Committed to Mass Public Spending

Posted on October 1, 2013 by MN Gordon

Yesterday President Obama said a government shutdown “would throw a wrench into the gears of our economy.”  Here at the Economic Prism we say, “Bring it on.”  For a wrench caught in the gears is just what’s needed…especially if the wrench can then be used to bolt down the top hatch on the national debt.

You see, Congress has raised the debt ceiling 79 times since 1940.  That’s more than once per year.  Obviously, the debt ceiling hasn’t done much to control spending.  Rather, the debt keeps growing like a metastasized cancer…with a doubling time of about 7 years.

Currently, the debt ceiling’s set at $16.699 trillion.  Even so, it was shattered months ago.  The Treasury just hasn’t owned up to it yet.

In fact, the US Debt Clock shows the debt at $16.9 trillion…well over the legal limit.  But regardless of your opinion of the current debt ceiling battle between the House and President Obama, one thing everyone can agree on is that government deficits, and the massive accumulation of federal debt, will drag the prosperity of future generations down like a ball and chain attached to a prisoner’s ankle. Continue reading →

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End Stimulus Now!

Posted on September 27, 2013 by MN Gordon

A dreary jobs market, stagnant GDP, declining household income, falling wages, workforce reduction, anemic production…  You name it.  The economy’s clunking down the road like an old Cutlass Supreme.

No matter what fixes are made, the thing can’t seem to fire on all cylinders.  A blown head gasket’s replaced and the very next day the spark plugs are fried.  Replace those and a piston ring blows.

Now, five years after the death of Lehman and the subsequent Great Recession, the recovery’s as lethargic as a junk yard dog.  Perhaps it needs a good kick in the rear to bare its teeth and put up a fight.  But where would the kick come from?  We have a few ideas…

From our perch, we see an economy that’s larded over with too much debt and funny money.  If you recall, all the stimulus was supposed to boost demand and GDP growth.  Before long, new jobs would appear faster than they could be filled and a new era of prosperity would be upon us.

What a crock of horse puckey that’s turned out to be. Continue reading →

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Shattering the Debt Ceiling

Posted on September 24, 2013 by MN Gordon

It’s always exciting when money and politics mix.  For example, on Friday billionaire investor Warren Buffett told students at Georgetown University it would be “pretty damn dumb” if Congress and President Obama don’t reach an agreement to raise the nation’s debt ceiling.  Here at the Economic Prism we delight in the words “damn” and “dumb,” especially when used to describe the country’s leaders.

But unlike Buffett we consider not raising the debt ceiling to be pretty damn smart.  Moreover, we’re in favor of Washington gridlock stopping the Treasury from borrowing from tomorrow to pay for things bought yesterday.  We’re also supportive of any opportunity to dismantle parts – or all – of the colossal Obamacare edifice.

Similarly, we hope financial markets lose their nerve over the game of debt ceiling chicken being waged between the House and the President.  An S&P 500 at 1,700 seems irrationally high.  Nonetheless, we don’t recommend shorting it. Continue reading →

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Stock Market Shangri-La

Posted on September 20, 2013 by MN Gordon

The big news early in the week was that Larry Summers – the man so smart he lost hot breakfasts for Harvard and $2 billion of the university’s operating funds – withdrew his name from consideration for the next Federal Reserve Chairman.  The stock market loved the news.  The S&P 500 jumped a combined 13 points on Monday and Tuesday.

By Wednesday the relief of not having Summers tinkering around with monetary policy had been cast aside.  All eyes were recalibrated on current Federal Reserve Chairman Ben Bernanke, and his forthcoming utterances.  What would he do now?

Many were expecting the Fed to begin tapering back its $85 billion per month asset buying program by about $10 – $15 billion per month.  But when it came time for the monetary Caesar to taper he did nothing of the sort.  Here are some choice excerpts from Wednesday’s FOMC statement…

“Taking into account the extent of federal fiscal retrenchment, the Committee sees the improvement in economic activity and labor market conditions since it began its asset purchase program a year ago as consistent with growing underlying strength Continue reading →

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