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Disasters Can Happen

The Next Frauds to Come Down the Turnpike

Fraudby MN Gordon

Economic Prism

The general suspicion that something just ain’t right with the economy has become an obvious reality.  Hope and optimism that somehow things will muddle along, or improve, are fading.  You can see it, feel it, and even smell it.

For example, several new data points were revealed Friday.  Each offered further confirmation that the economy’s not progressing.  Rather, it’s regressing.

According to the Bureau of Labor Statistics, producer prices dropped 0.4 percent last month and 1.6 percent on an annualized basis.  Naturally, wholesale prices go down when the dollar goes up.  They also go down when there’s weakening demand.

One would think that a strong dollar would encourage greater demand in the U.S. for imported goods.  Yet that’s not what’s happening at all.  “For the first time in at least a decade,” reports the Wall Street Journal, “imports fell in both September and (Read More....)

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Is Janet Yellen a Jenny Ass?

Federal Reserve, Federal Reserve's balance sheet, unconventional monetary policy, monetary policy implementation, Reserve Balances, Federal Funds Rate, Balance Sheet, Large-Scale Asset Purchases, Interest, Economic Collapse, USA Collapseby MN Gordon

Economic Prism

Federal Reserve Chair Janet Yellen’s at the top of her game.  She knows exactly what to do.  She’s a PhD economist, after all.  Her various affiliations with the Fed go back nearly 40 years.  She knows what the correct Fed response is for every situation.  She knows all.

But Yellen has her work cut out for her.  Attempting to pilot an economy via monetary policy is not for a feeble mind.  There are some answers that aren’t to be found in a textbook.  There are other answers that aren’t present in graphs or dot plot charts.  Sometimes squinted eyes, a furrowed brow, and deliberate prevarication are needed to parse out precisely what to do.

At this very moment, Yellen has a big brain twister panging her prefrontal cortex.  She can’t do what she thinks she’s supposed to do.  (Read More....)

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Before the Devil Knows You’re Dead

Californiaby MN Gordon

Economic Prism

Something rather strange is going on.  Ten year Treasury yields and gold are simultaneously envisaging inflation and deflation.  Yields on the ten year Treasury note have jumped from 1.98 percent to 2.34 percent during the last 30 days.  Gold’s price, on the other hand, has dropped about $100 an ounce during this same time.

Who’s right…Treasury yields or gold?  Will there be inflation or deflation?

These were the questions that faded from our thoughts as we traversed east along the 60 freeway from Los Angeles to Oak Glen last Saturday.  The answers seemed to matter less and less the further the urban sprawl receded behind us.

Oak Glen, 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 locals are relaxed and amiable…not frenetic and mad.

There are no stoplights or franchise drive-thrus.  Billboards and transmission lines do not blight the landscape.  These, and other aesthetic eye lacerations, end (Read More....)

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Garbage In Garbage Out Economics

Hand Me Downsby MN Gordon

Economic Prism

“On two occasions I have been asked, “Pray, Mr. Babbage, if you put into the machine the wrong figures, will the right answers come out? …I am not able rightly to apprehend the kind of confusion of ideas that could provoke such a question.” – Charles Babbage, Passages from the Life of a Philosopher.

Crunching Data to Fix Prices

The fundamental problem facing today’s economy is the flagrant contempt by governments the world over for the free exchange of goods and services and private stewardship of property.  Perhaps it is power and control governments are after.  Maybe they believe they are improving the economy and making the world a better place for all.

No one really knows for sure.  But what is lucidly clear is the muddled disorder modern day economic policies have wrought upon us.  You can hardly enter into a transaction without a cluster of intervention mucking with the price of payment.

Taxes, tariffs, wage laws, and subsidies.  These all impact prices.  But the (Read More....)

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The Exhilarating Romp to DOW 30,000

Moneyby MN Gordon

Economic Prism

The stock market appears to have resumed its upward trajectory.  The S&P 500’s back above its 200 day moving average.  In fact, the S&P 500’s less than 50 points from its all-time high of about 2,131.

Soon the brief panic in August and September will be nothing more than a mere blip on the price chart.  A convenient toehold where stocks dug in, coiled up, and then sprang to a new record level from.  Buy the dip aficionados will point to it for validation and self-satisfaction.

By all accounts, stocks are nearly as expensive as they’ve ever been.  No matter how you slice and dice it – be it the Shiller’s Cyclically Adjusted Price Earnings (CAPE) ratio or the Buffett indicator – overall stock prices are a complete and total rip off.  This simple fact is being largely ignored at the moment.

On top of that, treasury yields – which move inverse to price – are skidding along the bottom of a (Read More....)

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Constructive Simplicity for China’s Communist Party Plenum

Chinaby MN Gordon

Economic Prism

The People’s Bank of China cut benchmark interest rates by 0.25 percent on Friday.  This was the sixth time they’ve lowered interest rates within a year.  Bank reserve requirements were also reduced by 0.5 percent.

Economic growth has gradually declined in China over the last several years.  The official rate of GDP is at 6.9 percent, though that number should be taken with a grain of salt.  Nonetheless, a 6.9 percent GDP isn’t quite up to Beijing’s edict.  Something must be done.

Stimulating demand with cheap credit is the expedient policy for central bankers.  This move may even propel government statistics in the direction they want.  But, given that China’s economy has already been stimulated to death, what is it that the People’s Bank of China is trying to achieve?

Beijing’s policies of mass credit creation have enticed the Middle Kingdom’s corporations to borrow gobs of money.  Naturally, how this borrowed money was spent hasn’t always penciled (Read More....)

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Lost in Extrapolation

How To Avoid Debt, Pixabay Graphicby MN Gordon

Economic Prism

In the late 1970s the impossible happened.  Inflation and unemployment simultaneously went vertical.  The leading economists of the day were flummoxed.

The Phillips curve said there’s an inverse relationship between inflation and unemployment.  When unemployment goes down, inflation goes up.  Conversely, when unemployment goes up, inflation goes down.

How could it be that both were going up at once?  Weren’t they mutually exclusive?  Indeed, it took years of heavy handed government intervention to pull off such a feat.

When unemployment began creeping up in the 1970’s the U.S. Treasury, with backing from the Federal Reserve, did what Keynes had told them to do.  They spent money to stimulate the economy and spur jobs creation.  According to the Phillips curve, with rising unemployment the planners could have their cake and eat it too.  They could run large deficits without inflation.

Unfortunately, something unexpected happened.  Instead of jobs they got (Read More....)

. . . → Read More: Lost in Extrapolation

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