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Recent Posts

Disasters Can Happen

Mass Money Debauchery

by MN Gordon

Economic Prism

Debauchery

The present day offers the opportunity for many incredible experiences.  Perhaps one of the most rewarding of all is bearing witness to the final days before the greatest economic crackup the world’s ever known.  Not since Nero clipped coins in 64 A.D. and fiddled as Rome burned has there been such an intolerable collection of dingleberries in imperial office.

John Maynard Keynes, the godfather of modern day economic planning, in his 1919 work, The Economic Consequences of the Peace, wrote: “There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency.”

Incidentally, Keynes attributed this acute insight to another innovative central planner, one Vladimir Lenin.  Regrettably, these two visionaries predicted today’s present state of affairs with remarkable (Read More....)

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The Next President’s Debt Burden

by MN Gordon

Economic Prism

The Next President’s Debt Burden

According to the Department of Commerce, U.S. gross domestic product increased at an annual rate of 1.2 percent in the second quarter of 2016.  This, unfortunately, isn’t indicative of the sort of robust economic activity that will grow the economy out of debt.  In fact, as growth is stagnating, deficits are increasing.

The U.S. fiscal year 2015 budget deficit was about $439 billion.  For fiscal year 2016, the federal government is projected to run a deficit of $616 billion.  The upsurge, of roughly $177 billion, amounts to about a 40 percent deficit increase from 2015 to 2016.

Presently, the federal debt is well over 100 percent of GDP.  Obviously, 1.2 percent GDP growth is wholly inadequate to shrink the debt.  To the contrary, 1.2 percent GDP growth in the face of a (Read More....)

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Guided By Nonsense

Crisisby MN Gordon

Economic Prism

“Read the directions and directly you will be directed in the right direction.” — Lewis Carroll

Seven Year Achievement

U.S. consumers are at it again.  After a seven year hiatus they’re once again doing what they do best.  They’re buying stuff.

According to the Commerce Department, personal (Read More....)

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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....)

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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 (Read More....)

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Life After ZIRP

Pixabay Bailouts, USA Debt, by MN Gordon

Economic Prism

Federal Reserve Chair Janet Yellen finally made good on her promise.  On Wednesday she raised the federal funds rate to a target range of 0.25 to 0.5 percent.  Can you believe it?

After nearly a decade since the last rate hike, and seven years of zero interest rate policy (ZIRP), Yellen stiffened up her spine and did the dirty deed.  But, of course, she also placed a hedge.  She assured Wall Street she was in no hurry to cut off their liquidity.  Here’s a brief excerpt from the FOMC statement

“The Committee expects that economic conditions will evolve in a manner that will warrant only gradual increases in the federal funds rate; the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run.  However, the actual path of the federal funds rate will depend on the economic outlook as informed by incoming (Read More....)

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Money Velocity Lethargy

money-256319_960_720by MN Gordon

Economic Prism

Logic, common sense, and rational deduction are useful means for comprehending the world.  But they are merely tools.  The user will always be limited by the quality and quantity of the information available and their ability to properly interpret it.

Data and knowledge gaps can lead to false conclusions.  A wrong turn in the thought process can lead down a dead end street.  Where the economy’s concerned, people must make decisions with incomplete information.  That’s why things are often not what they seem.

For example, as night follows day and day follows night, should not price inflation follow the massive $3 trillion Fed balance sheet expansion that’s happened over the last 7-years?  Simply connecting the dots quickly leads one to a ‘yes’ conclusion.  More money chasing a static number of goods and services should result in price inflation.  For prices must rise to balance out all the new money.

This, of course, makes good practical sense.  In fact, it might even lead (Read More....)

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