When the Whole Paper Edifice Collapses

Posted on August 9, 2011 by MN Gordon

There was massive carnage on Wall Street yesterday – again.  No doubt, it makes for some exciting headlines.  But here at the Economic Prism we won’t take your time to ponder the stock market’s precipitous decline.  For, today, we’re more interested in the story behind the story.  What we mean is, today we’re more interested in not the stock market; but, rather, the credit market…and what inferences it offers.

For example, society’s willingness to damage itself is increasing by the day.  We don’t have hard facts or quantifiable evidence to back this assertion.  But that doesn’t make it any less so.  Our wide eyed observations and pragmatic experience supports the swelling notion that the logic of collective action has gone insane…civilization could cut its nose off to spite its face at any moment.

Late Friday, Standard & Poor’s downgraded U.S. government debt from AAA to AA+.  In doing so, Standard & Poor’s was merely recognizing what everyone who has actually thought about it already knew to be true…the credit worthiness of the U.S. government has become suspect.  Quite frankly, without massive spending cuts and massive tax increases – or massive amounts of money printing and massive inflation – the government will never be able to repay the massive amounts of money it has borrowed. Continue reading →

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When the Voters Get Whacked Again

Posted on August 5, 2011 by MN Gordon

Yesterday, at opening bell, stocks paused for a moment and then barfed all over themselves.  After that, they did it again…and again.  When it was over the DOW had plunged 512 points and Wall Street had fully freaked out.

Is this a sign of things to come or a fantastic opportunity to buy the dip?  We’ll soon find out…

But we won’t dwell on it today.  For we have bigger concerns on our mind than the stock market…like a fading economy.  And the government’s proclivity to do something remarkably stupid to try and fix it.

Public faith in the government’s ability to control the economy is declining.  And if it’s not, it should be…at least that’s what we think.  The government, of course, will keep trying to prop things up until the tallest mast of the ship of state finally submerges underwater.

Nonetheless, we won’t know if the collective masses want more bailouts or not until the next economic decline.  The government, no doubt, will be quick to act with stimulus and recovery acts and promises to save us from ourselves.  The way things are going, we may soon get to see the unveiling of the next economic fix… Continue reading →

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Deliver Us From Idiots

Posted on August 2, 2011 by MN Gordon

A central benefit of the government’s debt ceiling calamity was the outstanding comedy it provided.  We’ll certainly miss the B-rated entertainment.  While it’s unfortunate a default was avoided, the whole hullabaloo served up some tasty performances.

President Obama, for one, was hilarious.  Has there ever been a more comical buffoon in high office?

We can hardly look at the man without doubling over in sidesplitting laughter.  And when he opens his mouth we fall out of our chair…

“Make no mistake – for those who reflexively opposed tax increase on anyone, a lower credit rating would be a tax increase on everyone,” warned Obama on Sunday, with the clever backwards logic of a forward thinking liberal.

Then there was House Speaker John Boehner… He seems like an honest fellow, by Washington standards.  But his southwestern Ohio upbringing made it near impossible for him to negotiate with those who don’t walk or talk entirely upright.  Maybe we shouldn’t fault the man for this.  Nonetheless, we got quite a chuckle as proposal after proposal was rejected.

The rest of the cast – Mitch McConnell, Harry Reid, Chuck Schumer – you name it…all clowns. Continue reading →

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Admit Defeat of the Social Utopia

Posted on July 29, 2011 by MN Gordon

Production is the End

“The economic goal of any nation, as of any individual, is to get the greatest results with the least effort.  The whole economic progress of mankind has consisted in getting more production with the same labor,” began economist and author Henry Hazlitt in Chapter 10 of his book Economics In One Lesson, first published over 65 years ago.

According to Hazlitt, by maximizing production, full employment becomes a necessary byproduct.  In short, said Hazlitt, “production is the end, employment merely the means.”

Unfortunately, this simple and obvious insight was lost on the United States’ central planners when the economy cracked in 2008.

Goaded by academic elites, like Paul Krugman, they set about to solve the unemployment problem with massive amounts of government spending without considering what productive value it would provide.  They sought to stimulate new jobs by cranking up the printing press and directing and redistributing wealth through the visible and heavy hand of government.

Deficit spending, which had been out of control for decades, was rocketed into the fourth dimension.  Continue reading →

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