No Quick Fix for Structural Reforms

Posted on September 23, 2014 by MN Gordon

Finance ministers and central bankers from the Group of 20 leading nations met in Cairns Australia over the weekend.  The clever fellows believe, with the right balance of fiscal and monetary policies, they can improve the global economy.  This, of course, means greater stimulus and fabricated demand.

‘“We are determined to lift growth, and countries are willing to use all our macroeconomic levers – monetary, fiscal and structural policies – to meet this challenge,’ said Australian Treasurer Joe Hockey, who hosted the event.”  The G20 leaders want to increase global growth by 2 percent.  So far they can’t quite seem to get there.

The way things are going, it looks like they’ll fall about 0.2 percent short of their goal.  But it’s not because they aren’t trying.  “Almost 1,000 measures had been proposed that would boost global growth by 1.8 percent by 2018, nearing the ambitious goal of 2 percentage points adopted back in February.”

Perhaps the goal will be achieved.  But here at the Economic Prism we believe this will be more by luck than by erudite policy. Continue reading →

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Worshiping Utterances

Posted on September 19, 2014 by MN Gordon

The world around us is a strange and wacky place.  Even so, it becomes ever stranger and wackier by the day.  Just when we think we’ve seen it all…something new appears and creeps us out.

For instance, have you seen Hillary Clinton’s face lately?  Holy Toledo!  What a fright that is.  We can’t quite tell what happened.  But whatever it is…its gawdawful.

Taking notice of the many absurdities out there is both the joy and misery of the objective observer.  One moment you’re doubled over with laughter.  The next you’re doubled over expelling your lunch with disgust.

Did you know the U.S government paid federal workers $400 million to do nothing?  No kidding, they really did.  In addition, the IRS provided $17.5 million in IRS tax relieve for brothels in Nevada.  There was also $1.23 million of federal money spent on apartments for deaf seniors…that can’t be used by deaf seniors.

These examples straddle the line between the hilarious and the repugnant. Continue reading →

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Why We Are All Doomed

Posted on September 16, 2014 by MN Gordon

Second quarter GDP, as reported in by the Bureau of Economic Analysis on August 28, grew at an annualized rate of 4.2 percent.  This follows up a 2.1 percent decline in the first quarter.  Just what is it that turned things around from one quarter to the next?

According to the BEA report, “this upturn in the percent change in real GDP primarily reflected upturns in exports and in private inventory investment, accelerations in personal consumption expenditures (PCE) and in nonresidential fixed investment, and upturns in state and local government spending and in residential fixed investment that were partly offset by an acceleration in imports.”  Not bad, indeed.  It sounds like the economy’s expanding at a very robust rate.

But it doesn’t feel like things are improving for most households.  The amount of money Americans earn each hour after adjusting for inflation is lower today than it was five years ago.  Yet corporate profits are at an all-time high.

You’d think with the economy expanding and corporate profits at an all-time high there would be an abundance of new jobs.  Unfortunately, this isn’t what’s happening.  Rather, new jobs are being created at a sluggish rate. Continue reading →

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Holding the Permanently High Plateau

Posted on September 12, 2014 by MN Gordon

“Stock prices have reached what looks like a permanently high plateau,” said Ph.D. economist, Irving Fisher, on October 17, 1929.  “I do not feel there will be soon if ever a 50 or 60 point break from present levels, such as (bears) have predicted.  I expect to see the stock market a good deal higher within a few months.”

At the time of Fisher’s prediction, the DOW was at 341.86…down from a high of 381.17.  Several days after Fisher offered his “permanently high plateau” thesis, the stock market’s decline accelerated.  So, too, did the reputation of America’s most famous economist.

On October 23, 1929, after stocks had dropped 20 percent, Fisher declared business was “fundamentally sound.”  You can view early video of Fisher’s ill-fated statement here, if you are interested.  Despite Fisher’s optimism and academic confidence, he was spectacularly wrong.

Neither business nor the stock market was fundamentally sound.  Stocks were not “a good deal higher within a few months,” as Fisher expected. Continue reading →

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