Looming Greek Default is the IMF’s Problem

Posted on June 23, 2015 by MN Gordon

One of the more bewildering and frustrating things about life is that you rarely get what you expect.  You set out and strive for a certain goal with all the excitement and energy of a child.  You may think you’re doing all the right things.  You take all the logical steps.  You make big plans…dream big dreams…

But, when it’s all said and done, you never know what you’re going to get.  Often you end up with the exact opposite of what you thought you wanted.  This inconvenient truth is evidenced by the contents of a box of chocolates.  It is also apparent in the outcomes of grand geopolitical engineering schemes.

After the destructive nationalism of WWII, European nations desired a more integrated continent.  The European Union’s original architects envisioned a united Europe where a single market, common currency, and shared economic prosperity, promoted harmony throughout Europe.  But it took several generations of technocratic chiseling to erect the framework.

The Hague Congress in 1948 set the cornerstone.  The European Movement International and the College of Europe, where Europe’s future leaders would live and study together, were created. Continue reading →

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Lost in Transmission

Posted on June 19, 2015 by MN Gordon

On Wednesday, Federal Reserve Chair Janet Yellen offered several insights into what she wants you to believe she’s doing.  For starters, she wants you to think that, definitely maybe, she will raise rates soon.  But not too soon.  And certainly not now.

Apparently, the Fed believes the economy is strengthening.  Though it’s not strengthening quite enough to raise the federal funds rate from practically zero…where it has reclined for over six years.  That would take a willingness to deflate the stock market.

Naturally, the Fed doesn’t want to deflate the stock market.  They want to inflate it.  For everyone loves an inflating stock market.  The appearance of ballooning wealth makes one feel richer, smarter, better looking, and younger too.

Following the Federal Open Market Committee meeting, and the obligatory Fed statement, stocks immediately spiked.  The DOW jumped 180 points.  Yet the gusto quickly faded…and the DOW finished out the day just 31 points from where it started.  Then, yesterday, the animal spirits roared back to life; the DOW closed up 180 points. Continue reading →

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Going Boldly from Decent to Indecent

Posted on June 16, 2015 by MN Gordon

Zimbabwe officially retired the Zimbabwe dollar last Saturday.  This marked the end of a devastating monetary experiment that shattered the country and pushed all accrued wealth beyond its borders.  The country will be picking up the pieces of what little remains for several generations or more.

If you recall, the Zimbabwe government confiscated private farms from white landowners in the late 1990s.  From what we gather, the stated purpose of this was to correct the ‘injustices of colonialism’.  How this exactly would achieve these objectives is unclear.

But it had the effect of supplanting productive farmers with inexperienced farmers who didn’t know how to make the land work its magic.  First, food production fell by 45 percent.  Then the banking sector collapsed, and farmers were unable to obtain loans to support their failing farms.

By 2007 the unemployment rate had spiked to 80 percent.  Thus the Zimbabwe central bank resorted to the printing press…emitting a seemingly endless supply of paper currency. Continue reading →

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Riding the Waves

Posted on June 12, 2015 by MN Gordon

Something practically impossible happened on Tuesday.  It rained in Los Angeles in June.  Not a lot…less than a tenth of an inch.  But it was enough for us to discover we had a hole in the bottom of our shoe as we crossed John Fante Square.

Yet that wasn’t the only thing practically impossible to happen on Tuesday.  Bond and gold markets simultaneously projected inflation and deflation.  Yields on the 10-year Treasury note jumped to 2.41 percent, anticipating inflation.  Yet gold dropped 0.19 percent to 1,175 per ounce, anticipating deflation.

On Wednesday, things were still a little discombobulated.  Ten year Treasury yields eclipsed 2.47 percent, while gold held steady.  Then, yesterday, yields on the 10-year Treasury note pulled back to 2.38 percent.  Gold held at about $1,182 an ounce.  Crude oil bounced around $60 a barrel.

The stock market continues to yo-yo up and down.  The DOW has gone up and down, and down and up, all year.  But it has nothing to show for its troubles.  It’s currently about where it was when the year started. Continue reading →

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