One Lockdown from Disaster

The popular economic tune being played by the popular press drones on.  You know the melody by now…

That the post-pandemic boom is alive and well.  That growth is enduring.  That blue skies are here to stay.

If you listen closely, however, several notes ring sour.

The Commerce Department reported on Thursday that second quarter gross domestic product (GDP) increased at an annualized rate of 6.5 percent.  This may sound good, initially.  But economists with Dow Jones had estimated an 8.4 percent Q2 GDP increase.  Once again, extreme fiscal stimulus, at the expense of a long term debt burden, drifted off key.

The monetary policy refrain was also lacking.  This week, at the Federal Open Market Committee meeting press conference, Fed Chair Jay Powell remarked that, “we’re some way away from having had substantial further progress toward the maximum employment goal.”

Thus the Fed will continue to hold the federal funds rate near zero and will continue creating credit from thin air at a rate of $120 billion per month to purchase Treasuries and mortgage backed securities in the amounts of $80 billion and $40 billion, respectively. Continue reading

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Life and Death in the Age of Fear

The general mood presently being fortified by the chattering classes is one of perpetual fear.  The basic stratagem includes continuously implanting the populace with extreme panic.  For a fearful populace is a subservient populace.

The current hobgoblin is the delta variant of the coronavirus.  The bug, at this very moment, is dispersing through the population…as viruses do.  And, per latest reports from the front lines, the lambda variant’s now on the loose too.

Nonetheless, there’s something on the loose that’s far more deadly to society than a mutated coronavirus.  That is, the virus of fear.  It originates with the control freak central planners.  Then it’s showered on the populace in rapid succession.

Last Sunday, for example, at the conclusion of a meeting of Group of 20 finance ministers, Treasury Secretary Janet Yellen said she was, “…concerned that coronavirus variants could derail the global economic recovery and called for an urgent push to deploy vaccines more rapidly around the world.” Continue reading

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What Happens When the Chickens Come Home to Roost?

What happens when the chickens come home to roost?

This is today’s question.  But what is the answer?  In just a moment we’ll offer several thoughts and ruminations.  First, however, we must take stock of the chickens…

This week, for example, the chicken counters at the Bureau of Labor Statistics reported consumer prices, as measured by the consumer price index, increased in June at a year over year rate of 5.4 percent.  This marks the fastest pace of rising consumer prices since 2008.  And if you exclude food and energy, prices in June rose year over year by 4.5 percent…the fastest surge since November 1991.

In reality, consumer prices have increased much higher.  The ‘unofficial’ rate of consumer price inflation, as calculated using methodologies in place in 1980, is about 14 percent.  This rate of inflation is exceedingly caustic to retirees, savers, and wage earners.

Still, the Federal Reserve doesn’t think it’s a problem.  On Thursday, Federal Reserve Chair Jay Powell told the Senate Banking Committee he’s “not concerned” with rising cost of living.  He’s still asserting price inflation is transitory; that soon the price of used cars will abate and inflation will fall below the Fed’s 2 percent annual target. Continue reading

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Is the Great Post-Pandemic Boom a Great Big Dud?

“I want to talk about happy things, man.” – President Joe Biden, July 2, 2021

Lasting Disaster

The prices of certain commodities are down.  But not down enough to proclaim price inflation dead.

Lumber futures, for example, declined more than 40 percent in June.  This marked the largest price decline for lumber since the 1970s.  But after spiking from about $495 per thousand board feet in October 2020 to over $1,423 in April 2021, lumber’s current price of $718 is still almost double its 30 year average.

Futures for lean hogs have also pulled back of late.  After reaching an interim high of 121.95 cents per pound on June 9, they’re currently priced at 110.10.  Still, even with this recent decline, lean hogs have increased over 57 percent since the beginning of 2021.

Just one year ago, raw sugar futures were priced at 11.76 cents per pound.  In February, they hit a four year high of 18.49.  At the time of this writing, raw sugar futures are priced at 17.45.  Apparently, some of this price increase is attributed to concerns about dry weather impacting Brazilian sugarcane output.  Should you sweeten your portfolio? Continue reading

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