Yanking the Bank of Japan’s Chain

Posted on August 4, 2017 by MN Gordon

Based on the simple reflection that arithmetic is more than just an abstraction, we offer a modest observation.  The social safety nets of industrialized economies, including the United States, have frayed at the edges.  Soon the safety net’s fabric will snap.

This recognition is not an opinion.  Rather, it’s a matter of basic arithmetic.  The economy cannot sustain the government obligations that have been piled up upon it over the last 70 years.

In other words, the post-World War II boom is nearly over and the bills are coming due.  What’s more, greater and greater amounts of future growth are already claimed by existing debt obligations.  This, in turn, inhibits that growth from making its way into the larger economy, thus limiting future economic growth.

Perhaps this is why mature economies are finding it near impossible to attain 3 percent GDP growth.  In fact, the last time U.S. GDP grew by 3 percent or more for a calendar year was 2005, about 12 years ago.  Unfortunately, it doesn’t look like U.S. GDP growth will ramp up any time soon. Continue reading →

Posted in Inflation, MN Gordon | Tagged , , , , | Leave a comment

Views from a Top of the Skyscraper Index

Posted on July 28, 2017 by MN Gordon

On a warm Friday Los Angeles morning in spring of 2016, we found ourselves standing at the busy corner of Wilshire Boulevard and South Figueroa Street.  We were walking back to our office following a client wire brushing for events beyond our control.  But we had other thoughts on our mind.

Amongst a mob of pedestrians, we gazed up at the skeleton frame of what would become the Wilshire Grand Center.  For the first time in several years the buzz and hum of diligent building activity was eerily silent.  In fact, construction efforts were shut down for the day.

Sadly, less than 24 hours earlier a distraught electrician had taken a swan dive off the 53rd floor.  The man’s death prompted an immediate work stoppage and evacuation of the tower.  “It sounded like a bag of cement fell off the edge of the building,” one observer remarked.

Naturally, the sound of impact was far too grim for us to contemplate.  Instead, we wondered how time must have simultaneously slowed down and sped up for the jumper as they descended toward the ground.  Did they want a redo before it was game over? Continue reading →

Posted in Economy, MN Gordon | Tagged , , , , , , , | 11 Comments

Congress’s Radical Plan to End Illegal Money

Posted on July 21, 2017 by MN Gordon

One of the many downfalls of being the United States Secretary of the Treasury is the requirement to place one’s autograph on the face of the Federal Reserve’s legal tender notes.  There, on public display, is an overt record of a critical defect.  A signature endorsement of a Federal Reserve note by the Treasury Secretary represents their personal ratification of unconstitutional money.

If you recall, Article I, Section 8, of the U.S. Constitution empowers Congress – not the Federal Reserve – to coin money and regulate its value.  What’s more, Article I, Section 10, specifies that money be coined of gold and silver and cannot be bills of credit – such as paper legal tender notes.

As far as we can tell, paper dollars are illegal money on two counts.  First, they’re issued by the Federal Reserve.  Second, they’re bills of credit with no ties to gold or silver.

What gives?  Isn’t the U.S. Constitution supposed to be the supreme law of the land?

Don’t be silly.  Anyone with half their wits about them knows the U.S. Constitution has been reduced to a mere artifact of history.  Does this bother you? Continue reading →

Posted in Government Debt, MN Gordon | Tagged , , , , , , | 14 Comments

Adventures in Quantitative Tightening

Posted on July 14, 2017 by MN Gordon

All remaining doubts concerning the place the U.S. economy, and its tangled web of international credits and debts, is headed were clarified this week.  On Monday, Mark Yusko, CIO of Morgan Creek Capital Management, told CNBC that:

“…we’re flowing toward the path of 1928-29 when Hoover was president.  Now Trump is president.  Both were presidents with no experience who come in with a Congress that is all Republican, lots of big promises, lots of things that don’t happen and the fall is when people realize, ‘Wait, it hasn’t played out the way we thought.’

“[By the fall], we’ll have a lot more evidence of declining growth.  Growth has been slipping.”

If you recall, autumn of 1929 is when the U.S. stock market commenced a multi-year swan dive and the economy commenced a decade long Great Depression.  This is the path Yusko believes we’re flowing toward.  To be clear, this is a path that can be extraordinarily hazardous to your investment wealth. Continue reading →

Posted in Economy, MN Gordon | Tagged , , , , | 7 Comments