The Number One Factor Influencing Fed Monetary Policy

A brief scan of the financial and economic landscape – both in the U.S. and abroad – offers ample confirmation that we are in the midst of a great reset.  From a feint tickle at the turn of the new millennium to a persistent itch a decade ago, the preponderance of evidence in this regard is now much too painful to ignore.  There’s no denying that things ain’t right.

Debt is increasing while GDP’s stagnating.  Stocks are rising while earnings are declining.  Incomes are flat-lining for the majority of workers while growing by leaps and bounds for the 1 percent.  Plus there’s over $13 trillion of negative-yielding debt.

With all this going on, what’s become lucidly clear is the frank understanding that there’s nothing that can really be done to reverse it.  No executive order.  No monetary policy adjustment.  No congressional stimulus package.  No presidential candidate.

None of these, or any other conceivable command and control options, can really do a thing about it.  In fact, at this point, even the most well-intentioned of government programs will likely make the ultimate breakdown and dissolution much, much worse.  The hole’s already been dug far too deep to climb out of. Continue reading

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Yarns, Mysteries, and the CPI

Several ill-defined economic waypoints were unveiled this week.  Namely, the Labor Department’s July consumer price index report.  According to the government data, on whole, consumer prices for the month didn’t change one iota.

Reportedly, energy prices went down, food prices were unchanged, and all other items slightly increased.  So when the official number crunchers tallied them all up, the subtractions washed out with the additions.  Thus, the reported CPI came in at exactly 0.0 percent.

This number is strictly scientific, of course.  Independent teams of research grunts could easily replicate it with precision.  No guess work.  No fudge factors.  All seasonal adjustments and hedonic regression estimates would align with complete accuracy.

All kidding aside, what does a CPI reading of 0.0 mean?  What does it tell us?  How can we use this information to our advantage?

Should we short treasuries and go long gold?  Should we acquire bags of pre 1965 junk silver coins? Continue reading

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The Great Stock Market Swindle

Finding and filling gaps in the market is one avenue for entrepreneurial success.  Obviously, the first to tap into an unmet consumer demand can unlock massive profits.  But unless there’s some comparative advantage, competition will quickly commoditize the market and profit margins will decline to just above breakeven.

Unfortunately, finding and filling gaps in the market is much easier said than done.  Even the most successful serial entrepreneurs fail more than they succeed.  What’s more, success in one endeavor doesn’t guarantee success in another.

Anyone who has ever developed and marketed a new product from concept through sale knows how difficult it is to achieve profitability.  For every good idea there must be a hundred bad ones.  Yet the only way to really know the difference between a profit generating idea and a cash hemorrhaging fiasco is through trial and error.

Success and failure provide real feedback.  They deliver information – at a profit or loss – to businessmen and investors.  What’s working?  What isn’t?  What adjustments can be made to help eke out a profit? Continue reading

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Laurence Kotlikoff for President

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 projected $616 billion deficit will further increase the debt as a percent of GDP.

As far as we can tell, neither Hillary Clinton nor Donald Trump is talking about the U.S. debt problem.  What’s more, they’re economic platforms both include massive spending programs. Continue reading

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