Friday, November 25, 2011 – 11:45 a.m.

U.S. stocks ended lower for the seventh trading session in row on Friday,

While investment analysts cry that “Stocks are cheap.”, “It’s a buying opportunity.”, “I like stocks here.”, and “Investors shouldn’t panic.”, the markets continue to recede.

Even the recent trading range doesn’t look too warm and fuzzy.

*It’s true that some companies are making more money. And it’s true interest rates are at record lows.

*But it’s also true that unemployment hasn’t really improved. The latest glimmer of light is only due to seasonal holiday hiring and nothing more.

*It’s also true that banks continue to struggle with problem mortgages. Even with taxpayers absorbing hundreds of billions of dollars in bank losses through Fannie Mae and Freddie Mac.

*It’s also true that retail gasoline prices are 20% higher, on a year over year basis.

*It’s also true that the price of crude oil is fluctuating near $100 per barrel.

*It’s also true that a blind man can see that consumer inflation, food prices in particular, is higher than what the government portrays.

*But most importantly, it’s also true that nearly all industrialized nations continue to overspend and borrow money from investors or themselves by way of central bank money printing.

Here is the problem.

Most countries, with the United States being the biggest problem, continue to wildly overspend.

The overspending leads the offending countries to issue more debt through market auctions.

Bond market auctions that haven’t gone well lately.

In the U.S., the Federal Reserve Bank now owns more U.S. Treasury Debt than China.

Why?

To manipulate interest rates lower.

Thus, long-term U.S. debt rolls over at dramatically lower rates compared to thirty years ago.

The only marginally-positive benefit that can be seen from anything taking place now.

In the European Zone the problem is much more serious.

Greece has essentially defaulted.

Recent sovereign debt auctions in Italy, Portugal and more importantly Germany have been a disaster.

Interest rates on German debt, considered the most stable, have started climbing.

In the latest German debt auction, the country’s central bank had to buy up bonds not purchased by investors.

Meaning investors aren’t sure if they’ll be paid back.

The situation is bleak when debtor countries issue more debt to bailout the troubled debt of other countries.

Yes, it’s true!

Eventually the taxpayers in the creditor nations get fed up.

The core problem is that deficit-spending countries, once again the U.S. being the worst, need to balance their budgets and work to pay down debt.

A move viewed as bad for the economy, since government spending has become the main driver of growth.

In other words, balanced budgets bring more short-term economic pain.

But is there any other way to solve the problem?

The answer? Not really.

The situation is too far along for the “grow our way out of the deficit” pipe dream.

The so-called economic brains at the Federal Reserve warn against cutting back on spending too quickly because it might stunt the phantom recovery.

They’re right. It will.

But it’s just prolonging the inevitable. The kick the can down the road move is all used up.

Why you ask? Because there’s no more road.

Central bankers around the globe, who know the downside of printing money out of thin air, have to be sweating now.

Especially when the new bubble is the stock market itself.