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Disasters Can Happen

The Three Headed Debt Monster That’s Going to Rampage the Economy

The Three Headed Debt Monster That’s Going to Rampage the Economy

by MN Gordon

Economic Prism

“The bank is something more than men, I tell you.  It’s the monster.  Men made it, but they can’t control it.” – John Steinbeck, The Grapes of Wrath

Mass Infusions of New Credit

Something strange and somewhat senseless happened this week.  On Tuesday, the price of gold jumped over $13 per ounce.  This, in itself, is nothing too remarkable.  However, at precisely the same time gold was jumping, the yield on the 10-Year Treasury note was slip sliding down to 2.15 percent.

In short, investors were simultaneously anticipating inflation and deflation.  Naturally, this is a gross oversimplification.  But it does make the point that something peculiar is going on with these markets.

Clear thinking and simple logic won’t make (Read More....)

. . . → Read More: The Three Headed Debt Monster That’s Going to Rampage the Economy

Don’t Blame Trump When the World Ends- MN Gordon

by MN Gordon

Economic Prism

Alien Economics

There was, indeed, a time when clear thinking and lucid communication via the written word were held in high regard.  As far as we can tell, this wonderful epoch concluded in 1936.  Everything since has been tortured with varying degrees of gobbledygook.

The fall from grace was triggered by the 1936 publication of John Maynard Keynes’ The General Theory of Employment, Interest and Money.  The book is rigorously indecipherable.  What’s more, it has the ill-effect of making those who read it dumber.

Nonetheless, politicians and establishment economists remain enamored with Keynes’ gibberish.  For it offers academic rationale for governments to do what they love to do most – borrow money and spend it on inane programs.  In particular, Keynes advocated filling bottles with money and burying them in coalmines (Read More....)

. . . → Read More: Don’t Blame Trump When the World Ends- MN Gordon

Trump’s Plan to Close the Trade Deficit with China

chinaBy MN Gordon

Economic Prism

Rags to Riches

Jack Ma is an amiable fellow.  Back in 1994, while visiting the United States he decided to give that newfangled internet thing a whirl.  At a moment of peak inspiration, he executed his first search engine request by typing in the word (Read More....)

. . . → Read More: Trump’s Plan to Close the Trade Deficit with China

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 (Read More....)

. . . → Read More: China’s $6.6 Trillion Toxic Loan Problem

Fighting the Suck in China

Chinaby MN Gordon

Economic Prism

Old records are being broken.  New records are being notched.  On Monday, for example, the People’s Bank of China reported a record liquidation of foreign exchange reserves occurred in November.

Specifically, China’s foreign exchange reserves declined $87.22 billion in November to $3.438 trillion.  This amounts to a monthly sell off of 2.5 percent.  What could possibly be prompting the massive sales?

For starters, China’s economy is slowing down.  Chinese exports, the major growth engine for China’s economy, fell 6.9 percent on an annual basis through October.  What’s more, China’s on target to report its slowest growth in the last (Read More....)

. . . → Read More: Fighting the Suck in China

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....)

. . . → Read More: Constructive Simplicity for China’s Communist Party Plenum

The Chinese Fiasco

Chinese Policeby MN Gordon

Economic Prism

The twilight receded into the vista of the glowing port lights.  Docked container ships melded into the profusion of overhead cranes.  Sporadic refinery flares overtook the final sparkles of dusk.

The sun slipped beyond the far side of the Palos Verdes cliffs.  We lit a giant bonfire and settled down to its tantalizing flames.  The kindling crackled and snapped.  Sparkling embers escaped in the light onshore breeze.

School’s back in session tomorrow.  But for the under 10-year old crowd we tent camped with last Saturday night at Cabrillo Beach Youth Center, sitting in a classroom was the furthest thing from their mind.  Whittling drift wood, tying bowline knots, and kayaking the breakwater were the tasks at hand.

Our vantage point from Cabrillo Beach in San Pedro, looking back at the Port of Los Angeles and over to the Port of Long Beach, was a sight for reflection.  At this outer peninsula tip the managed chaos of container ships, docks, cranes, semi-trucks and railcars intermingled in (Read More....)

. . . → Read More: The Chinese Fiasco

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