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Disasters Can Happen

What to Buy as the Great Unraveling Gets Underway

Stock Market  - Pixabayby MN Gordon

Economic Prism

The Federal Reserve’s open market committee meeting is taking place today and tomorrow. Central to their discussion are the two words “considerable time.” Have you ever heard something so nonsensical? What gives?

It all started several months ago when Janet Yellen said these words mean six months. So, now, if the Fed drops the words considerable time from its press release tomorrow this is assumed to be code that they will begin raising the federal funds rate in exactly six months. If you recall, the federal funds rate has been near zero for the last six years.

Tomorrow we’ll discover if the era of zero interest rate policy is over. We watch intently for the market’s reaction and secondary convulsions. Naturally, here at the Economic Prism we are eager for the ZIRP era to be over…it never should’ve started to begin with.

In fact, we find the Federal Reserve, and their cheap money policies, to cause more economic harm than good. For one thing, they’ve led us to the place where (Read More....)

. . . → Read More: What to Buy as the Great Unraveling Gets Underway

Watch Out Below

Dropping Oil Prices Pixabayby MN Gordon

Economic Prism

Six months ago a canary was sent down into the global economic coal mine. At the time, oil was priced at over $110 a barrel. Last month they pulled the canary retrieval line back up…the canary was dead. The economy may be next.

Yesterday, oil’s price sat around $59 a barrel. That’s down over 45 percent in the last six months. No doubt, this qualifies as a market crash. Moreover, since it’s a crash in the global economy’s most essential commodity, it surely signals something wicked this way comes.

The rapid fall in oil price is wreaking havoc upon the paper financing structure that was stimulating new exploration and production. A similar event, triggered by an unexpected drop in house prices, occurred several years ago. Bank balance sheets were shredded.

If you recall, when Lehman Brothers vanished from the face of the earth a little over five years ago, black swans relentlessly descended upon the LIBOR like common ravens upon fresh Southern California road kill. Spread movements (Read More....)

. . . → Read More: Watch Out Below

Something to Cheer About

Jobs, Employment, Work, Picture Credit Pixabayby MN Gordon

Economic Prism

This year’s on target to be a banner year for jobs growth. With a month still left, total payrolls have already increased by 2.65 million. An upsurge like this hasn’t been notched since the twilight of the last millennium.

The Bureau of Labor Statistics published the November employment numbers last Friday. When they counted up the beans, they concluded 321,000 new jobs were added in November. Although the unemployment rate held at 5.8 percent, economists and financial pundits celebrated the news with gusto…

“In one line: spectacular and, more to the point, believable,” said Ian Shepherdson, chief economist at Pantheon Macroeconomics. “We’ve had strong hiring indicators in a number of surveys, and lower jobless claims, so sooner or later, we were going to get a blockbuster (Read More....)

. . . → Read More: Something to Cheer About

Central Bankers Unite

Bankers, Elite, Federal Reserve - Picture Credit Pixabayby MN Gordon

Economic Prism

Government planners float the economy up on a sea of credit. Financial markets rest on an eroding base of wet sandy debt. With all the funny money sloshing around…no solid footings remain.

Here at the Economic Prism we long for a concrete foundation we can stub our toe on. The resulting pain would be comforting. For it would provide confirmation that consequences still exist. Thus we’ll begin today’s supposition with some perspective…

“Credit expansion can bring about a temporary boom. But such a fictitious prosperity must end in a general depression of trade, a slump,” noted 20th century economist Ludwig von Mises.

But what happens if a credit expansion is followed with an additional expansion of credit? Does the debt ever have to be repaid? With enough credit based money, can’t the economic depression be postponed ad infinitum?

“If the credit expansion is not stopped in time,” said Mises, “the boom turns into the crack-up boom; the (Read More....)

. . . → Read More: Central Bankers Unite

Somewhere Between Heaven and Hell

Blind Americans - Picture Credit Pixabayby MN Gordon

Economic Prism

Looking for ordinary ideals of Americana is like searching for consistencies in the Affordable Care Act statute. They simply don’t exist. The valued conviction of one American vastly differs from that of another.

One may celebrate adventures in mysticisms. Another may find inspiration sitting in a NASCAR grandstand. While a third struggles to free himself of the orthodox hobgoblins that suffocate his soul.

In the more respectable newspapers, the story of the national struggle is told with delicate regularity. The news is professed from the locus of the two party political system…any diverging views are carefully sifted out. What’s reported is only what the story editors allow to pass through their single micron particulate filters.

We’re told a never ending Marxian tale of the evil rich exploiting the noble poor. Even worse, we’re led to believe that clowns like John F. Kerry know exactly what the heck they’re doing. Plus we’re led to believe that what they are doing (Read More....)

. . . → Read More: Somewhere Between Heaven and Hell

What You Must Know About Global Currency Debasement

Global Currency Debasement- Picture Credit- Pixabayby MN Gordon

Economic Prism

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

Here Comes the Flood

Economic Collapse Picture Credit Pixabayby MN Gordon

Economic Prism

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

Hold On To Your Gold

Stock Market Crashby MN Gordon

Economic Prism

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?

Currency Debasement

The U.S. (Read More....)

. . . → Read More: Hold On To Your Gold

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