Three Ways to Shelter Your Cash from Inflation

Posted on June 17, 2011 by MN Gordon

Building wealth ain’t easy.  On the one hand you must pay taxes on what you make.  On the other hand inflation is continuously gnawing away at what you are able to save.  With these two forces working against you why bother trying at all?

Of course, taxes and inflation are two sides of the same coin.  What we mean is they are both products of the government.  Taxes are deliberate and disagreeable.  Inflation is subtle and hideous.

“Inflation is always and everywhere a monetary phenomenon,” said Milton Freidman.  What he likely meant is that inflation is the increase in the supply of money relative to the supply and demand for goods and services that money is traded for.  Rising prices are not inflation; rather they are the effect of an inflated monetary base.

Inflation – expanding the money supply – is caused by the government.  Inflation allows the government to pay for things they couldn’t normally afford through direct taxation.

“By a continuing process of inflation,” said John Maynard Keynes, “governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens.” Continue reading →

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On Savages and Perpetual Infancy

Posted on June 14, 2011 by MN Gordon

Last Tuesday Federal Reserve Chairman Ben Bernanke said the economic recovery was “frustratingly slow.”  By Wednesday the yield on the 10-Year Treasury Note had dropped below 3 percent.  At the same time, stocks, oil, and gold were shellacked in unison.

Obviously, people are getting a little down on the economy.  For several years now the recovery has been trudging along like a camel in quicksand and, after all this time, jobs are still scarcer than ice cubes in the Sahara desert.  What’s more, there’s nothing to show for the record stimulus, bailouts, and government gimmicks except for a national debt that has expanded well beyond what the economy can support.

All debt involves risk.  When used with caution and care, debt can help build wealth and prosperity.  Debt applied to a venture that will likely generate profitable revenue for years into the future is a risk worth taking.  Debt that’s applied to fancy dinners and exotic vacations will lead to bankruptcy.

When the financial market’s frosted over in late 2008, the Fed rained down a 100-year flood of money without reservation.  Would the money restore prosperity?  Would the spending be directed into profitable ventures?  Would it create jobs to replace the one’s being vaporized by the economic crash? Continue reading →

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How to Accumulate Wealth

Posted on June 10, 2011 by MN Gordon

On Wednesday we drove out to San Bernardino to meet with a client.  It was warm, gray, and gloomy.  Nothing like the blue sunny skies and cool breezes we left behind us at the beach.  Nonetheless, it wasn’t the dreary weather producing the melancholy aura as we entered the city…it was the economy.  For we’d passed into what has been called the Detroit of southern California.

If you’ve never been to San Bernardino, you can count it a blessing.  In statistical terms, the place falls two standard deviations left of mean on a normal bell curve distribution of the range between heaven and hell.  In common terms, the place is a hell hole.

Had there been an economic recovery, San Bernardino would’ve been the last place to know it.  Thus, any sign of recovery over the last two years had not graced the empty storefronts and blighted street corners of the downtown business area.  Still, hear at the Economic Prism we have a helpful heart and a soft spot for the down and out, so we made the trek out to the depths of the Inland Empire to offer our time and our talents…at market price.

Even though we were honoring a commitment to a project we wish we’d have passed on, we went about our business with curiosity. Continue reading →

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Let the Fun Begin

Posted on June 7, 2011 by MN Gordon

Last week Wall Street finally realized something that everyone else has known for some time…this economy stinks worse than rotten tomatoes.  After rising 14 points on Tuesday, the S&P500 dropped 45 points to close out the week.  Then, yesterday, it dropped 14 more…losing 4.6 percent over the last four trading days.

If the market’s supposed to be a forward looking animal, in this instance, it was blind to the obvious.  Namely, that the recovery is a fraud.  Anyone who works in the real world for a living knows that the recovery has been a sham since it began.

Economic growth has hardly budged.  Jobs creation has been nonexistent.  The only thing that’s improved over the last two years is the stock market, which has been boosted up by nearly $2 trillion dollars of funny money from the Federal Reserve.

Without all the heavy handed intervention by the Fed stock prices would be a lot lower.  So, too, it’s possible, after suffering a swift decline, the economy would have landed on solid ground and a real economic recovery would have begun.

Instead, following a two year delay of the inevitable, the government’s up to its eyeballs in debt, and it appears things are setting up for the great double dip. Continue reading →

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