Jerome von Havenstein: Inflation Or Bust

This week brought forth new evidence that – to be perfectly frank – we’re all screwed.

On Thursday, the yield on the 10 year Treasury note topped 1.55 percent.  Subsequently, the Dow Jones Industrial Average, after hitting an all-time high on Wednesday, dropped 559 points.  Wall Street must not be listening to Federal Reserve Chairman Jerome Powell.

Earlier in the week, Powell, in testimony to the Senate Banking Committee, confirmed that the central bank would keep the federal funds rate near zero until maximum employment is achieved.  In addition, the Fed, in its recently released semiannual Monetary Policy Report, confirmed it would continue to create credit from thin air to buy $80 billion per month of Treasuries and $40 billion per month of mortgage backed securities (MBS).

What’s more, the Report specified the Fed’s purchases of Treasuries and MBS “…will continue at least at this pace until substantial further progress has been made toward its maximum employment and price stability goals.”  The operative words being, “at least.” Continue reading

Posted in Economy, MN Gordon | Tagged , , , , | 23 Comments

The Great Egghead Caper

“Where the hell are we?” – President Joe Biden, February 16, 2021

Highway to Hell

The President asked a most important question.  So we’ll offer the puzzled fellow an answer…

We – as in the USA – are hurtling down the highway to hell.  The state of the union is chaos.  America’s finances are completely out of control.

Spending is rapidly outpacing revenue.  Debts and deficits are mushrooming like mold spores on wet drywall.  Rot and decay have set in.  The nation’s structural foundations have fallen into irreversible disrepair.

Don’t believe us?

According to the recently published Congressional Budget Office (CBO), Budget and Economic Outlook: 2021 to 2031, America’s broker than broke.  For example, the CBO projects a federal budget deficit of $2.3 trillion in 2021.  At 10.3 percent of gross domestic product (GDP), the deficit in 2021 would be the second largest since 1945, exceeded only by the 14.9 percent shortfall recorded last year. Continue reading

Posted in Government Debt, MN Gordon | Tagged , , , , | 23 Comments

By Big Government For Big Government

One of the notable byproducts of the current age of unreason is the popularity of lies as a matter of public policy.  We’ll clarify this claim in just a moment.  But first, some context is in order…

On Wednesday, the Bureau of Labor Statistics reported that the Consumer Price Index (CPI) increased 0.3 percent in January.  Not bad, so long as you didn’t have to drive anywhere.  If you did, you may have noticed your dollars didn’t get you as far.  The gasoline index increased 7.4 percent in January.

What’s going on?

Over the last 10-months the price of oil has quietly recovered from an extreme negative in April of 2020 to over $58 for a barrel of West Texas Intermediate (WTI) crude.  And the UN Food and Agriculture Organization’s food price index is at its highest level since July 2014.  The main factors contributing to its rise are increases in grain prices.

Our hunch is that consumer prices will rise much further and faster in 2021 than the bean counters at the Bureau of Labor Statistics anticipate. Continue reading

Posted in Government Debt, MN Gordon | Tagged , , , , | 24 Comments

Did You Make Janet Yellen Rich?

Up until the WallStreetBets crowd short squeezed Melvin Capital for a $7 billion loss, Robinhood had it made.  But losing billions is stressful.  And when your product blows up your customer the clucking that follows comes hot and heavy.

One of the sweetest displays in the world, we’ve been told, is the bursts of digital confetti that shower down Robinhood’s investment app to celebrate the purchase of stocks, options, and cryptocurrencies.  These digital confetti bursts – in addition to spinning prices and scratch off rewards – are great entertainment.  So, too, is watching the price of bitcoin quoted in neon pink.  It just screams buy!

Trading on Robinhood is designed to be both fun and exciting.  There are even freebie alerts.  It’s like playing Candy Crush.  Only the score is kept in dollars and cents.  And with a little practice you can strike it rich.

The clucking for Robinhood CEO, Vlad Tenev, began on Thursday, January 28, at 3:30 am Pacific Time.  That’s when the National Securities Clearing Corporation (NSCC) informed his company that it had to put up $3 billion. Continue reading

Posted in MN Gordon, Stock Market | Tagged , , , , , | 13 Comments