How to Sleep Well During the Great Dollar Panic Ahead

Posted on August 10, 2012 by MN Gordon

Periods of epic price deflation have occurred several times in American history.  The Great Depression, of course, is the only period still within living memory for some.  But peering back another 100 years, there’s an instance of price deflation that was far greater.

Without coincidence, the Panic of 1837 followed a grand experiment in central banking.  Over issuances of unbacked paper money by the Second Bank of the United States – the U.S. central bank from 1817 to 1836 – led to rampant speculation and price inflation.  Much like today, the combination of the central bank, legal tender law, fractional reserve banking, and government deficits, dramatically increased the supply of money and credit…compelling people to borrow money to buy things they couldn’t afford with money they couldn’t repay.

Murray N. Rothbard documented the massive monetary inflation in his historic tomb Continue reading →

Posted in Inflation, MN Gordon | Tagged , , , , , | 1 Comment

Disgraceful and Insulting

Posted on August 7, 2012 by MN Gordon

New discoveries were made on the economic front last week.  The Labor Department reported that 163,000 jobs were added in July.  Yet even with the new jobs, the unemployment rate rose to 8.3 percent.

“We’ve still got too many folks out there who are looking for work,” said President Obama.  Fortunately, for those folks who are looking for work, Obama has a solution: pizza and roads.

No kidding.  According to Obama, pizza and roads are the solution to the economic problem.  At least that’s what he explained to the good people of Ohio last week.  If you don’t believe us, you can witness the lecture here.

Who knows?  Perhaps President Obama is right.  Maybe pizza and roads do grow the economy.

However, there is an important distinction to make.  In particular, where the money comes from to buy the pizza and pay for the roads.  Does it come from an economy funded by savings and investments in capital markets?  Or does it come from an economy funded by debt based government stimulus? Continue reading →

Posted in Government Debt, MN Gordon | Tagged , , , , , | Leave a comment

What You Can Do About the Drought and Rising Food Prices

Posted on August 3, 2012 by MN Gordon

Can you believe it?  Yesterday European Central Bank President Mario Draghi failed to clarify what he meant last week when he promised business leaders in London to do “whatever it takes to preserve the euro.”

Traders were looking for concrete steps to saving the euro.  Instead they got muddy stumbles to nowhere.  The DOW dropped 92 points in disappointment…for its fourth consecutive day of losses.

Still, we won’t dwell on it anymore today.  For, if you hadn’t noticed, there’s an epic drought going on…

If you remember back in 2007, following a long dry spell, and severe water rationing, the Georgia state government was out of ideas for quenching the thirst of the parched population of Atlanta.  In a moment of despair they held hands with ministers on the steps of the state Capitol to pray for rain.  Providentially, the heavens complied and soon after it rained.

Yet once again, drought conditions have returned.  This time they’ve descended on the Midwest and Mississippi Basin.  It’s being called the worst drought since 1956. Continue reading →

Posted in Inflation, MN Gordon | Tagged , , , | 2 Comments

Collective Destruction

Posted on July 31, 2012 by MN Gordon

Last Tuesday we remarked that Mario Draghi and the European Central Bank were receiving valuable on the job training.  Most notably, that money creation operations are much harder to stop than to start.

By Thursday, Draghi confirmed he’s an astute learner when he announced to an audience of business leaders in London that the ECB would do “whatever it takes to preserve the euro.”  What exactly that is…one can guess.  But Draghi will have the opportunity to explain it to everyone this Thursday when the ECB’s governing council meets.

Details aside, and in confirmation of the adage to ‘buy the rumor sell the news,’ world markets celebrated the announcement with a manic rally.  The DOW ran up 207 points on Thursday and another 190 points on Friday.  “Mario Draghi Just Put a Floor in Market, Pros Say,” declared a CNBC headline.

But what type of floor is it, really?

Certainly, it isn’t a marble floor keyed into granite bedrock. Continue reading →

Posted in Inflation, MN Gordon | Tagged , , , , , , | Leave a comment