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Disasters Can Happen

China’s $6.6 Trillion Toxic Loan Problem

Chinaby MN Gordon

Economic Prism

Rotting Vegetables

“As long as you’re green, you’re growing.  As soon as you’re ripe, you start to rot,” once remarked Ray Kroc, mastermind of the McDonald’s franchise empire.

At the moment, no truer words can be spoken for China’s ripe economy.  The Middle Kingdom’s 30-year economic boom is being overcome with the unpleasant odor that befalls rotting vegetables.  What’s more, there’s no way to reverse it.

The state of economic activity in China is stalling out.  All of the sudden, the mistakes that were hidden by a growing economy are surfacing en masse.  Excess capacity is turning up in all corners of the economy and no one knows what to do about it.

Each day, it seems, new rot comes to bear upon Beijing’s central planners.  Somehow the miracle workers have lost their hot hand.  A slowing economy, falling stock market, exodus of wealth, and weakening currency are not conforming to the graphs and statistics reported in the latest blueprint for the planned economy.

How could it (Read More....)

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Something’s Gone Horribly Awry

2016by MN Gordon

Economic Prism

Marginal Activities

The S&P 500 has fallen 7.37 percent so far this year.  What to make of it…

Naturally, some people find falling stock prices to be unpleasant.  Others find them distressing.  Another way to look at falling stock prices, however, is like a high-fiber diet.  The effect is necessary to a healthy functioning system.

The simple fact is that stock prices, fueled by speculative liquidity, have long since outrun the real economy.  The disconnect between the two has been widely observable.  The economy’s lagged, incomes have stagnated, yet stocks have soared.

Thus the present, ever so slight reduction in liquidity, and the subsequent lowering of stock prices, is having a cleansing influence.  For it will serve to eliminate marginal businesses, and trim the fat from larger businesses.

Consequently, business owners, managers, and workers of marginal undertakings will have to redirect their efforts into something new…something that’s of greater value.  For example, (Read More....)

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Chasing the Wild Goose in Davos

Jobs, Employment, Work, Picture Credit Pixabayby MN Gordon

Economic Prism

Despite the reformers endless efforts to encircle mankind, some persist beyond the broad extent of their casted net.  In the backwaters of the new Republic, for instance, the distant rumble and flicker of Saturday night hootenannies still befall yonder the mighty oak groves.

In defiance of all things good and proper, the unconsecrated gather under the pale moonlight and jig step to zydeco washboard rhythms while downing tipples of corn syrup and fermented grain.  These knees-ups certify that, even in this era of big government, there remain places in the lower forty-eight where freedom reigns.

Similarly, the backwoods of the old world, rare as they may be, have not been entirely defamed.  Though old world songs are more rigid – and drinks more dry – there are still places where people come together with gusto, and without interference, to dance the polka around the maypole.

Across the planet, no doubt, there are still (Read More....)

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Earthquake Economics

United-States-Helpby MN Gordon

Economic Prism

“The United States of America, right now, has the strongest, most durable economy in the world,” said President Obama, in his State of the Union address, on Tuesday night.  What performance metrics he based his assertion on is unclear.  But we’ll give him the benefit of the doubt.

Maybe this is so…right now.  But it isn’t eternal.  For at grade, hidden in plain sight, a braid of positive and negative surface flowers indicate an economic strike-slip fault extends below.  What’s more, the economy’s foundation dangerously straddles across it.

Something must slip.  A massive vertical rupture is coming that will collapse everything within a wide-ranging proximity.  It is not a matter of if it will come.  But, rather, of when…regardless of what the President says.

Here at the Economic Prism we have no reservations about the U.S. – or world – economy.  We see absurdities and inconsistencies.  We see instabilities perilously pyramided up, (Read More....)

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The Muted Delight of the Forthcoming Recession

Economic Collapse Picture Credit Pixabayby MN Gordon

Economic Prism

One week down.  Fifty-one more to go.  No doubt, this has been a wild start to the New Year.  We expect many more to follow.

For example, on Monday, Chinese investors overloaded the Shanghai Stock Exchange.  An abundance of traders hit the sell button in unison and nearly shorted out the sell side circuit.  By early afternoon the breakers had tripped to prevent a full market meltdown.  Here are the particulars, as reported by Bloomberg

“The worst-ever start to a year for Chinese shares triggered a trading halt in more than $7 trillion of equities, futures and options, putting the nation’s new market circuit breakers to the test on their first day.

“Trading was halted at about 1:34 p.m. local time on Monday after the CSI 300 Index dropped 7 percent.  An (Read More....)

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Who Will Be President and Other Hunches for 2016

2016

by MN Gordon

Economic Prism

The Metaphysical Approach

The New Year is here.  The slate’s been wiped clean.  New hopes.  New dreams.  They’re all accessible.  They’re all within reach.  No doubt, 2016 will be the year you get everything you deserve in life.  But what else will happen?

Today we squint our eyes and peer deep into the crystal ball.  There, at the center of the orbuculum’s refractive light, we scry visions of what’s to come in the year ahead.

Will stocks go up or down?  What about gold?  Are we destined for World War III?  Who will be the next President of the United States?

These are the questions – and more – we intend to answer.  Obviously, clairvoyance via crystal gazing is more art than science.  But so is taking a charted wave pattern and extending resistance and support lines out into the future.

Remember, past performance is no guarantee of future results.  Thus, we’re eschewing common forecasting techniques for a metaphysical approach.  But before we gaze into (Read More....)

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Doom and Gloom for North American Oil Producers

Dropping Oil Prices Pixabayby MN Gordon

Economic Prism

To the dismay of U.S. shale producers, oil prices continue their long slow slide into the abyss.  Perhaps the current price of $35 per barrel – an 11 year low – is the final destination.  More than likely, however, it’s a brief reprieve before the next descent.

Oil exporters, including Saudi Arabia and Russia, have maintained high production rates.  Their goal is to bankrupt U.S. shale companies and preserve market share.  At the same time, oil demand is tapering as the global economy cools.

The combination of high production and declining demand has resulted in excess supply, and lower prices.  The trend of lower prices won’t change until either demand increases or production decreases.  At the moment, it doesn’t appear that either of these factors will change any time soon.

So how low can oil prices go?  If you recall, in the late-1990s, oil prices (Read More....)

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