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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Life After the Day of Reckoning

Posted on October 18, 2011 by MN Gordon

The 2011 fiscal year ended on September 30th and the beans of U.S. Government revenue and spending have been counted up.  Total revenue for the year was $2.3 trillion.  Total spending for the year was $3.6 trillion.  The difference – a $1.3 trillion deficit – was made up with debt, pushing the national debt to $14.8 trillion…over 100 percent of GDP.

Just five years ago mention of a $1 trillion dollar annual budget deficit would have been shocking and unimaginable.  Back then, during the blissful days before the 2008 financial meltdown and economic fallout, a budget deficit of $500 billion was considered outrageous.  But in this brave new world, the federal government has spent $1 trillion more than it has taxed the last three years in a row.

Of course, there are consequences for actions.  Paying the interest on the debt is now the fastest growing budget category.  In 2011, net interest payments rose 15.7 percent to $227 billion.

No doubt, the U.S. Government is bleeding money.  Every month is takes over $108 billion of new debt just to keep the lights on.  So far the U.S. Government has gotten by on the generosity of its creditors and their willingness to buy treasuries at historically low rates Continue reading →

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Let Them Fail

Posted on October 14, 2011 by MN Gordon

Good jobs are in high demand these days.  Yet, unfortunately, they’re in limited supply.  Gone are the days when any old hack could show up with a tie and a smile, shuffle papers around a cubicle, surf the internet all day, drink coffee on the house, and collect a comfortable paycheck every two weeks.

To get a good job these days you must possess a financially valued skill that can turn a profit for your employer.  And, above all, you must work your ass off.  That’s our experience, at least.

Most university degrees no longer cut it.  Particularly those in soft subjects like sociology of zebras in captivity.  Recent graduates with degrees in such fluff are discovering their learned knowledge of worthless matter…is worthless.  Come to find out, it hardly qualifies them to operate an espresso bean grinder.  Who would have thought?

On Tuesday the Senate demurred to President Obama’s jobs bill, which included tacking $447 billion to the debt to create jobs the market doesn’t warrant.  This must be, without a doubt, the most intelligent thing the blockheads in the Senate have done this century.

By refusing to spend money it doesn’t have to create jobs the world doesn’t need, the government’s giving the economy a shot at making an honest recovery Continue reading →

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A Telling Sign of Things to Come

Posted on October 11, 2011 by MN Gordon

The Labor Department reported last Friday that 103,000 jobs were added in September.  Considering the lethargic state of the economy, this number could have been much worse.  Nonetheless, a quick scratch below the surface reveals the headline jobs number wasn’t quite what it first appeared.

In particular, the jobs number included the return of 45,000 communications workers that had been on strike.  If you exclude them from the jobs report, employment increased by a measly 58,000.  Still, even the official 103,000 jobs count was not enough to lower the unemployment rate from 9.1 percent.  There were also several other substandard statistics buried below the headlines in the September labor report.

For example, the average duration of unemployment marked a record high of 40.5 weeks.  In addition, close to 45 percent of the 14 million unemployed had been out of work for greater than six months – up from 42.9 percent in August.  Yet even worse, when including people who want to work, but have given up looking for a job, and people who work part time, but want to work full time, the unemployment rate increased to 16.5 percent. Continue reading →

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