Manna from Heaven

Posted on August 28, 2015 by MN Gordon

Modern day monetary policy’s something we disparage around here at the Economic Prism.  Relegating what price to set the key lending rate to a cadre of unelected technocrats is a contradiction of life in a free society.  That’s how we see it, at least.

Make of it what you will.  But we think willing lenders and borrowers can agree on a fair rate of interest on an individual basis much better than Janet Yellen and her fellows can dictate for all.  For their part, the Fed’s made a great mess of their efforts to remake the world in their image.

When the stock market crashed on October 19, 1987, newly appointed Fed Chairman, Alan Greenspan took monetary policy in a new direction.  He seized the day and planted seeds of disaster…dropping the federal funds rate a half percent from 7.5 percent to 7 percent.  The influx of liquidity backstopped the market and soon stock prices were again moving up and to the right.

The stock market’s quick recovery made Greenspan the maestro.  Wall Street cheered.  Widows poured their savings into stock mutual funds.  Bob Woodward even wrote a book celebrating Greenspan’s greatness. Continue reading →

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All Bets Are Off

Posted on August 25, 2015 by MN Gordon

Stock markets across the planet gazed out across the economic landscape yesterday and vomited all over themselves.  After that, they convulsed and dry heaved again and again.  For the global economic disfiguration has grown so grotesque, so awesomely awful, that the collective stomach of world markets has wrenched into knots.

Japan and China started the great purge.  In the land of the rising sun, the Nikkei 225 expelled 895 points.  The Middle Kingdom followed this up with a remarkable feat…the Shanghai Composite Index projectile spewed 8.49 percent.

Unfortunately, the sickness spread to Europe and the United States.  The German Dax gave up 4.7 percent and, in London, the FTSE gutted out 4.7 percent.  The Dow followed this up with an initial 1,089 point freefall…before crawling its way back to just a 588 point discharge.

What’s next?  No one quite knows, for sure.  But something different is underway.  Over the last six years there’s hardly been a notable stock market decline. Continue reading →

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The Fed’s Edifice Crumbles Away

Posted on August 21, 2015 by MN Gordon

There have been many appeals to ignorance over the last several years with respect to the effectiveness of monetary policy.  One popular tactic of policy goons is to point to an improved economic statistic – like unemployment – and self-adulate for maneuvering it down.  The fading print media rarely questions these spurious claims.

But just because one action was taken doesn’t mean it was the cause of a later result.  For correlation does not imply causation.  Or, as the post hoc fallacy claims, “after this, therefore because of this”…post hoc ergo propter hoc.

“Gross domestic product has increased,” a policy conspirator may hold up as evidence of their handiwork, “therefore, quantitative easing must have worked.”  Maybe so.  Or maybe not.  Without a control group, and all other things being equal, how can you really know if quantitative easing caused GDP to increase?  You can’t.

One of the great vanities of our time is that government officials and academic bureaucrats control the economy.  That, somehow, upon assuming their positions, they take on god like qualities, which allow them to manifest outcomes by decree.  This is far from the truth. Continue reading →

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Doug Casey on the Real FIFA Scandal

Posted on August 18, 2015 by MN Gordon

Doug Casey on the Real FIFA Scandal
By Doug Casey, The Casey Report

The truth be known, I really don’t give a damn about soccer.  Nor do most Americans.

Indeed, until recently, all that most Americans knew about “football” was that Brandi Chastain ripped off her jersey, to display a great physique, after she scored the winning goal for the US in the 1999 FIFA Women’s World Cup playoff against China.

However, “football”, as it’s known to the 6.7 billion non-Americans on the planet, is revered by the rest of the world as a secular religion.

But now football, and FIFA, the sport’s governing body, is in the news because of an alleged corruption scandal.  Let’s not discuss the details of who was bribing whom, and where all the money went, for two reasons.

First, that’s all over the Internet, and you don’t need me to repeat it here.

Second, and much more important, it’s really none of our business.  Despite the fact that the FBI has taken it upon itself to prosecute at least 14 FIFA officials for corruption. Continue reading →

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