Titanic Myths and the End of Consumer Capitalism

Posted on March 20, 2012 by MN Gordon

Next month marks the 100-year anniversary of the Titanic’s star-crossed demise into the frigid waters of the North Atlantic Ocean.  To commemorate the occasion, the April edition of National Geographic features a cover story on the grand ocean liner and its untimely end.

Here at the Economic Prism we’re always on the lookout for allegories that can help explain the world we live in…particularly, the post-2008 dollar standard era of U.S. consumer capitalism.  Clearly, the sinking of the Titanic is a rich source of metaphors.  Consider the following offered by National Geographic…

“Something else, beyond human lives, went down with the Titanic: An illusion of orderliness, a faith in technological progress, a yearning for the future that, as Europe drifted toward full-scale war, was soon replaced by fears and dreads all too familiar to our modern world.

‘“The Titanic disaster was the bursting of a bubble,”’ said Titanic film writer, director, and producer, James Cameron.  ‘“There was such a sense of bounty in the first decade of the 20th century. Continue reading →

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Compulsory Profits Off the Back of Every American

Posted on March 16, 2012 by MN Gordon

In the fall of 2009, back when the sky was falling, Goldman Sachs’ top man, Lloyd Blankfein, explained to The Times of London that his bank was doing “God’s work.”  At the time we weren’t sure what Blankfein was getting at.

Perhaps he flattered himself into thinking his firm was efficiently allocating capital to its highest and best use…and that this was, somehow, the work of God.  We don’t know.  Nonetheless, in an essay titled, Hell To Pay, we scribbled out some thoughts on how Blankfein may have reached this conclusion.

There are some basic rules to how the world works, we reasoned.  And there are consequences for ignoring them.  For example, you can’t get something for nothing, artificially suppressing the price of money distorts an economy, and, most importantly, a fool and his money are soon parted.

Recognizing these basic rules, we surmised, is also acknowledging there’s a divine moral and natural order to the world.  Consequently, we concluded, Blankfein was right.  Based on the presence of a divine order, by separating fools from their money, Goldman Sachs was, in fact, doing “God’s work.” Continue reading →

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The Fed’s Next Price Fixing Scheme and You

Posted on March 13, 2012 by MN Gordon

Free markets these days are always and everywhere under assault.  Europe, China, Japan, and the United States, among others, are delving into extreme economic intervention.  For whatever reason, uplifters around the globe have taken it upon themselves to meddle in people’s lives on a grand scale.

Last week, for instance, it was revealed that greater price-fixing operations are being considered.  Regrettably, these plans would be more intrusive than commanding the price of Peruvian bananas or rents on New York City apartments.

Unfortunately, the latest scheme being considered would do much, much more.  In a roundabout way it would affect the price of all goods and services.  For it would fix the price of the economies most important commodity…its money.  Here are the particulars…

According to the Wall Street Journal, the Federal Reserve is mulling over a new bond buying program.  Like past quantitative easing operations, the Fed would print money to buy long-term mortgage bonds and Treasuries.  However, this next experiment would be a bit different… Continue reading →

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Sowing the Seeds of Mass Inflation

Posted on March 9, 2012 by MN Gordon

Around the time Elvis Presley choked on his last pill the impossible happened; inflation and unemployment increased simultaneously.  Economists were confounded.

According to the Philips curve there was supposed to be an inverse relationship between inflation and unemployment.  When the unemployment rate increases, the inflation rate decreases.  Conversely, when the unemployment rate decreases, the inflation rate increases.

How could it be that both were going up at once?  Of course, it took years of government intervention into the economy to pull off such a feat.  Let’s explore…

When unemployment began rising in the 1970s the U.S. Treasury did what Keynes had taught…they ran deficits and spent money to create jobs.  But, to their surprise, they did not get jobs.  Instead, something unexpected happened.  They got inflation.

When they tried it again, amazingly, they still did not get jobs.  To their chagrin, they got more inflation.  By the time Jimmy Carter left the White House, the misery index, which is the sum of the unemployment rate and the inflation rate, was rocketing toward 20 percent. Continue reading →

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