Global Recession and Other Visions for 2017

Posted on December 30, 2016 by MN Gordon

Today’s a day for considering new hopes, new dreams, and new hallucinations.  The New Year is here, after all.  Now is the time to turn over a new leaf and start afresh.

Naturally, 2017 will be the year you get exactly what’s coming to you.  Both good and bad.  But what else will happen?

Here we begin by closing our eyes and slowing our breath.  We let our mind role back into the grey matter of our brain.  We wait patiently for new neurological connections to open up.  Then, ever so subtly, visions of the year ahead come into focus.

Will stocks go up or down?  What about gold and Treasury bonds?  Will the economy expand or contract?  Are we fated for World War III?  Who will win the Super Bowl?

These are the questions – and more – we intend to answer.  Obviously, conjuring up visions is more art than science.  But so is Fed monetary policy.

Nonetheless, before we get to it we must first lean upon ancient Chinese Philosopher Lao Tzu for a full disclaimer: “Those who have knowledge, don’t predict.  Those who predict, don’t have knowledge.” Continue reading →

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Wreck the Halls

Posted on December 23, 2016 by MN Gordon

Despite the best efforts of the bulls to make history happen, they’ve been unable to ‘git-r-done.’  At the time of this writing, the DOW is facing another bout of arrested development; it has yet to notch 20,000 for the very first time.

What a feat it will be when this remarkable, but trivial, event comes to pass.  After a near eight year run, the DOW will likely eclipse this exquisitely round numeric threshold in the very near future.  Shouldn’t such an achievement – and the associated wealth effect – have made us all rich?

Apparently not.  For on the other side of the ledger a distinct, yet somehow related milestone is imminently approaching.  The U.S. National Debt is at $19.9 trillion.  Soon it will surpass a round and rotund $20 trillion.

The reality, however, is that the national debt exceeded $20 trillion a long time ago.  In fact, it’s really over 600 percent higher.  Remember, current unfunded liabilities, including Social Security and Medicare, now total over $104.5 trillion.

Added together the national debt and current unfunded liabilities total $124.4 trillion.  Truly, this number is so large it’s near impossible to comprehend. Continue reading →

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Has the Fed Turned “Hawkish?”

Posted on December 16, 2016 by MN Gordon

Stimulus, in a general sense, is something that causes an action or response.  A ringing alarm clock may prompt someone to exit their slumber.  Or a fist to the gut may force someone to gasp for breath.

Stimulus can come in many forms and varieties.  It can come in the form of a stick; do this and you won’t get whacked over the head.  So, too, it can come in the form of a carrot; do that and you’ll get a reward.

Other forms of stimulus can produce a short, burst like, reaction.  The caffeine in a cup of coffee, for instance, will temporarily reduce drowsiness.  Yet once the caffeine wears off, more coffee is needed to sustain the effect.

Former professional baseball player, and all around dirt bag, Jose Canseco knows a thing or two about stimulus.  Not from what someone has taught him.  But from what he learned through real world experience.  He literally wrote the book on it.

His 2006 memoir, Juiced: Wild Times, Rampant ‘Roids, Smash Hits, and How Baseball Got Big, tells the story of how he and other athletes experimented with performance enhancing drugs to stimulate their baseball careers. Continue reading →

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Smart Programs of Capital Destruction

Posted on December 9, 2016 by MN Gordon

These days everything must be smart.  There are smart cities, smart grids, smart policies, smart TVs, smart cars, smartphones, smart watches, smart shoes, and smart glasses.  There’s even something called smart underwear.

Before long everything around us will be so smart we’ll no longer have to do one critically important thing.  We’ll no longer have to think; smart algorithms will think for us.  What’s more, the possibilities for not thinking are seemingly limitless.

Just this week, for instance, in an effort to sound smart, Chicago Fed President Charles Evans indirectly advised President elect Donald Trump that fiscal policy must be “smart.”  Presumably, what Evans means by this is that fiscal policy must not be “stoopid.”

Fortunately, New York Fed President William Dudley clarified how smart fiscal policy would work.  According to Dudley, smart fiscal policy would include spending programs that are automatically triggered by a recession.  Specifically, Dudley said “extensions of unemployment compensation and cuts in payroll taxes could be triggered by a downturn.” Continue reading →

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