by MN Gordon
After six years of heavy handed market intervention the financial system has been pushed to the extremes. Scientific management of the economy has twisted and contorted it in ways that would’ve otherwise been impossible. Rather than moderating the business cycle it has exacerbated it…the booms are bigger, the busts are more pronounced.
What we mean is the yin and the yang of inflation and deflation have never pulled harder. Stock prices rise to record highs yet real wages decline. Obviously, this doesn’t compute. Something has got to give.
Like the subduction zone where the Pacific Plate pushes underneath the North American Plate, the pressure builds. No outward instability is apparent on the surface for years…or even decades. In fact, the peace and tranquility extends for so (Read More....)
. . . → Read More: What You Must Know About Global Currency Debasement
by MN Gordon
The United States’ economy is flying high. In fact, when compared to Japan and Europe, the state of the union is strong and prosperous. What’s more, it’s only getting better.
The unemployment rate continues its slow soft slide downward. It was at just 5.8 percent the last we checked. Meanwhile, consumer prices are rising at a benign 1.7 percent. At the same time, annual GDP is increasing at a healthy 3.5 percent clip. On top of that, the stock market continues to make everyone rich.
There are occasional moments of idyllic perfection where one must pinch themselves to know if they are really happening. These are the green flash instances…like when Teddy Kennedy up and died. Out of nowhere the stars align and the good spirits reign.
Sometimes these moments are (Read More....)
. . . → Read More: Here Comes the Flood
by MN Gordon
Something befuddling’s going on. It is quite the brain twister. As night follows day and day follows night, should not price inflation follow the massive $4 trillion Fed balance sheet expansion that’s happened over the last 6-years?
Simply connecting the dots quickly leads one to a ‘yes’ conclusion. More money chasing a static number of goods and services should result in price inflation. For prices must rise to balance out all the new money.
This, of course, makes good practical sense. In fact, it might even lead someone to sell dollars and buy gold. Certainly they’d have a bullet proof rationale guiding their decision.
Yet the world isn’t always a practical place. Often time things happen that don’t make sense. Sometimes the exact opposite of what should logically occur ends up happening.
Gold’s price peaked around $1,900 an ounce in 2011. Gold’s currently at about $1,180. That’s over 37 percent off its high. What is going on?
The U.S. (Read More....)
. . . → Read More: Hold On To Your Gold
by MN Gordon
There are pleasant hamlets where the radiant warmth of sunshine smiles down and sprinkles daily blessings and abundance. There are other places where the sun no longer shines. Remnants of past jollies cast shadows of decay. Sources of prosperity have rusted over like an old tin garbage can.
Scranton, Pennsylvania, hitched its wagon to the wrong horse nearly a century ago. But it took nearly 50-years for this to become apparent. Sometimes the source of an economic boon is ultimately the cause of demise.
For Scranton, the blessing of an abundance of anthracite coal brought unhindered growth and prosperity to the city from the turn of the 20th century until about the end of World War II. By the mid-1930s, the city’s population had expanded to over 140,000. Nearly double today’s population.
But, alas for Scranton, the world is dynamic. It is ever changing. Too much of a good thing leads to over dependence. Or, as Hyman Minsky observed, stability leads to instability.
The rug was (Read More....)
. . . → Read More: How to Kill a City Financially
By MN Gordon
One of the pleasures of living in a postmodern world is witnessing the incoherent monetary policy efforts of central bankers. It’s like watching a child chase seagulls at the beach. There’s a lot of movement with no purpose or accomplishment.
Nonetheless, observing the central bankers of the world go about their business makes one unsettling thing clear. They are making it up as they go. They have no intelligible principle…except to recklessly inflate the money supply to fight off the economic boogeymen of unemployment, deflation, and falling asset prices.
Just think of all the fun you’d be missing out on if you were born at practically any other period of human history? Zero interest rate policy. Operation twist. Quantitative easing – the equivalent of using adhesive tape to control diarrhea.
Certainly, these frauds are galling. Yet they are also instructive. They serve as examples that our leaders are liars and grifters.
You should never trust them. (Read More....)
. . . → Read More: Experience the Magic of Unconventional Instruments
by MN Gordon
Late last week something remarkable happened. The Fed announced it would close out its quantitative easing program…and stocks went up. This occurrence is what a psychologist would call cognitive dissonance.
We’ll have more to say on this in a moment, but first a review of some of last week’s other key happenings. First off, the dollar rallied and commodities were obliterated. Given the inverse relationship between commodities and the dollar this price action makes sense.
This relationship was clearly at work on oil and gold prices. Oil dropped below $80 per barrel and gold fell to $1,172 per ounce. Obviously, the Fed putting a stop to its mad money creation scheme should be positive for the dollar.
With fewer digital monetary units being credited to the financial system each existing dollar should retain its value or become more valuable. Accordingly, items priced in dollars, such as oil and gold, should become cheaper. However, this is only part of the story…and last week’s feat (Read More....)
. . . → Read More: Why You Should Prepare Now for the Fed’s Next Money Pumping Scheme
by MN Gordon
One of the more endearing things about politics is election season. Although hardly a soul in this day and age still takes them serious, they are not without merit. In fact, they are not all bad.
For what better opportunity is there to point and laugh at the buffoons as they parade across the walk? The show we’re greeted with is more amusing than anything a Hollywood screen writer could conjure up. Clowns, cads, and cons…tripping over each other for your vote.
With mid-term elections just around the corner there’s been no shortage of scoundrels and drivel dribblers to entertain us. Take former Secretary of State Hillary Clinton, for instance. Last week she emitted a real whopper.
“Don’t let anyone tell you it’s corporations and businesses that create jobs,” said Clinton while campaigning for Martha Coakley for governor of Massachusetts. “You know that old theory, trickledown economics. That has been tried, (Read More....)
. . . → Read More: Hollow Words from a Hollow Man
by MN Gordon
Global economies are struggling. Europe’s economy is stalling out. The Japanese economy’s shrinking at an annualized rate of 7.1 percent. But we won’t dwell on Europe or Japan at the moment. For today we set our sights on a Chinese bull’s eye; namely, China’s miracle engine of growth that appears to finally be slowing down.
Naturally, when an economy slows many problems that had been covered up by new growth are exposed. For example, after years and years of stimulating the Chinese economy with borrowed money, the mistakes and distortions have literally piled up as far as the eye can see. There’s a gross overcapacity of property.
“According to Chinese data, cities have built enough for 97 million new city residents, but over the past 5 years, only 35 million people have moved into these cities, a gap of 62 million people. These are the potential ghost cities.”
Typically a ghost city appears following a long period of (Read More....)
. . . → Read More: Why China Will Suffer a Hard Landing