A Run on the United States Government

Posted on July 15, 2011 by MN Gordon

Things are ugly out there.  The governments of the world are going broke in unison.  Over in Europe, the credit ratings of Greece, Ireland, and Portugal have been downgraded to junk bond status.  Italian and Spanish debt is sure to follow.

If just one of these countries were to default, the big banks in France and Germany, which loaned out all the money, will be wiped out.

Here in the U.S. things keep slipping and sliding along.  Congress and the President can’t figure out how to cut spending so they can raise the debt limit…if you can believe that.  But that’s not the half of it…

The economy’s taking on water like the Titanic and we have a lunatic in the Federal Reserve that’s hell bent on trying to bail it all out – again – by cranking up the printing press.

“We have to keep all the options on the table.  We don’t know where the economy is going to go,” said Federal Reserve Chairman Ben Bernanke to the House Financial Services Committee on Wednesday.  Several hours later Moody’s Investor Service placed the nation’s credit rating under review for downgrade.

No doubt, there are limits to everything.  Continue reading →

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Doomed from the Get Go

Posted on July 12, 2011 by MN Gordon

According to the National Bureau of Economic Research the Great Recession ended in June 2009.  That means the U.S. economy has been in recovery for over two years. Perhaps, semantically, this is so.  But just what type of recovery is this?

It all seemed so peculiar.  One day the newspaper headlines were proclaiming this was the worst economic collapse since the great depression.  The next day all we heard was optimism and economic recovery.

From our vantage point, after all the stimulus and monetary shenanigans from the Federal Reserve, the only notable change we observed was a rapid and prolonged stock market recovery.  We still believe this is a dead cat bounce…a suckers rally for the ages.  But with all the funny money printed over the last three years a dramatic stock market decline could be masked by monetary inflation.

Regardless, off of Wall Street, down on Main Street, where the real economy is, there is one question we can’t seem to shake when assessing the condition of today’s economy…

Namely, where are the jobs?  A simple question, indeed.  Nonetheless, a simple question without an answer.  Here’s what we mean… Continue reading →

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Default Now

Posted on July 8, 2011 by MN Gordon

It is too bad that idiots don’t warn people before they do something really stupid.  Perhaps someone of sound mind could intercept them and redirect their misguided intentions. Instead they seem to attract other kindreds…where they thrash about with self-reinforcing laughter like a pack of wild hyenas.

Take one Philip A. Contos of Parish, NY. Last Sunday he met up with a group of his friends for a helmetless protest ride.  He was, no doubt, contemplating the absurdity of helmet laws and the liberation of helmetless riding with the rider next to him when his Harley Davidson motorcycle fishtailed, sending him over the handlebars and to his death.

According to troopers, Contos would have likely survived if only he had been wearing a helmet.  Poor Contos… He didn’t stand a chance.  He was an idiot.  What’s more, all his friends were idiots too.

But in no way was Contos’ death a waste.  It proved a valuable point…you can’t legislate away stupidity.  So why bother with helmet laws to begin with?  Of course, this lesson will be far too complex for blockhead legislators to comprehend.  They’re now likely hard at it – drafting a new law banning helmetless protest rides against helmet laws.

Here at the Economic Prism we highlight this terrible tale not for amusement or enjoyment Continue reading →

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The Path of Least Resistance

Posted on July 5, 2011 by MN Gordon

The stock market hopped like a frog last week…jumping higher than in any week in over two years.  When the week was over, the DOW had climbed 5.4 percent, the S&P500 had climbed 5.6 percent, and the NASDAQ had climbed 6.2 percent.

From what we gather, stocks were boosted up by the Institute for Supply Management’s manufacturing index, which rose from 53.5 percent in May to 55.3 percent in June.  Other factors attributed to the stock market’s surge were the apparent passage of austerity measures by Greece’s parliament and the conclusion of QE2.

On the former, European finance ministers must now follow up the Greece austerity with a bailout, as promised.  On the latter, we don’t have much of an opinion. Markets knew all along when QE2 would end.  Why would they take the official end date of QE2 as a signal to buy stocks?

Regardless, we don’t think we’ve seen the last of QE. For while the stock market jumped, the real action was over in the bond market…where treasury yields jumped even more… Continue reading →

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