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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Why the U.S. Government Should End the 40-Year Crude Oil Export Ban

Posted on September 9, 2014 by MN Gordon

An abundance of oil hides a lot of mistakes.  Just think of Saudi Arabia.  Oil accounts for 95 percent of their exports and contributes 70 percent of government revenue.

Unfortunately, the royal family’s taken this cash cow and squandered it.  After years and years of pumping and selling this precious resource they’ve been unable to empower their people to stand on their own feet.  Instead, their economy remains dependent on mass oil exports.

Oil contributes 45 percent of Saudi Arabia’s gross domestic product.  When oil prices significantly declined in the 1990’s, per capita income fell from a high of $11,700 in 1981 to $6,300 in 1998.  Conversely, when oil prices rose in the 2000s, per capita income rose to $15,000.

High oil prices, rather than helping Saudi Arabia, handicapped it.  The revenue boost it provided masked over the economy’s limitations.  Rather than diversifying its economy, Saudi Arabia continued to rely on its one great resource.

Now, Saudi Arabia and other oil export economies, face a great challenge. Continue reading →

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I Didn’t Believe the IRS Anyway

Posted on September 5, 2014 by MN Gordon

I Didn’t Believe the IRS Anyway
By Dennis Miller, Miller’s Money Forever

Lois Lerner’s emails are back from the dead—sort of.  The former IRS official’s BlackBerry, however, is still long gone.  The IRS intentionally destroyed it in June 2012 (after congressional staffers interviewed Lerner about the IRS targeting conservative groups) as the Deputy Assistant Chief Counsel acknowledged in a recent sworn declaration.

We’ve all met someone we just don’t trust but don’t know why.  There’s often a pretty good reason to feel that way.

Has someone ever made an insincere attempt to flatter you?  Their words might be complimentary, but their body language, tone, and/or context let you know the compliment is phony.  Does this guy really think I’m that stupid?

So, up goes your trust wall.  If he’ll lie about this, he’ll lie about anything.

The IRS debacle is a prime example of why we build trust walls.  The emails Congress requested had (supposedly) been deleted when several hard drives crashed. Continue reading →

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