The United States Can’t Afford Prosperity

Earlier this week it was revealed that something remarkable and totally unexpected happened during the fourth quarter of 2012.  The economy didn’t grow.  It shrank.

“Real gross domestic product – the output of goods and services produced by labor and property located in the United States – decreased at an annual rate of 0.1 percent in the fourth quarter of 2012,” reported the Bureau of Economic Analysis on Wednesday.

What’s going on?  Isn’t the economy supposed to be in full recovery mode by now?

The Federal Reserve, in a FOMC statement on Wednesday, said “that growth in economic activity paused in recent months, in large part because of weather-related disruptions and other transitory factors.”

Of course, blaming poor performance on the weather doesn’t work in most professions.  Still, for the central bank to the United States government, excuses are the norm.  Plus a flailing economy supports their program of creating $85 billion a month, from nothing but a ledger notation, to buy mortgages and treasuries. Continue reading

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Currency Wars and the New Age of Desperation

It must have seemed like a good idea at the time.  Of course, the time is always right for government policy makers to improve upon the natural order of things.  In their dim minds, the unintended consequences of their actions are not to be considered…they can always be rectified later by another policy fix.

Evidently, none of the officials from West Germany, France, the United States, Japan, and the United Kingdom, who gathered at New York’s Plaza Hotel on September 22, 1985, knew they were letting the genie out of the bottle.  Regrettably, once out, it’s near impossible to put back in.

By 1985, fourteen years after Nixon severed the last remnants of the linkage between the dollar and gold, floating currencies had resulted in grotesque distortions to the global economy.  The U.S. dollar had appreciated 50 percent between 1980 and 1985 against the Japanese yen, West German Deutsche Mark, and British pound – the currencies of the next three largest economies at the time.  American manufacturers could not compete with the dollar valued so much higher than its competitors. Continue reading

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When Not to Buy Stocks

The stock market’s really going for it.  The S&P 500’s just a scratch from its October 9, 2007, all-time high of 1,565.  Is it time to pop the champagne bottle and celebrate?

We’ll let you decide.  But do you recall what happened just after the October 2007 high was notched?  The stock market then went into freefall for nearly a year and a half.

By March 8, 2009, the S&P 500 bottomed out at 676…for a loss of 56.8 percent.  Since then the S&P 500’s run up over 120 percent.  Some say it will go higher.

Perhaps it will.  But if you believe that the key to making money in the stock market is to buy low and sell high – not buy high and sell low – then now is not the opportune time to invest.  Of course, there’s the possibility you could buy high and sell higher.  However, like jaywalking across an interstate highway, the potential risk and reward are not very favorable.

Still, people are tripping over themselves to get into stocks at a record pace… Continue reading

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Davos Polka Dance

[Editor’s note: Parts of today’s Economic Prism appeared nearly a year ago under the title Davos Hootenanny and Salvation Call.  Herein we’ve merely updated it for this year’s Davos Polka Dance.]

Pockets of Liberty

Despite the reformers endless efforts to encircle mankind, some persist beyond the broad extent of their casted net.  In the backwaters of the Republic, for instance, the distant rumble and flicker of Saturday night hootenannies still befall yonder the mighty oak groves.  In defiance of all things good and proper, the unconsecrated gather under the pale moonlight and jig step to zydeco washboard rhythms while downing tipples of corn syrup and fermented grain.

These knees-ups certify that, even in this era of big government, there remain places in the lower forty-eight where freedom reigns.  Across the planet, no doubt, there are pockets of liberty where individuals can use whatever light bulb they want without fear of the pokey.

These places are uniquely exceptional with their own distinct rhyme.  But, in common, they’re all places where the air smells sweet, the water flows clean, and the people can hold their chin up. Continue reading

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