Smiling with Gratitude

Posted on November 25, 2011 by MN Gordon

The Commerce Department reported Tuesday that the economy grew at an annual rate of 2 percent in the third quarter…a downward revision from the initial 2.5 percent estimate made last month.  More importantly, it was reported that after-tax, inflation-adjusted incomes fell by 2.1 percent.  That’s the biggest drop in incomes since the third quarter of 2009.

The incomes decline could drag down the fourth quarter’s growth numbers.  Remember, consumer spending makes up 70 percent of the economy.  Declining incomes would presumably lead to declining consumer spending, and declining economic growth.

Obviously, the cornerstone of the economic recovery is jobs.  But not any old jobs will cut it.  Profitable jobs are what are needed.  Jobs that generate more revenue than they consume, contribute to business growth, and fund further investment and hiring.

Currently the economy is not creating these jobs.  In fact, on Wednesday the Labor Department reported that applications for unemployment insurance increased last week to 393,000.  That was an increase of 2,000 applications from the 391,000 reported for the prior week.

Unfortunately, the unemployment rate has been stuck around 9 percent for over two years Continue reading →

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Go Occupy Yourself

Posted on November 22, 2011 by MN Gordon

Popular movements have their messiahs.  Those eager to standup and champion the codswallop of the day.  They have little regard for substance and clear thinking; they’re enamored with the indecency of the moment.

Take Che Guevara, for instance.  The Argentine Marxist was an utter fool.  He bosh mongered throughout South and Central America spreading the good word of incomprehensible nonsense.  “In this period of the building of socialism we can see the new man and woman being born,” said Guevara.  “The image is not yet completely finished – it never will be, since the process goes forward hand in hand with the development of new economic forms.”

Guevara saw the world around him and was aghast at its crude deficiencies.  Why do some live so low in poverty while others live so high up on the hog?  The apparent injustice of it all turned his brain to mush as he set off to build what he thought would be a better world.

From the get go his chosen means to reach that end were twisted.  Rather than working for a private solution Guevara sought a political solution.  With the right government in power and the right policies in place, thought Guevara, the world could be remade in his image. Continue reading →

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Congressional Super Committee Farce

Posted on November 18, 2011 by MN Gordon

Shortly after the opening bell on Wednesday, the price of oil topped $100 per barrel…a 26 percent increase in less than two months.  What gives?

The Associated Press tells us it was the Labor Department’s Wednesday report, that consumer prices fell to 3.5 percent from 3.9 percent in October, which pushed oil’s price back above triple digits for the first time since July.  Here at the Economic Prism we don’t quite comprehend the connection.

Maybe AP is inferring that, somehow, lower consumer prices will encourage higher consumer spending, which will boost the economy, result in higher oil demand, and, thus, higher prices.  But that is just conjecture on our part since the author failed to elaborate their supposition.

Perhaps what they meant to say is that $100 per barrel oil represents the potential for increased demand butting up against a more limited supply.  Still, that’s just half the story… Continue reading →

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European Money Printing: What Could Possibly Go Wrong?

Posted on November 15, 2011 by MN Gordon

Last Friday, while many were off for Veteran’s Day, we put in a day at the office, belaboring things portentous to our clients…and by extension ourselves.  Nonetheless, we paused a moment to consider the ‘all quiet on the western front’ Armistice and today’s world we live in.

From what we gather ‘the war to end all wars’ brought a new disorder to Europe.  By the time it was over, economies were ruined, governments were defeated, and national confidences were crushed.  On top of that, the Treaty of Versailles, and its repercussions, prompted Germany to blow up its currency.  It was the rational thing to do.

One of the provisions of the treaty required Germany to make reparation payments that were impossible for their economy to cover.  To lighten the burden the German government, the Weimar Republic, began printing paper banknotes.  The results were disastrous.

Between January 1922 and November 1923 the wholesale price index rocketed from 36.7 percent to 726,000,000,000.0 percent.  By late 1923 it took 200 billion marks to buy a loaf of bread.  In effect, Germany’s money died…along with its middleclass. Continue reading →

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