Shooting Monetary Blanks

Posted on April 29, 2011 by MN Gordon

Severe storms in the Midwest and South are flooding out levees and riverbanks at a rate not seen in 74 years.  From what we gather, if levels rise much higher at the confluence of the Ohio and Mississippi rivers the Feds will blow up a levee to disperse the flood waters onto open farmland before it washes out downstream towns.

Similarly, in the world of money the Feds have released a flood of money also not seen in 74 years.  At the confluence of unemployment and inflation, if money flows rise much higher, the Feds will blow up the dollar bringing the world as we’ve always known it to an end.

On Wednesday Federal Reserve Chairman Ben Bernanke stepped up to the microphone and confirmed that he’s certifiably and demonstrably insane.  What we mean is Bernanke confirmed he’ll continue with the madman policies he’s been pursuing…

“Federal Reserve Chairman Ben Bernanke signaled on Wednesday that the U.S. central bank is in no rush to scale back its support for the economy with the labor market still in a ‘very, very deep hole,’ reported Reuters.

“The central bank’s policy-setting committee said after a two-day meeting it will complete the purchase of $600 billion in bonds in June to support the economy’s recovery, and said it would keep its balance sheet, currently at $2.67 trillion, steady for a time to ensure its support does not fade. Continue reading →

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The Origins of Central Banking

Posted on April 26, 2011 by MN Gordon

Ben Bernanke must think he’s an amateur entertainer.  Tomorrow, after 98 years of silence, the Fed Chairman will give the central bank’s first-ever press conference.

Here at the Economic Prism we’ll be watching with wide eyes and anticipation…hoping for the sort of gut busting comedy that comes from a night at the Laugh Factory.  From our perspective we are more interested in the questions Bernanke gets than the answers he gives.

No doubt, most of the questions will be predictable drivel about the federal funds rate, inflation expectations, and the end of quantitative easing.  Still, we hope someone, somewhere, someway, will ask a question that is completely and utterly unexpected, unpredictable, and uncouth.  Something like, “What are your thoughts on John Law?”

Of the many professions out there, earning one’s living as a central banker of a paper money standard is one of the more devious ventures one can pursue.  In this modern world, where smartphones keep getting smarter and waist lines keep getting wider, the business of central banking is as ridiculous as the day it was invented.

For all the conceit out there about inflation targeting, liquidity traps, and scientific management of the economy, when it comes down to it, central banking is still the work of carnival magicians. Continue reading →

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Oil Hits 32-Month High As Unrest Persists in the Middle East

Posted on April 22, 2011 by MN Gordon

Oil prices keep going up. Gas prices too.  We filled up our tank on Wednesday and paid $4.19 per gallon for the cheap stuff.  What gives?

According to the President high oil prices are caused by speculators gaming the oil futures markets…

“It is true that a lot of what’s driving oil prices up right now is not the lack of supply.  There’s enough supply.  There’s enough oil out there for world demand,” said Obama at a reelection campaign event in Annandale, Virginia, on Tuesday.

“The problem is, is that oil is sold on these world markets, and speculators and people make various bets, and they say, ‘you know what, we think that maybe there’s a 20 percent chance that something might happen in the Middle East that might disrupt oil supply.’

“‘So we’re going to bet that oil is going to go up real high.’  And that spikes up prices significantly.”

Perhaps, as the President asserts, speculators are responsible for pushing up oil prices.  But, unlike the President, we don’t consider that to be the problem. Continue reading →

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Something to Believe In

Posted on April 19, 2011 by MN Gordon

Something to Believe In

“Congress is going to have to raise the debt limit,” said Treasury Secretary Timothy Geithner on Sunday’s Meet the Press.

Poor Timothy Geithner.  Aside from the President he must have the worst job in the world.  What could be worse than presiding over the world’s reserve currency at just the moment it blows up?

No doubt, Geithner’s fighting an uphill battle.  His number one product – the U.S. Dollar – has been diluted down like an over breaded meatloaf.  Both its quality and reputation have been compromised by years of moronic fiscal and monetary policy.

On the fiscal side, the government’s run up a $14 trillion debt.  On the monetary side, the Federal Reserve’s artificially suppressed the cost of money and, if you can believe it, they’ve loaned out trillions of dollars they never had to begin with.

Now, after years and years of pushing the tab out into the future, the bill’s due.  In fact, according to Geithner the government will reach its $14.3 trillion debt limit by May 16.  What’s more, the Congressional fight to raise the debt limit may last longer than the money does. Continue reading →

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