Simple Math of Bank Horsepucky

We stepped out on our front stoop Wednesday morning and paused to take it all in.

The sky was at its darkest hour just before dawn.  The air was crisp.  There was a soft coastal fog.  The faint light of several stars that likely burned out millennia ago danced just above the glow of the street lights.

After a brief moment, we locked the door behind us and got into our car.  Springtime southern California mornings are exquisitely pleasant.  The early morning drive to downtown Los Angeles, on the other hand, is exquisitely painful.

Nonetheless, we make the best of it like we make the best of a trip to the dentist – or a visit with our accountant.  If anything, it affords us the opportunity to do something most people rarely do.  In particular, it gives us time to think.

Before we knew it we’d reached our destination.  But not before uncovering half dozen unrectified incongruences.  The sorts of things that are futile to piece together.

One thing that stuck in our craw like a broken chicken bone is the raw deal main street depositors and lenders get from credit unions and commercial banks. Continue reading

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Hell To Pay

Economic nonsense comes a dime a dozen.  For example, Federal Reserve Chair Janet Yellen “think(s) we have a healthy economy now.”  She even told the University of Michigan’s Ford School of Public Policy so earlier this week.  Does she know what she’s talking about?

If you go by a partial subset of the ‘official’ government statistics, perhaps, it appears she does.  The unemployment rate is at 4.5 percent, which is considered full employment.  What’s more, inflation is ‘reasonably close’ to the Fed’s 2-percent inflation target.  But what does this mean, really?

According to Fed Chair Yellen, it means that now’s the time to tighten up the nation’s monetary policy.

By now you’ve likely seen this upcoming – choice – quote from Yellen.  Nonetheless, we can’t resist repeating its remarkable idiocy.  For Yellen, who was in the greater Detroit metropolitan area, was kind enough to humor us all with a nifty automotive analogy to explain how to go about normalizing monetary policy. Continue reading

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Credit Contraction Episodes

Taking the path of least resistance doesn’t always lead to places worth going.  In fact, it often leads to places that are better to avoid.  Repeatedly skipping work to sleep in and living off credit cards will eventually lead to the poorhouse.

The same holds true for monetary policy.  In particular, cheap credit policies that favor short-term expediency have the effect of layering society up with an abundance of long-term mistakes.  Artificially suppressed interest rates via central bank asset purchase schemes are not without consequences.

What’s more, once set in motion these consequences don’t stop until they’ve fully run their course.  The booms of plentiful credit must always be followed by the busts of unserviceable debt.  As more and more debt drifts into arrears the debt structure breaks down.  Yet when the actual tipping point is crossed is often unclear until after the fact.

Quantitative easing “officially” ended over two years ago.  The interim period has been relatively sanguine; asset prices have continued to inflate.  But lurking around the corner is the inevitable downside of quantitative easing. Continue reading

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Failure to Launch

The future is here and it’s not all it was cracked up to be.  For example, one of the great disappointments of the 21st century, thus far, is the lack of flying cars.  Wasn’t this supposed to be the signature achievement of Tomorrowland?

The frustration was aptly expressed by PayPal cofounder and early Facebook investor Peter Thiel when he said, “We wanted flying cars, instead we got 140 characters.”  Of course, the 140 character reference is in regard to Twitter and its 140 character limit per tweet.

Indeed, Twitter is a second-rate alternative to flying cars.  What’s more, it has the ill-effect of reducing people’s brains to mashed potatoes.  In place of well-reasoned and thoughtful discourse, Twitter promotes inane statements from Congressional representatives and even the President.

But all is not lost.  For the flying car will soon be a reality.  The IFO – or Identified Flying Object – is a proposed two seat concept drone that looks like a UFO.  Not only does it fly.  It’s safe too. Continue reading

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