by MN Gordon
No CPI Change
by MN Gordon
No CPI Change
Consequences of Central Bankers
The existing capital stock continues to be frittered away at the expense of savers and retirees. Nonetheless, central bankers don’t give a doggone about it. This, after all, is one consequence of roughly eight years of near zero interest rate policy.
Another related consequence is that the pricing equilibrium of capital markets has broken down. In particular, bond yields no longer reflect a market determined price of money established by the economy’s demand for credit. Hence, previously unfathomable interest rate movements are now happening with regular occurrence.
Presently, the yield on the 10-Year U.S. Treasury note is sliding into the abyss. On Wednesday a new record low yield of 1.34 percent was reached. This is the lowest historical (Read More....)
. . . → Read More: Larry Summers Wants to Give You a Free Lunch
by MN Gordon
Myths and Legends
“Myths and legends die hard in America,” remarked Hunter S. Thompson in The Great Shark Hunt, nearly 40-years ago. Thompson didn’t likely have U.S. Treasury bonds in mind when he made this observation. Though, if he were still alive, he may find the present state of the great Treasury bond bubble to be an amusing anecdote.
On Monday the yield on the 10-Year Treasury note touched down at 1.45 percent. This is but a scant distance from the 1.39 percent (Read More....)
. . . → Read More: Celebrating this Land of Absurdity
“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....)
. . . → Read More: Earthquake Economics
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....)
. . . → Read More: Life After ZIRP
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....)
. . . → Read More: Money Velocity Lethargy
Gentlemen-rankers out on the spree,
Damned from here to Eternity,
God ha’ mercy on such as we,
Baa! Yah! Bah!
— Gentlemen-Rankers, Rudyard Kipling
Insults and Offenses
For the first time in 80 years, vast numbers of hardworking, industrious people are finding themselves up the creek without a paddle. Buying a home, paying college tuition, and squirrelling away a few nuts for retirement has become discouragingly difficult. What’s more, the presumed benefit of these endeavors has become ever more suspect.
These days there’s a trifecta of offenses debasing the rewards of hard work, saving money, and paying one’s way. Quite frankly, it’s insulting. There’s nothing less to make of it, particularly for those competing in the rat race (Read More....)
. . . → Read More: From Here to Eternity