We will have $18 trillion in debt and an 18,000 Dow to end 2014.  What will we have for 2015’s end?  Looks like a 20,000 Dow and $20 trillion in debt.  And who could be against that?

The correlation of these two metrics – 18 and 18, 20 and 20 – at first seems coincidental.   However, the management of federal debt created by deficit spending is being facilitated by the Federal Reserve.  Under the guise of promoting maximum employment, stable prices, and moderate interest rates, the central planning Fed has enabled the massive deficit spending to explode without meeting the market discipline of supply and demand.  More debt, back in the 20^th century, would curtail the creation of more debt because of the interest rate impact due to increased supply.  Yet the Fed protects deficit spending from normal market reactions.

Is the Fed hiding behind its triple-mandate to enable government deficit spending?

Is deficit spending the driving force behind the stock market?

How long can this go on? 

With the reported unemployment at under 6%, and the GDP now reported at 5% growth for the 3^rd quarter, the Federal Reserve now must prove that they are something more than managing the 45-degree-upward path of the stock market indices.  Steady and plodding upward they advance, like an annuity.

But Yellen is trapped in her own rhetoric.  She will not do anything to harm the recovery, yet returning to “normal” and market-determined interest rates would do just that.  She will be “patient.”  So now what? 

The percentage return game increasingly becomes more challenging for the central planners.  If the markets yield a 10% return this year, then to do the same in 2015, the Dow must rally another 1,800 points, and Standard and Poor's another 200-plus points.

For 2016 they will have to add 1,980 Dow points and 220 Standard and Poor's points.  And so on.

The Federal Reserve have created a crowded situation that they are expected to maintain.  And maintain they will.  Damn the old parameters of Federal Reserve actions and mandates.  On with the new grand entitlement of an ever-increasing stock market.  No wonder the phenomenally rich stock investors feel guilty.  This is too easy.

A rising tide lifts all boats.  But for that to matter, you have to own a boat.