Hell To Pay

Posted on April 14, 2017 by MN Gordon

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

Posted on April 7, 2017 by MN Gordon

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

Posted on March 31, 2017 by MN Gordon

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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March to Default

Posted on March 24, 2017 by MN Gordon

“May you live in interesting times,” says the ancient Chinese curse.  No doubt about it, we live in interesting times.  Hardly a day goes by that we’re not aghast and astounded by a series of grotesque caricatures of the world as at devolves towards vulgarity.

Just this week, for instance, U.S. Representative Maxine Waters tweeted, “Get ready for impeachment.”  We assume this was directed at President Trump.  But what Waters meant by this was sufficiently vague.  There was no guidance as to how President Trump should be getting ready.

Should he pack his bags?  Should he double knot his shoelaces?  Should he say a prayer?

Naturally, the specifics don’t matter in the darnedest.  Rather, these days, it’s style over substance in just about everything.  This is why Waters – a committed moron – rises to the top of class in the lost republic of the early 21st century.

At the same time, the individual has been displaced by the almighty aggregate.  Economists pencil out the unemployment rate, with certain omissions, as if it represents something meaningful.  Then lunkheads like Waters repeat it as if it’s the gospel truth. Continue reading →

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