Just a Few Nuts a Day Makes All the Difference

Posted on April 12, 2013 by MN Gordon

Did you know that one in six Americans age 65 and older lives in poverty?

We discovered this while doing research for a new publication we’re working on about how to retire rich.  Quite frankly, we find this figure to be a shocking disgrace.  But what’s more, President Obama’s proposing to Mickey Mouse down the Social Security inflation adjustment.

The crux of the new adjustment is some academic hogwash called “chained-CPI.”  The whole premise of chained-CPI is that when the price of one thing goes up you can offset it by buying more of something else.  For example, when apples go up people can buy oranges, when Coke goes up they can buy Pepsi, and when tuna goes up…there’s always cat food.

No doubt, Obama’s being forced to do this by powers well beyond his control.  You see, the Social Security System was doomed to fail from the get go. Continue reading →

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Clogging Up the Economy

Posted on April 9, 2013 by MN Gordon

By most accounts, as the season turned from winter to spring in 2013, economic recovery was ready to bloom.  The economy’s fields had been tilled and planted with care…housing was finally on the upswing.  Plus, the Federal Reserve was sprinkling its monetary fertigation at an EZ flow rate of $85 billion per month.

Everyone just knew the next big economic growth would appear at any moment.  In fact, if you skipped a blink, you could already see it.  What’s more, you could almost taste the forthcoming fruits of an abundant and bountiful summer harvest.

The stock market, that forward looking animal, was already investing borrowed capital and counting the unearned returns that would surely be generated by future profits.  New highs were being hit nearly every day.  Suckers were even buying stocks again.

How couldn’t they?  Suckers always buy high and sell low.  New all-time highs were the perfect carrot to bait them back in at just the imperfect moment.

Then, just when everyone least expected it, something rather displeasing happened.  Economic wheat rust appeared last Friday like grade school head lice. Continue reading →

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The Biggest Baddest Bubble of All

Posted on April 5, 2013 by MN Gordon

“The Fed is ‘like a wet blanket all over the economy,”’ said David Stockman on The Daily Ticker on Tuesday.  “Everything is being micromanaged by them … they will fail and take private enterprise economy down with it.”

The former Reagan budget director, private equity investor and author was busy this week promoting his new book, The Great Deformation: The Corruption of Capitalism in America.  In fact, Stockman started off the week with a Sunday New York Times op-ed, which explores many of the themes covered in this newsletter.

It’s quite a lengthy article.  Nonetheless, it’s well worth your perusal.  You can read it here.

In the meantime, we’ll quote Stockman’s closing statement…

“The United States is broke — fiscally, morally, intellectually — and the Fed has incited a global currency war (Japan just signed up, the Brazilians and Chinese are angry, and the German-dominated euro zone is crumbling) that will soon overwhelm it.  When the latest [stock market] bubble pops, there will be nothing to stop the collapse. Continue reading →

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Open Season on Savers

Posted on April 2, 2013 by MN Gordon

Austrian economist Ludwig von Mises called it time preference.  That is, the assumption that, all else being equal, people prefer attainment of a given end sooner rather than later.  People prefer present satisfaction over future satisfaction.

These days’ people’s time preference is instant.  They want instant gratification.  Mises called this high time preference.

Obviously, the discipline of saving and investing doesn’t conform to such a high time preference.  Nonetheless, people also want more…lots more.  More stuff, nicer, things, a bigger house, exotic vacations.

But to enjoy greater consumption, people must first produce.  The cost of production takes time.  It also takes sacrifice.  Mises called the willingness to sacrifice present consumption for greater future consumption, a low time preference.  The result of having a low time preference is increased savings.

Low time preference people (i.e. savers), are critical to the process of wealth generation and the strength of capital markets.  Without them money would be instantly spent and capital would not be available to improve production. Continue reading →

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