The Decline of Per Capita Wealth

Posted on November 1, 2011 by MN Gordon

Yesterday was a momentous day.  According to the State of World Population 2011, published by the United Nations Population Fund, it was the day world population topped 7 billion people.  We find this to be momentous not just for the sheer size of the population, but, more importantly, for the rate at which it is increasing.

For example, at the time of Christ’s death the world’s population was around 300 million. Slowly, over the next 1800 years, the planet added 700 million more people…hitting 1 billion when John Adams was President of the United States…and causing quite a shock to the intellectuals of the day.

The world’s burgeoning population produced visions of apocalypse for English economist, Robert Thomas Malthus.  Between 1798 and 1826, he scribbled six editions of his famous treatise, An Essay on the Principle of Population, in which he predicted a massive collapse brought about by population increasing faster than the supply of food.

Of course, Malthus was dead wrong.  Just 127 years later, in 1927, world population hit 2 billion.  Then, 32 years later, in 1959, the 3 billion mark was reached.  Fifteen years later, in 1974, the population topped four billion.  Thirteen years after that, in 1987, five billion was surpassed Continue reading →

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Bringing About Our Own Special Misery

Posted on October 28, 2011 by MN Gordon

Consumer confidence laid a rotten egg in October.  The Conference Board’s index of consumer sentiment was reported Wednesday at 39.8…its lowest reading since March of 2009.  To put this in perspective, during a robust economy, consumer confidence readings are at 90 and above.

Consumer spending accounts for about 70 percent of the U.S. economy.  Hence, consumer confidence is a key indicator.  If consumers do not feel good about the direction of the economy and their income they are less likely to spend money.

Obviously, consumers don’t have much to be excited about.  Stocks have gone sideways for the last 12 years, houses are underwater, and median middle class pay has dropped 7 percent over the last decade.  According to the Conference Board, about twice as many people now expect a pay cut over the next six months as expect a raise.  Others, including recent college graduates, can’t even find a job.

For example, as reported by the Bureau of Labor Statistics, the unemployment rate for college graduates under the age of 25 is nearly 14 percent.  Considering, too, that the Class of 2009 began their career years with an average of $24,000 in student debt, there’s a good chance many of those loans will go bad Continue reading →

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The Euro is Done

Posted on October 25, 2011 by MN Gordon

The November issue of National Geographic tells of the recent discovery of the Staffordshire Hoard – a treasure of gold, silver, and garnet military objects from the early Anglo-Saxon era that had been buried in the English countryside for 1300 years.

According to the article, after Roman colonizers withdrew from Britannia around A.D. 410, Britons solicited Germanic troops from the continent to defend them against Scotti and Pict tribes invading from the west and north.  Naturally, people rarely get what they expect.

Before long the Germanic warriors were piling into Briton in hoards.  Soon the Scotti and Pict tribes were no longer the menace…the influx of people from modern Germany quickly outnumbered the natives on the island.  Then, after crowding into the island, they turned on their local allies and created their own kingdoms.

The sixth century British monk, Gildas, described the island wide bloodshed that followed in his treatise, On the Ruin of Britain.  “For the fire of vengeance…spread from sea to sea…and did not cease, until, destroying the neighboring towns and lands, it reached the other side of the island.”  The surviving Britons fled or were enslaved Continue reading →

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The Wrath of Inflation

Posted on October 21, 2011 by MN Gordon

The U.S. Bureau of Labor Statistics reported on Wednesday that inflation, as measured by the Consumer Price Index, increased 0.3 percent in September.  Increases in energy and food prices were the main contributors to the rise.  On an annualized basis, price increases in September were 3.6 percent, which is about in line with the 3.9 percent CPI increase over the last 12 months.

With an annual inflation rate of 3.9 percent you’d think the economy was running white hot.  But, alas, it is not.  The latest GDP report said the economy was expanding at an annual rate of 1.3 percent.  Accounting for inflation, the economy is growing at an annual rate of minus 2.6 percent.  In other words, the economy is shrinking.

No doubt, anyone who works for a pay check knows this is true.  Even those fortunate enough to get a small pay raise have watched, helplessly, as inflation has gobbled it up. Everyone else has lost ground…some have even lost their job.  Moreover, those on fixed incomes have experienced the double whammy of low treasury yields and rising prices.

On Wednesday the government announced that Social Security payments will increase 3.6 percent next year.  Yet, even with the increase, they will still payout 0.3 percent less in inflation adjusted terms than they did last year Continue reading →

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