Black Swan Fledgling – The Debt Crisis Takes Flight

Posted on October 2, 2015 by MN Gordon

The debt based money system plods along according to plan.  The Fed offers unlimited credit.  Public and private entities borrow and spend it.

One of the more popular delusions of contemporary culture is disbelieving the money will ever have to be repaid.  There’s no logical thesis that we are aware of to support this misconception.  But it prevails across the general populace all the same.

Day by day, however, the bills come due.  They pile up like wrecked autos on the 405 freeway.  Over the last 30 years or so they’ve stacked up beyond what the economy can possibly support.

The breaking point was reached in 2008.  We are currently living through the interim period of suspended disbelief.  Many aren’t quite ready to accept their new fate.  This wasn’t what they’d bargained for.

Scientific management of the economy, as executed by the Federal Reserve System, was supposed to perpetually inflate away each generation’s debts. Continue reading →

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Oil Debt Bubble Facing Total Collapse

Posted on September 29, 2015 by MN Gordon

Oil prices appear to be holding at about $45 per barrel, for now.  Gasoline prices are finally coming down too.  Here in the land of fruits and nuts we filled up our gas tank over the weekend with the cheap stuff for just $3.19 per gallon.  What a deal.

The combination of over production, diminishing global growth, and the end of sanctions against Iran, could keep oil prices down for several years – or more.  For southern California commuters, and other consumers, lower oil prices act like an income boost.  The savings at the pump can be used to buy more goods.

Ordinarily, lower oil prices, and the potential for greater consumption, would serve to increase the Fed’s favorite metric…aggregate demand.  Conceivably lower oil prices could give GDP a bump.  So, too, they could allow consumers to pay down debt.

But this is hardly an ordinary, garden variety, cyclical oil price decline.  Unfortunately, it is the great big bust that followed the great big boom in U.S. oil and gas development and production. Continue reading →

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Brazilian Model for Wealth and Prosperity

Posted on September 25, 2015 by MN Gordon

Booms and busts fueled by cheap credit are incredibly disruptive. What’s more, they’re exacerbated by central bank efforts to smooth out the business cycle.  Rather than rounding the peaks and tapering the bottoms, monetary policy, as currently executed, has the unfavorable effect of magnifying them.  There’s an abundance of fresh examples.

One of the more accentuating illustrations of recent years is China’s mass concrete binge.  Pumping credit to stimulate construction in China has had the ill-effect of compelling the country to do something extraordinarily incredible.  In short, they’ve mixed up massive amounts of concrete and splattered it across the landscape.

Specifically, China’s economy used 6.6 gigatons of cement between 2011 and 2014.  What a gigaton is we don’t really know.  But we assume it is something unfathomable heavy.  To put this in perspective, the U.S. used 4.5 gigatons of cement over the last 100 years.

What in the world compelled an entire nation to behave like utter blockheads?  Unsurprisingly, misguided stimulus policies pushed everyone beyond the absurd. Continue reading →

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Command and Control Economics

Posted on September 22, 2015 by MN Gordon

Goldman Sachs, Larry Summers, and the global financial alliance got their way last Thursday.  Fed Chair Janet Yellen rolled over and slobbered on herself like a yellow Labrador…offering more ZIRP to please her masters.  Savers, seniors, and freedom lovers the world over got sour lemons.

Here at the Economic Prism we always make lemonade when life gives us lemons.  Moreover, when the glass is half empty we reach for a smaller glass.  For it doesn’t take much to overflow a Dixie cup.

What we mean is Yellen did us all a grand favor.  By continuing the insane policies of mass credit creation she’s accelerating the Federal Reserve’s ultimate demise.  From our perspective, the sooner it’s over the better.

Some restraint by the Fed now would only extend the broken scheme out further into the future.  Perhaps there’d be another 20 or 30 years more of this charade if the Fed were to pretend it was tightening down the cranks on the money supply.  Why not get it over with now? Continue reading →

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