A Wrong Against the Human Race

Posted on April 20, 2012 by MN Gordon

Last month brought forth new evidence that not only are things getting better, they’re getting worse too.  For instance, borrowing by Spanish banks from the ECB hit a new record in March at 227 billion euros.  The banks, in turn, loaned the money to the Spanish government through bond purchases.

Don’t ask where the ECB got the money to loan out.  For a magician’s tricks are a magnificent disappointment when you know their secrets.  Nonetheless, the cash infusion will make things better in the short term.  The banks can remain solvent and the government afloat…for now.  But, over time, this will only make things worse as the banks and the government link their fates and go further into debt.

In the United States things are equally absurd.  After Secret Service agents were caught in flagrante delicto short paying Columbian working girls, President Obama took a moment Tuesday to lambast speculators for bidding up the price of oil and pushing gas prices up at the pump.  It’s an election year, after all.  Blaming oil traders for high gas prices is a great way to procure some votes. Continue reading →

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The Consequences of Lard

Posted on April 17, 2012 by MN Gordon

The Labor Department reported last Friday that consumer prices increased 0.3 percent in March.  More importantly, however, when adjusting for the increase in prices, worker earnings fell 0.4 percent during the month.  What this means is that wage earners are losing ground at an annualized rate of 4.8 percent.

These days most workers are just grateful for having a job.  They look around and see plenty of intelligent and able people who’ve received the dreaded pink slip.  Still, when rising at the crack of dawn Monday morning to embark on another week of drudgery, some may find it discouraging to know their efforts are moving them backwards at an annual rate of nearly 5 percent.

The combination of rising prices and a soft labor market are a reflection of the economy’s anemic recovery in the face of mass money creation.  Last we checked the unemployment rate had dropped to 8.2 percent.  On the surface things appear to be improving…the unemployment rate’s going down, not up.  But, unfortunately, a small scratch below the surface reveals a less sanguine picture. Continue reading →

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How to Build Wealth and Stick it to the Government

Posted on April 13, 2012 by MN Gordon

Doing the Roth Arithmetic
By Terry Coxon, Casey Research

It’s clear to me, even though it may not be clear to you, that unless there is something very unusual about your situation, if you have a traditional IRA, you should pay the tax now and convert it to a Roth IRA.  Not just maybe, but definitely.  Not just for a small advantage but for a big one.  If you don’t convert today, you’ll ultimately surrender much more to the tax collector.  You’ll be throwing money away.  And you’ll keep throwing it away.  It’s a result neither of us wants.

Your IRA is an object in motion, with money going in and out of it and investments turning over inside of it.  It lives not just on your brokerage statement but across the years of your calendar as well.  That’s why the Roth conversion question can seem so tangled. Because of the time dimension, deciding whether to convert isn’t as simple as deciding whether to replace one stock with another.  But there is, as I’ll try to show, a way to look at the question that cuts through the complexity. Continue reading →

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Spain to ECB: Inflate or Die

Posted on April 10, 2012 by MN Gordon

The Bane of Europe

“Thou hast seen nothing yet.” – Miguel de Cervantes, Don Quixote

In the late 15th century, the gods look down from the heavens above and smiled upon Spain.  With the capture of the Emirate of Granada in 1492, Spain completed the Reconquista of the Iberian Peninsula…ending the last remnant of a 781-year presence of Islamic rule.  That same year, in a voyage funded by Queen Isabella, Christopher Columbus discovered the new world.

Soon after, Spain emerged as the first world power.

For the next 200-years Spanish treasure fleets transported vast riches of gold, silver, spices, tobacco, and agricultural goods, from the Spanish Empire in the Americas to the homeland.  Spanish rulers just knew their good fortune was limitless and without end.  But alas, the bounty was not without consequences.

Overtime the flow of wealth to Spain became an expected entitlement.  The influx of riches proved not to be a blessing, but a curse.  Like spoiled heirs of a family fortune, or an unprepared lottery winner, Spain squandered its wealth through a succession of misadventures. Continue reading →

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