The Paradox of Fed Credit

Posted on June 24, 2014 by MN Gordon

Last Tuesday the Bureau of Labor Statistics reported the Consumer Price Index increased 0.4 percent in May and 2.1 percent over the last 12 months.  That means if you didn’t get a 2 percent raise this year you’re doing worse – not better – than last year.  But not to worry…

The following day, Federal Reserve Chair Janet Yellon dismissed the CPI report…calling the data “noisy.”  Obviously, she missed the announcement from In-N-Out – the iconic California hamburger stand – that they’re raising prices because of the soaring cost of dairy and beef.  Is this noise too?

Perhaps in Yellon’s world – a place where the polar vortex is the root cause of lethargic GDP – it is.  For the rising cost of dairy and beef is due to the epic California drought.  Somehow, according to the top Fed head, these price hikes are all just noise.

We don’t quite comprehend how the Fed figures what’s noise or not.  In our world, higher prices are higher prices.  As for the California drought, we took a drive through ground zero on Sunday. Continue reading →

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Plume Economics

Posted on June 20, 2014 by MN Gordon

Central banking, dishonest money, and big bank bailouts.  Earlier this week we referred to these as a trifecta of depravity.  We also noted how through the Fed’s mechanism of mass money creation financial assets – overwhelmingly owned by the wealthy – are floated up on a sea of debt.

The general public has been well aware for some time now that the Federal Reserve borrows money into existence and loans it to the Treasury.  That secret’s been out of the bag for a while.  What’s more, it’s espoused as an integral monetary policy.  Manipulating interest rates down is supposed to stimulate demand and boost the economy…its actual effect has been to boost asset prices.

But if you were still under the supposition that the stock market is a last bastion of free market capitalism, unhindered and unfettered by central bank intervention, we must apologize.  For we must forever end your bliss.  You see, central banks the world over are creating money from nothing and using it to buy stocks. Continue reading →

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The Trifecta of Depravity

Posted on June 17, 2014 by MN Gordon

You don’t have to look very far these days to see economic disparity, divergence, and contrary counterparts.  The rich have never had it so good.  A rising stock market, rising home values, and record corporate profits have the top 10 percent of earners taking home more than half the nation’s total income.

Meanwhile, the middle class has been completely shredded.  Well-paying white collar jobs have been downsized.  Good manufacturing jobs have been offshored.

In return, former middle class professionals must compete for low-paying service jobs.  Is it any wonder why the labor force participation rate is at a 36-year low?  What’s more, the labor force has been steadily falling since the turn of the new millennium.

Quite frankly, it’s demoralizing for someone to go work for a third of the pay they made not long ago…especially when the Fed’s zero interest rate policy has stolen the rewards of hard work, saving money, and paying your own way.  Many would rather drop out of the labor force than do mind numbing work in return for peanuts. Continue reading →

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Cause and Effect of a Broken Market

Posted on June 13, 2014 by MN Gordon

According to the professionals, the economy’s improving.  Can you believe it?  Despite the fact that first quarter GDP declined at an annual rate of 1 percent, economists are coming up with the darnedest reason why things are getting better.

“Late Friday afternoon, the Federal Reserve released data on consumer credit for April,” reported MarketWatch one week ago.  “Student and auto loans have been powering that growth for some time, and that continued last month: Nonrevolving credit rose at a seasonally adjusted annual rate of 9.5 percent, the fastest growth since February 2013.

“But the real news was in credit-card growth, which leaped 12.3 percent.  That’s not just the fastest one-month growth since February 2001 — credit-card growth hasn’t even exceeded 7.5 percent since the recession.”

Somehow, the statistic showing consumers are increasing the rate at which they’re spending money they haven’t earned is pointed to as a sign that the economy’s getting better.  This sounds crazy we know…but it’s happening all the same… Continue reading →

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