Is an Economic Deluge Nigh?

Posted on May 8, 2012 by MN Gordon

Is an Economic Deluge Nigh?
By David Galland, Casey Research

If history has taught one certain lesson, it is that the less fettered an economy, the better humankind is able to do what it does best: run from trouble and run toward opportunity.  In this way mistakes are quickly resolved and progress assured.

Conversely, the deeper the muck of regulation, mandates, taxes, subsidies and other bureaucratic meddling, the slower we humans are in following our natural instincts until the point that progress is slowed or even stopped.

It is said that history doesn’t repeat itself, but it often rhymes.  In the current circumstances, it appears that enough time has passed that current generations have completely forgotten the critical connection between the ability of humans to freely pursue their aspirations and economic progress.

You can see this ignorance in the popular demand for even more, not less, meddling in the affairs of humankind.  Should this trend continue – and for reasons I will touch on momentarily, I firmly believe it will – then the aspirations of the productive minority will soon be dampened by ever higher taxes and other attempts to “level the playing field” and the global economy, already in tatters, will fall off the edge. Continue reading →

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Why There Are No Jobs

Posted on May 4, 2012 by MN Gordon

What a week.  On Tuesday the DOW finished the day at 13,279, its highest close since December 2007.  In terms of the stock market, we’ve crossed the great divide…December 2007, remember, was pre-financial crisis.

In fact, it was nearly a year before Lehman Brothers vanished from the face of the earth and black swans relentlessly descended upon the LIBOR like common ravens upon fresh Southern California road kill.  If you recall, when the sky was falling in late 2008, spread movements that were statistically not possible in a million years, somehow, happened every day.

Money market shares of the Reserve Primary Fund did the impossible…they broke the buck – falling to $0.97 cents a share.  Still, while the stock market may be back to where it was over four years ago, the world is dramatically different…

For one thing, back in December of 2007 you could buy a 10-year Treasury Note yielding 4.23 percent.  Today the 10-year Note Yields less than half that.  Of course, December 2007 was before TARP, CPFF, MMIFF, TAF, ZIRP, QE, QE2, Operation Twist, and all sorts of other harebrained schemes were put into practice to “reflate” financial markets. Continue reading →

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Mass Delusions of Cupcakes and Credit

Posted on May 1, 2012 by MN Gordon

According to the Commerce Department, the U.S. economy grew at an annual rate of 2.2 percent during the first quarter of the year.  Like the economy, something doesn’t feel quite right about this number.  But what is it, really, that should be a surprise?

The clever fellows at PIMCO have been telling everyone of a new normal – low growth, low returns – world since 2009.  Isn’t 2.2 percent GDP consistent with their thesis?

Maybe so.  But that’s if you consider 2.2 percent GDP to be real growth.  Here at the Economic Prism we have reservations.  What we mean is we’re more interested in what this number doesn’t represent than what it does.

In particular, 2.2 percent GDP doesn’t represent growth.  It represents lack of growth.  In fact, a headline GDP of 2.2 percent means the economy is not increasing at all.

More exactly, by our back of the napkin estimation, the economy’s contracting at an annual rate somewhere between negative 0.5 percent and negative 8.1 percent.  The wide differential in our estimate represents the fudge factor in CPI reporting.  Here’s what we mean… Continue reading →

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So Long, US Dollar

Posted on April 27, 2012 by MN Gordon

So Long, US Dollar
By Marin Katusa, Casey Research

There’s a major shift under way, one the US mainstream media has left largely untouched even though it will send the United States into an economic maelstrom and dramatically reduce the country’s importance in the world: the demise of the US dollar as the world’s reserve currency.

For decades the US dollar has been absolutely dominant in international trade, especially in the oil markets.  This role has created immense demand for US dollars, and that international demand constitutes a huge part of the dollar’s valuation.  Not only did the global-currency role add massive value to the dollar, it also created an almost endless pool of demand for US Treasuries as countries around the world sought to maintain stores of petrodollars.  The availability of all this credit, denominated in a dollar supported by nothing less than the entirety of global trade, enabled the American federal government to borrow without limit and spend with abandon. Continue reading →

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