Adventures in Currency Debasement
by MN Gordon
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....)
. . . → Read More: Rekindling the Dollar Debasement Strategy-MN Gordon
by MN Gordon
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....)
. . . → Read More: Significant Yuan Devaluation Imminent
by MN Gordon
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....)
. . . → Read More: The Fed’s Edifice Crumbles Away
by MN Gordon
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....)
. . . → Read More: How to Cash In On the Economic Sweet Spot
by MN Gordon Economic Prism
What if the savings in your bank account lost 83 percent of its value over just 18 months? We suppose you’d be a little disgruntled. Unfortunately, that’s what has happened in Venezuela…
“Since February 2013,” reports El Universal, “the administration of Venezuela’s President Nicolás Maduro has kept the exchange rate at VEB 6.30 per US dollar, compared with a hike averaging 83 percent in the price of goods. Whereas in Venezuela’s major trade partners – United States, China, Colombia, Mexico and Brazil – inflation is much lower, what can be bought with VEB 6.30 in Venezuela is much lower than what can be (Read More....)
. . . → Read More: Refuse the Filthy Trash