What Brookfield’s Default Has to Do with You

Over more than two decades we worked off and on in Downtown Los Angeles.  We had a client for several years at 555 West 5th Street, in the tower at the base of Bunker Hill.  We’d meet several times a week.  Always in the morning.

Sometimes he would boast about his property in Coeur d’Alene, Idaho, and how he’d one day leave LA.  Other times he’d deliver us a wire brushing for events beyond our control.  One time he accused us of ‘smash and grab’ tactics for merely requesting payment of a past due invoice for contracted work that had already been delivered.

After these inspiring encounters we’d hike by the collection of derelicts and dope smokers sprawled out on the wall in front of the Central Library.  This was as we made our way back to our office at the Wedbush Center on Wilshire Boulevard near Figueroa Street.

On the corner in front of the 7-Eleven a clown appeared one day.  He had oversized shoes, a rainbow wig, face paint – the whole costume.  All day every day, rain or shine, he was there, jumping around, waving at cars and buses, and fist bumping people walking by.  Then, after about nine months, he was gone.  We never saw or heard of him again. Continue reading →

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The Creative Process of Government Destruction

“History is a record of ‘effects’ the vast majority of which nobody intended to produce.”

– Joseph Schumpeter

Unintended Consequences

It was about a year ago when IMF Director Kristalina Georgieva took part in a panel discussion hosted by CNBC.  This may have been a fairly common occasion.  The conversation, however, was entirely uncommon.

Typically, central bankers are illusive in their remarks.  They speak in code.  They avoid potentially inflammatory words like recession.  Most certainly, they never use the D-word – as in depression.

They also generally avoid taking any responsibility for their mistakes.  What’s more, they position their failures as successes.

Ben Bernanke’s ‘courage to act,’ for instance.  What a bunch of baloney.

Deep inside central bankers must know the folly of planning an economy by stretching the money supply.  Still, they want to maintain the perception that they’re masters of the universe – and so, so much smarter than you. Continue reading →

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Bondage Is Cruel

Did you know that San Francisco’s recently completed 1.7-mile Central Subway cost $1.95 billion?  That amounts to over $217,400 per foot.  On a per inch basis, this is over $18,000.

Is $18K per inch a good deal?

Currently, less than 3,000 daily riders take the Central Subway.  This represents about 0.37 percent of the city’s total population.  Perhaps for these riders it’s a good deal.  For everyone else it’s a complete rip off.

Still, this should come as no surprise.  After more than a decade of artificially low interest rates, courtesy of the Federal Reserve, reckless municipal projects are everywhere.  When borrowing is cheap, hideous waste is the standard.

Politicians, no doubt, are enamored with these mega spending projects.  They’re bold, daring, and stimulating.  Moreover, they offer countless opportunities for the politicians to buy votes.

In Los Angeles, for example, it costs $837,000 to build a single housing unit for one homeless person.  Certainly, there’s plenty of grift built into LA’s homeless industrial complex, which merely exercises the malady to keep the money flowing.  This is terrible for the city’s working and taxpaying residents.  But it’s fantastic for politicians and their friends. Continue reading →

Posted in MN Gordon, Politics | Tagged , , , , | 4 Comments

Is the Bank Crisis Already Over?

Taking the path of least resistance eventually leads to disastrous places.  Like the Alexandria Hotel in Los Angeles, circa 1990s, these are places that are best to be avoided.  Still, some people, after consistently choosing the easier and softer way, ended up there, going mad, in their SRO unit.

The same holds true for monetary policy.  Terminally intelligent policies, which favor short-term expediency, have the effect of layering society up with an abundance of long-term mistakes.  Intervening in credit markets to suppress interest rates via central bank asset purchase schemes is not without consequences.

What’s more, once set in motion these consequences cannot be readily undone.  The booms of plentiful credit must always be followed by the busts of unserviceable debt.  There’s no way around it.

Over time the easier and softer way becomes fraught with pain, upset, and turmoil.  Debt problems that could have been addressed with hard work and perseverance become all consuming.  The debt pile becomes too mega. Continue reading →

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