Shattering the Fed’s Hall of Mirrors

Posted on February 25, 2014 by MN Gordon

“We will develop ambitious but realistic policies with the aim to lift our collective GDP by more than 2 percent above the trajectory implied by current policies over the coming 5 years,” declared the G20 statement.  The communiqué was released Saturday following a two-day meeting of Group 20 finance ministers and central bankers, representing about 85 percent of the global economy, in Sydney, Australia.

“We are putting a number to it for the first time — putting a real number to what we are trying to achieve,” said Australian Treasurer Joe Hockey.  “We want to add over $2 trillion more in economic activity and tens of millions of new jobs.”

What to make of the enthusiastic words?  Here we’ll defer to German Finance Minister, and all around killjoy, Wolfgang Schauble for a thoughtful assessment of the G20’s plans…

“What growth rates can be achieved is a result of a very complicated process,” noted Wolfgang Schaeuble.  “The results of this process cannot be guaranteed by politicians.”

In other words, prosperity cannot be legislated into existence. Continue reading →

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Total Abandonment of the Rules of Common Sense

Posted on February 21, 2014 by MN Gordon

U.S. consumers are doing what they do best.  After a six year hiatus, they’re back at it.  Consumers are eagerly borrowing money.  What’s more, they’re spending it!

According to the Federal Reserve Bank of New York, U.S. consumer debt rose during the fourth quarter of 2013 by the most in six years.  “Household debt increased 2.1 percent, or $241 billion, to $11.52 trillion,” reported Bloomberg, “the biggest gain since the third quarter of 2007.”  Evidently, consumers went in hock to buy homes, cars, and pay for education.

Economists applauded the news.  ‘“Signs that consumers are starting to releverage again and take on more debt is consistent with the idea that we’re turning a corner on the recovery,’ said Tim Duy, a professor at the University of Oregon in Eugene and a former U.S. Treasury economist.”  Naturally, this consumption is a big part of what propelled fourth quarter GDP to a 3.2 percent growth rate.

But is increasing household debt really something to get excited about?  Not from our unobstructed viewpoint…located far away from the clouded brains that comprise a college economics department. Continue reading →

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Price Rebound Speculating for the Calculated Profit Seeker

Posted on February 18, 2014 by MN Gordon

Markets grow stranger by the day.  The more you follow them the more befuddling they become.  When it comes to the stock market’s day to day movements, there’s no sense to be had at all.  It ambles about however it may, without much rhyme or reason.

For instance, stocks closed out last week with a second consecutive week of gains.  In fact, the NASDAQ ended the week at levels last seen in 2000 – nearly 14 years ago.  On top of that, the S&P 500 is now just a hair way from its all-time high.

Was it a “risk on rally?”  Quite frankly, we really don’t know.  It could be any number of factors converging and diverging to compel investors to buy and sell.

We could come up with a whole host of reasons why the stock market could tank.  For one thing, prices seem a little out of whack.  The S&P 500’s price to earnings ratio, based on trailing twelve month reported earnings, is 19.48 percent.  The historic average is around 15.51 percent.

While not at nose bleed levels, stocks aren’t all that cheap either. Continue reading →

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Paper Gold Ain’t as Good as the Real Thing

Posted on February 14, 2014 by MN Gordon

Paper Gold Ain’t as Good as the Real Thing
By Doug French, Contributing Editor, Casey Research

For the first time ever, the majority of Americans are scared of their own federal government.  A Pew Research poll found that 53 percent of Americans think the government threatens their personal rights and freedoms.

Americans aren’t wild about the government’s currency either.  Instead of holding dollars and other financial assets, investors are storing wealth in art, wine, and antique cars.  The Economist reported in November, “This buying binge… is growing distrust of financial assets.”

But while the big money is setting art market records and pumping up high-end real estate prices, the distrust-in-government script has not pushed the suspicious into the barbarous relic.  The lowly dollar has soared versus gold since September 2011.

Every central banker on earth has sworn an oath to Keynesian money creation, yet the yellow metal has retraced nearly $700 from its $1,895 high.  The only limits to fiat money creation are the imagination of central bankers and the willingness of commercial bankers to lend. Continue reading →

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