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Disasters Can Happen

Rekindling the Dollar Debasement Strategy-MN Gordon

Adventures in Currency Debasement

by MN Gordon

Economic Prism

Rekindling the Dollar Debasement Strategy

The U.S. dollar, as measured by the dollar index, has generally gone up since mid-2014.  The dollar index goes up when the U.S. dollar gains strength (value) against a basket of currencies, including the euro, yen, pound, and several others.  Conversely, the dollar index goes down when the U.S. dollar loses value.

Between July 30, 2014 and December 28, 2016, the dollar’s value, as measured by the dollar index, increased from 79.78 to 103.30 – or 29 (Read More....)

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Significant Yuan Devaluation Imminent

Significant Yuan Devaluation Imminent by MN Gordon

Economic Prism

The Department of Commerce reported last week that U.S. gross domestic product grew at a 2.1 percent annual rate during the third quarter, not the 1.5 percent rate previously stated.  Apparently, private inventory investment was greater than initially estimated.  Nonetheless, GDP is significantly down from the 3.9 percent growth during the second quarter.

The more remarkable data point, however, was reported for corporate profits.  In particular, profits from current production decreased $22.7 billion in the third quarter.  This followed a $70.4 billion increase in the second quarter.

“Profits”, as reported by Reuters, “were down 8.1 percent from a year ago, the biggest decline since the fourth quarter of 2008.”  No doubt, a decline in profits that recalls Great Recession era weakness (Read More....)

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The Fed’s Edifice Crumbles Away

Moneyby MN Gordon

Economic Prism

There have been many appeals to ignorance over the last several years with respect to the effectiveness of monetary policy. One popular tactic of policy goons is to point to an improved economic statistic – like unemployment – and self-adulate for maneuvering it down. The fading print media rarely questions these spurious claims.

But just because one action was taken doesn’t mean it was the cause of a later result. For correlation does not imply causation. Or, as the post hoc fallacy claims, “after this, therefore because of this”…post hoc ergo propter hoc.

“Gross domestic product has increased,” a policy conspirator may hold up as evidence of their handiwork, “therefore, quantitative easing (Read More....)

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How to Cash In On the Economic Sweet Spot

Europeby MN Gordon

Economic Prism

By all accounts, the U.S. stock market is expensive. Not only is it hitting new nominal highs, its valuations are also off the charts. How can one tell?

Fortunately, there are several metrics to guide us. The Shiller’s Cyclically Adjusted Price Earnings (CAPE) ratio, for instance, is currently 27.5. That’s 65 percent higher than the CAPE’s long-term historical average.

What’s more, there have only been two occasions over the last 100 years that saw the CAPE at a higher valuation than today. One was during the late 1920s…right before the stock market crash. The other was the late 1990s…just prior to the popping of the internet bubble.

The Buffett indicator, which is a ratio of the total market capitalization over gross domestic product, also shows that stocks are significantly overvalued. The ratio currently stands at about 125 percent. A fairly valued market is a ratio somewhere between 75 and 90 (Read More....)

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