses Decay
US Sovereign Ten Year Note Futures Verses the US SPX composite

13 June 2007 US Ten Year Note Futures:
13/33/23 of 26 months :: x/2.5x/2x.

23 October 2007 US Ten Year Note Futures
23 of 26 months
(3) 4/9/7 months (14 September 2012) completed :: x/2-2.5x/1.6x.
(3)4/9/10 months (13 December 2012) completed :: x/2.5x/2.5x.

(6)16/39/39 weeks (13 December 2012) completed x/2.5x/2.5x.

The 14 Day Base Equity Decay Fractal (Use Canadian SPX for weather related US trading gaps):
23 October 2/4/4 days :: x/2x/2x to peak
Between the juncture of the 4 day 2nd fractal and the 4 day 3rd fractal,  a 2/5/3 day :: y/2.5y/1.5y decay series and a conjoined  2/4/3 day :: y/2y/1.5y  day decay series totaling 14 days and ending on 15 November form the initial decay base. This decay base incorporates the terminal 22nd week of the 4 October 2011 11/26/22 week growth series.

This daily y/2-2.5y/1.5y decay pattern will replicate a terminal 4 June 2012 8/17/12 week :: y/2-2.5y/1.5y conjoined  terminal growth and decay fractal with the first 8/17 weeks containing the last 22 weeks of an ideal 4 October 2011 11/26/22 week Lammert growth fractal:    x/2-2.5x/2x.

 

And this  daily y/2-2.5y/1.5y pattern will replicate itself in a  29 October 2012 14/33/21 day pattern and a 3/8/5 week terminal decay fractal pattern.

Note that the Canadian  composite SPX equity has taken on a reciprocal y/2.5y/1.5y decay pattern of the dominant x/2.5x/1.5x growth pattern of Hegemonic US Sovereign debt futures dating to Volcker’s 1982 America.

 

Equities have been endowed by their financial house creators and promoters  with great tax advantages by the legislatively bought and endorsed concept of after tax dollar investment – so that money made without societally useful work by the transgenerationally wealthy is taxed at a lower  rate than services and products produced by the working citizen. As well, the wealthy and financial houses have immediate access to borrowing for speculation. In a progressive society,  non work related gains would reasonably be taxed at least – at least – at a rate equivalent to the rate for gainful societally useful employment.

Equity valuations, now supported by the new US real bills doctrine,   by the existing unfair tax advantaged laws for speculation will proceed to the end their maximal time quantum based fractal extensions of x/2.5x/2-2.5x :: 11-12/27-29/22-27 days and 22/55/50-55 or so days.

The  US 156 year second fractal nonlinear end of composite equity valuations has always been expected to be exquisitely nonlinear.