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Disasters Can Happen

The Paradox of Fed Credit

Ben Bernanke,Fed’s balance sheet,economic implosion,Bernanke, Obama, Congress, recession,Marxism-Leninismby MN Gordon Economic Prism

Last Tuesday the Bureau of Labor Statistics reported the Consumer Price Index increased 0.4 percent in May and 2.1 percent over the last 12 months. That means if you didn’t get a 2 percent raise this year you’re doing worse – not better – than last year. But not to worry…

The following day, Federal Reserve Chair Janet Yellon dismissed the CPI report…calling the data “noisy.” Obviously, she missed the announcement from In-N-Out – the iconic California hamburger stand – that they’re raising (Read More....)

. . . → Read More: The Paradox of Fed Credit

Scientific Management of the Economy is Absurd

Moneyby MN Gordon Economic Prism

A Fed insider shattered the glass and pulled the fire alarm this week.

“A strengthening U.S. economy may force the central bank to hike rates ‘sooner rather than later’ to stay ahead of inflation,” Philadelphia Federal Reserve President Charles Plosser said on Tuesday.

Meanwhile, top Fed head Janet Yellen offered the New York University graduating class some commencement words at Yankee Stadium. According to Yellen, success is determined more by (Read More....)

. . . → Read More: Scientific Management of the Economy is Absurd

Putin’s Revenge?

vladimir-putinby MN Gordon Economic Prism

Buying low and selling high is an investment strategy that guarantees success.  But few are capable of doing it.  Most people have an uncanny ability to buy high and sell low.

They’d rather buy Facebook at 80 times earnings than DOW Chemical Company at 13 times earnings.  The simple fact is, where financial markets are concerned, most people couldn’t recognize a good deal if it hit them square in the face.  If something’s selling for 80 percent off its peak price they won’t even consider it.

Of course, you can’t go by price alone.  A certain stock may be beaten down because its business is failing.  What appears to be a bargain price may not be such a good deal after all if shares eventually fall to zero.

Warren Buffett, the world’s most successful investor, noted that “It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.”  He also clarified “…that a business or stock is [not] (Read More....)

. . . → Read More: Putin’s Revenge?

Peddling Loans and Lies to Kids

Price Fixingby MN Gordon Economic Prism

There’s nothing like an abundant flow of money and credit to push prices out of whack. Borrowing from tomorrow to buy today has the effect of boosting demand. Prices must rise to equilibrate the boost in demand.

But prices can never quite equilibrate when the supply of money and credit keeps expanding. On the flipside, the amount of debt supporting the price increases must also run up. Before long the price structure becomes so distorted that it’s nearly impossible to pay for near anything with cash.

Take housing, for instance. In most cities it’s impossible to buy a bad house in a decent neighborhood with cash. An abundance of credit has pushed house prices well above what a middle class income earner (Read More....)

. . . → Read More: Peddling Loans and Lies to Kids

Total Abandonment of the Rules of Common Sense

Economy, Federal Reserve, Economic Collapse, Stock Marketby MN Gordon Economic Prism

U.S. consumers are doing what they do best. After a six year hiatus, they’re back at it. Consumers are eagerly borrowing money. What’s more, they’re spending it!

According to the Federal Reserve Bank of New York, U.S. consumer debt rose during the fourth quarter of 2013 by the most in six years. “Household debt increased 2.1 percent, or $241 billion, to $11.52 trillion,” (Read More....)

. . . → Read More: Total Abandonment of the Rules of Common Sense

The Downside of the Bubble Economy

by MN Gordon Economic Prism

Another signal that financial reflation has pumped up more than just the stock market flashed and beeped on Tuesday. The housing market, following an epic bust and years of extraordinary monetary measures, is once again expanding at a specious rate. Could it be the Fed has finally succeeded in engineering a new housing bubble?

We may not know for years. However, at the moment, we’re beginning to catch a whiff of something with an uncanny scent. In fact, when we breathe in deeply we feel it in our pulmonary alveoli. Do you?

“The S&P/Case-Shiller index of property prices in 20 cities climbed 13.7 percent from November 2012, the biggest 12-month gain since February 2006, after a 13.6 percent increase in the year ended in October,” reported Bloomberg.

“All 20 cities in the index showed a year-over-year gain, led by a 27.3 percent advance in Las Vegas. Values climbed 23.2 percent in San Francisco.”

Not bad, if you’re a home owner. Just for living in your home you experienced the added joy of ballooning wealth. The experts say this will give the economy an added boost (Read More....)

. . . → Read More: The Downside of the Bubble Economy

Travesty of a Free Society

Americas-Freedomby MN Gordon, Economic Prism

A quick look at the headlines tells us things are looking up. Earlier this week, for instance, the Commerce Department reported that consumer spending rose 0.5 percent in November…notching the seventh consecutive monthly increase. Obviously, this is big news for the U.S. economy.

Why is this big news? In particular, this is big news because consumer spending accounts for about 71 percent of the U.S. economy. When consumer spending is increasing, economic growth gets a good boost.

In fact, this is what appears to be happening. According to the latest estimate form the Commerce Department, third quarter GDP increased at an (Read More....)

. . . → Read More: Travesty of a Free Society

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