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Disasters Can Happen

Consumers Don’t Stand a Chance

Every Penny Countsby MN Gordon

Economic Prism

Most economists don’t do any favors for the esteem of their trade. They take ideas a third grader would know are idiotic and champion them with bluster and bravado. Hardly a day goes by where some economist doesn’t prove he’s a moron.

Take cash for clunkers. Everyone, with the exception of brain dead economists, knows that giving people money to scrap perfectly good vehicles is a value subtracting enterprise. Yet economists cheer on the outward demand for new cars it stimulates…and the boost to GDP.

But if this were really the road to riches, why not give everyone cash to buy a new car? Automaker factories would be buzzing. So, too, why not give everyone money to buy a house? Homebuilder payrolls would swell. This would work perfectly well…if we were living in fantasy land.

Another popular delusion of modern day economic thought is that wealth is created by borrowing money and spending it…as opposed to saving money and investing it. Simple logic proves this thinking is false. Yet (Read More....)

. . . → Read More: Consumers Don’t Stand a Chance

The Solution to Deflation

Make Moneyby MN Gordon

Economic Prism

The stock market laid another egg yesterday. We won’t dwell on it much. Only enough to make the observation that change is in the air. You can see it. Feel it. And even smell it. Nonetheless, being prepared for it – both for profits and protection – is the real challenge. Here’s what we mean…

The United States dollar has strengthened against other currencies over recent months. The dollar index – a measure of the U.S. dollar relative to a basket of foreign currencies – was around 80 for the first half of the year. But since July it has run up significantly.

Currently, the dollar index is around 86. That means the dollar has increased in value by 7.5 percent on the foreign exchange market over the last three months. What are the consequences of a stronger dollar?

Naturally, there are both advantages and disadvantages to a stronger dollar…depending on how you look at it. A more valuable dollar is a good thing for the typical saver and consumer alike. In general, it means imported goods become cheaper. Dollars (Read More....)

. . . → Read More: The Solution to Deflation

Buyer’s Remorse

Money, Stock Market, Economic Collapse, Poverty, Investmentsby MN Gordon

Economic Prism

The stock market was clobbered on Tuesday. The DOW sold off 272 points. What did it mean? Was it an indicator the market is finally rolling over, as we’ve anticipated for some time? Or was it just another head fake on the way to new highs?

On Wednesday we thought we had our answer. The DOW ran back up 274 points…recovering all of the prior day’s losses, plus two points. It was the market’s best day of the year. Wall Street was euphoric.

Even gold stocks rose. Junior mining stocks, as measured by the Junior Gold Miners ETF (GDXJ), jumped up 9.61 percent. Fixed income investors also joined in on the fun. Yields on the 10 year treasury note fell to just 2.32 percent, nearly to their 52 week low of 2.30 percent.

What was the cause for the elation? Is GDP soaring? Are incomes finally rising? Is Putin packing up Russian troops and vacating Ukraine? Was a vaccine for Ebola discovered?

Nope. It was nothing of the (Read More....)

. . . → Read More: Buyer’s Remorse

The End of Extend and Pretend

Europeby MN Gordon

Economic Prism

About 60-years ago twentieth century economist Hyman Minsky developed his Financial Instability Hypothesis. His main premise was that economic stability breeds instability. How’s that possible?

As Minsky observed, financial crisis follow periods of economic stability and prosperity. Moreover, it’s these periods of prosperity that sow the seeds of the next calamity. In short, the extended stability encourages borrowers and lender to progressively take on greater risk. This results in ever greater increases in credit and debt, which inflates asset prices.

Eventually, excess optimism leads to instability…lending and debt move to unsustainable levels. Debt levels move beyond what the economy can support. Financial bubbles then burst. Asset prices crash and the mistakes of the preceding boom are corrected.

Last week the DOW offered a stark reminder that stocks don’t always go up. What’s more, in addition to not always going up…something else can happen. Stocks can go down.

After a soft slide on Monday and Tuesday, (Read More....)

. . . → Read More: The End of Extend and Pretend

Pouring Buckets of Ice Water on the Fed’s Delusion

Ebola, Stock Market, Economy, Obamaby MN Gordon

Economic Prism

Just two weeks ago President Obama said it would be unlikely if we had a case of Ebola virus in this country. On Tuesday the Center for Disease Control and Prevention confirmed the first known U.S. Ebola virus case. No doubt, it didn’t take long for the unlikely to happen.

From what we gather the infected adult traveled from West Africa to Texas on September 19. Several days later, on September 24, he started developing symptoms. After first being turned away from the hospital and sent home on September 26, he was finally admitted for treatment on September 28.

During this time he came in contact with a number of others…including five schoolchildren. (Read More....)

. . . → Read More: Pouring Buckets of Ice Water on the Fed’s Delusion

An Autumn Encounter with the Headless Horseman

An Autumn Encounter with the Headless Horsemanby MN Gordon

Economic Prism

A pleasing land of drowsy head it was,

Of dreams that wave before the half-shut eye;

And of gay castles in the clouds that pass,

Forever flushing round a summer sky.


Apple Country

Oak Glen, California, located just past the outer limits of Southern California’s sea of concrete, is a world apart. The air is clean and crisp at its mile high elevation. The pace of play is slow and relaxed…not frenetic and mad.

There are no stoplights or franchise drive-throughs. Billboards and transmission lines do not blight the landscape. These, and other aesthetic lacerations to the eye, remain with the wide Euclidean Boulevards in the valley below.

The built milieu hardly scars the natural environment. Just a windy and narrow mountain road extends upward. Apple orchards fill the gentle slopes that are nestled between the larger and steeper (Read More....)

. . . → Read More: An Autumn Encounter with the Headless Horseman

No Quick Fix for Structural Reforms


Economic Prism

Finance ministers and central bankers from the Group of 20 leading nations met in Cairns Australia over the weekend. The clever fellows believe, with the right balance of fiscal and monetary policies, they can improve the global economy. This, of course, means greater stimulus and fabricated demand.

‘“We are determined to lift growth, and countries are willing to use all our macroeconomic levers – monetary, fiscal and structural policies – to meet this challenge,’ said Australian Treasurer Joe Hockey, who hosted the event.” The G20 leaders want to increase global growth by 2 percent. So far they can’t quite seem to get there.

The way things are going, it looks like they’ll fall (Read More....)

. . . → Read More: No Quick Fix for Structural Reforms

Worshiping Utterances

Crisisby MN Gordon

Economic Prism

The world around us is a strange and wacky place. Even so, it becomes ever stranger and wackier by the day. Just when we think we’ve seen it all…something new appears and creeps us out.

For instance, have you seen Hillary Clinton’s face lately? Holy Toledo! What a fright that is. We can’t quite tell what happened. But whatever it is…its gawdawful.

Taking notice of the many absurdities out there is both the joy and misery of the objective observer. One moment you’re doubled over with laughter. The next you’re doubled over expelling your lunch with disgust.

Did you know the U.S government paid federal workers $400 million to do nothing? No kidding, they really did. In addition, the IRS provided $17.5 million in IRS tax relieve for brothels in Nevada. There was also $1.23 million of federal money spent on (Read More....)

. . . → Read More: Worshiping Utterances

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