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Recent Posts

Disasters Can Happen

More Signs the End is Nigh

city-569093_960_720by MN Gordon

Economic Prism

Hyperventilating Minds

“What has been will be again, what has been done will be done again; there is nothing new under the sun,” explained Solomon in Ecclesiastes, nearly 3,000 years ago.

Perhaps the advent of negative yielding debt would have been cause for Solomon to reconsider his axiom.  We can only speculate on what his motive would be.  As far as our studies have shown, negative interest rates are a brave new (Read More....)

. . . → Read More: More Signs the End is Nigh

Even Death Won’t Save Us

money-256319_960_720by MN Gordon

Economic Prism

Rubbernecking at the economic train wreck of central planners is not without hazard.  A strained collar and dry eyes, for instance, are common perils.  So, too, is the lasting grimace of disbelief that comes with the rollout of each zany scheme to save us from ourselves.

Etched forehead lines and nighttime bruxism are several of the secondary effects.  Not owning shares of Amazon is another.  Though, over the long term, this will likely be an advantage.

Certainly, gawping at the present execution of monetary and fiscal policy in America is not without some benefit.  A healthy suspicion is garnered of politicians and public officials.  This, at the very least, relieves us from voter’s remorse.  Since we didn’t vote for President Obama we don’t have to live with the soiled conscious that most surely befalls those who (Read More....)

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The Cure is Worse than the Disease

2016by MN Gordon

Economic Prism

Today we look back to the recent past with singleness of purpose.  Context and edification for the present economy is what we’re after.  We have questions…

How come the recovery has been so weak?  Why is it that, nearly seven years after the official end of the Great Recession, the economy’s still mired in a soft muddy quag?  Squinting, focusing, and refocusing, there’s one particular week that rises above all others.

On Saturday September 20, 2008, Treasury Secretary Hank Paulson delivered a draft of the Troubled Asset Relief Program (TARP) to Congress for review.  If you recall, it had been another wild week.  On Monday, September 15, after 158 years of operation, Lehman Brothers vanished from the face of the earth…Dick Fuld, “The Gorilla,” be damned.

All week the sky relentlessly fell on financial markets.  (Read More....)

. . . → Read More: The Cure is Worse than the Disease

Something’s Gone Horribly Awry

2016by MN Gordon

Economic Prism

Marginal Activities

The S&P 500 has fallen 7.37 percent so far this year.  What to make of it…

Naturally, some people find falling stock prices to be unpleasant.  Others find them distressing.  Another way to look at falling stock prices, however, is like a high-fiber diet.  The effect is necessary to a healthy functioning system.

The simple fact is that stock prices, fueled by speculative liquidity, have long since outrun the real economy.  The disconnect between the two has been widely observable.  The economy’s lagged, incomes have stagnated, yet stocks have soared.

Thus the present, ever so slight reduction in liquidity, and the subsequent lowering of stock prices, is having a cleansing influence.  For it will serve to eliminate marginal businesses, and trim the fat from larger businesses.

Consequently, business owners, managers, and workers of marginal undertakings will have to redirect their efforts into something new…something that’s of greater value.  For example, (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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Garbage In Garbage Out Economics

Hand Me Downsby MN Gordon

Economic Prism

“On two occasions I have been asked, “Pray, Mr. Babbage, if you put into the machine the wrong figures, will the right answers come out? …I am not able rightly to apprehend the kind of confusion of ideas that could provoke such a question.” – Charles Babbage, Passages from the Life of a Philosopher.

Crunching Data to Fix Prices

The fundamental problem facing today’s economy is the flagrant contempt by governments the world over for the free exchange of goods and services and private stewardship of property.  Perhaps it is power and control governments are after.  Maybe they believe they are improving the economy and making the world a better place for all.

No one really knows for sure.  But what is (Read More....)

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Lost in Extrapolation

How To Avoid Debt, Pixabay Graphicby MN Gordon

Economic Prism

In the late 1970s the impossible happened.  Inflation and unemployment simultaneously went vertical.  The leading economists of the day were flummoxed.

The Phillips curve said there’s an inverse relationship between inflation and unemployment.  When unemployment goes down, inflation goes up.  Conversely, when unemployment goes up, inflation goes down.

How could it be that both were going up at once?  Weren’t they mutually exclusive?  Indeed, it took years of heavy handed government intervention to pull off such a feat.

When unemployment began creeping up in the 1970’s the U.S. Treasury, with backing from the Federal Reserve, did what Keynes had told them to do.  They spent money to stimulate the economy and spur jobs creation.  According to the Phillips curve, with rising unemployment the planners could have their cake and eat it too.  They could run large deficits without inflation.

Unfortunately, something unexpected happened.  Instead of jobs they got (Read More....)

. . . → Read More: Lost in Extrapolation

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