On Black Swans and White Lies

“If you hear a ‘prominent’ economist using the word ‘equilibrium,’ or ‘normal distribution,’ do not argue with him; just ignore him, or try to put a rat down his shirt.”

– Nassim Taleb, The Black Swan

Facing the Unexpected

There was an old European belief that persisted for centuries. People were convinced that all swans were white. Their reasoning was founded in logic and supported by empirical evidence.

Every single swan they’d ever seen was white. It was a universal truth. A rock-solid assumption based on all the available evidence.

But then, in the late 17th century, a Dutch explorer found black swans in Australia. The one-time truth that all swans were white was instantly shattered. The existence of black swans showed how fragile knowledge and assumptions can be when faced with the unexpected.

Nearly 20 years ago, in his book The Black Swan, author and options trader Nassim Taleb described a Black Swan as an event that comes as a complete and utter shock. Something that nobody saw coming, which has a massive, widespread impact. What’s more, after it happens, we look back and convince ourselves that it was totally predictable all along. Continue reading

Posted in MN Gordon, Stock Market | Tagged , , , , | 1 Comment

The Unvirtuous Cycle of Rate Cuts

Economic Prism Articles | Insights on Gold, Stocks, Inflation & FOMCPresident Trump wants rate cuts. Stock market investors do too. As do home buyers.

Their reasons are slightly different. But they all generally believe rate cuts to be the path to greater riches and glory.

Trump wants cheaper credit for several reasons. First, he wants cheaper credit so the Treasury can better finance the U.S. government’s massive $37.5 trillion pile of debt.

The 2025 fiscal year ends September 30. Through August, the federal government has run a budget deficit of $1.97 trillion. About half of this – $933 billion – was merely to cover the interest on the debt.

If interest rates were to drop by a percentage point or two the annual debt interest could fall by several hundred billion. This may buy a little time for the U.S. government’s fiscal reckoning. But it really wouldn’t change anything.

The U.S. government is on target to run a budget deficit of $2.2 trillion for FY 2025. Lower interest rates, and thus a lower net interest payment, would only reduce the deficit to around $2 trillion – a difference of just over a half percent of the total $37.5 trillion of outstanding debt. In other words, it would do exactly diddly-squat for the nation’s finances. Continue reading

Posted in Inflation, MN Gordon | Tagged , , , , | 1 Comment

Invasive Species

The growth of government from day to day is often subtle. A new law here. Another regulation there. The imposition of an added fee. All with the best of intentions.

But over a decade – or a century – like the introduction of an invasive specie to an unsuspecting habitat, the small additions of government take over the entire landscape. The citizenry is left to contend with – and pay for – the wreckage of overgrown government.

Adding to government, however, is much simpler than subtracting from it. In fact, it is a rare day when a government takes it upon itself to shrink its scope and reach. Yet this is exactly what is happening in Argentina.

Joel Bowman, founder and author of Notes from the End of the World, has been tracking the progress of what he calls the Greatest Political Experiment of Our Age. Today we check-in with Mr. Bowman from his interim perch in Villa la Angostura, for his exclusive boots on the ground perspective.

From this remote locale, Bowman encounters Invasive Species and delivers the latest findings of Javier Milei’s chainsaw campaign to eradicate them from the administrative state. The results, thus far, are proving to be mutually beneficial to both personal freedom and economic prosperity. Continue reading

Posted in Economy, MN Gordon | Tagged , , , , | Leave a comment

How a Government Shutdown Can Restore American Independence

“Give me liberty or give me death!”

– Patrick Henry

Shutdown Season

The clock is ticking. Congress has until the end of the month to avert a partial government shutdown. Federal agencies, and their dependent employees, are counting on a last-minute deal to keep the money flowing to their coffers.

Certainly, there have been government shutdowns in the past. In fact, since 1976 there have been 20 of them. Typically, they just last for a day or two. But the most recent partial government shutdown, which took place during President Trump’s 1st term – between December 22, 2018, and January 25, 2019 – lasted for 35 days.

Government shutdowns, without question, can be highly disruptive. This is especially true in America in the year 2025 where a good part of the population is dependent on Washington in some form or another. Federal employees, contractors, businesses and individuals who rely on government services will quickly feel the pinch as federal dollars disappear. Continue reading

Posted in MN Gordon, Politics | Tagged , , , , | 3 Comments