The Triumph of Madness

Posted on February 7, 2020 by MN Gordon

Viewing the past through the lens of history is unfair to the participants.  Missteps are too obvious.  Failures are too abundant.  Vanities are too absurd.  The benefit of hindsight often renders the participants mere imbeciles on parade.

Was George Armstrong Custer really just an arrogant Lieutenant Colonel who led his men to massacre at Little Bighorn?  Maybe.  Especially when Sitting Bull, Crazy Horse, and numbers estimated to be over ten times his cavalry appeared across the river.

Were George Donner and his brother Jacob naïve fools when they led their traveling party into the Sierra Nevada in late fall?  Perhaps.  Particularly when they resorted to munching on each other to survive the relentless blizzard.

Certainly, Custer and the Donner brothers were doing the best they could with the information available to them.  The decisions they made must have seemed reasoned and calculated at the time.  But what they couldn’t see – until it was too late to turn back – was that with each decision, they unwittingly took another step closer to their ultimate demise. Continue reading →

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How Xi Jinping will Save the World from Coronavirus

Posted on January 31, 2020 by MN Gordon

In 1349, when Black Death was ravaging Europe, many of the day’s best and brightest banded together in pursuit of a common cure.  They had little choice.  Black Death was rapidly spreading across the continent.  Nothing could stop it.

Boils were lanced with precision.  Blood was let with vigor.  But there was no escape from the plague’s instant death.  It was efficient.  It was relentless.  People would go to bed at night perfectly healthy; by morning, they’d wake up perfectly dead.

Then, at the exact moment of maximum death and despair, flagellants came to the rescue.  Processions marched to and fro, seeking relief through forcefully whipping themselves in public displays of self-mutilation.  According to the History Channel:

“Some upper-class men joined processions of flagellants that traveled from town to town and engaged in public displays of penance and punishment: They would beat themselves and one another with heavy leather straps studded with sharp pieces of metal while the townspeople looked on.

“For 33 1/2 days, the flagellants repeated this ritual three times a day. Then they would move on to the next town and begin the process over again.” Continue reading →

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The Impulses of Lunar Fed Policy Under Repo Madness

Posted on January 24, 2020 by MN Gordon

This week, while you were busy working, Jamie Dimon, CEO of JP Morgan Chase, took time out from rubbing elbows with fellow movers and shakers at the World Economic Forum in Davos, Switzerland, to share his trepidations:

“The only thing I have trepidation about is negative interest rates, QE, and the diversion between stock prices and bond prices and yield and stuff like that….  I think it’s very hard for central banks to forever make up for bad policy elsewhere, that puts them in a trap.  We’re a little bit in that trap today with rates so low around the world.”

Fair enough.  Though Dimon, in what we presume was an inadvertent omission, failed to share that his firm may have recently walked the Federal Reserve into an elaborate policy trap.  Now the Fed’s stuck.  JP Morgan’s thrown away the keys.  And Dimon’s reaped a significant windfall.

If you recall, between Monday night and Tuesday morning September 16/17 the overnight repurchase agreement (repo) rate hit 10 percent.  Short-term liquidity markets essentially broke.  The Fed had to intervene in the repo market, via overnight repo operations, to push the repo rate back below 2 percent. Continue reading →

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Living On Borrowed Time

Posted on January 17, 2020 by MN Gordon

Practicality the entirety of Congress now believes that the ability to pay should not limit the ability to promise people whatever they want.  There’s no poll of members of Congress to support this assertion.  We base it on what they’ve communicated by real, material actions.

Remember, per the Constitution, Congress – and in particular, the House of Representatives – is vested with the “power of the purse.”  They retain the authority to tax and spend public money for the federal government.  Over the last 50 years Congress has demonstrated they give less than half a rip about the government’s ability to pay.

Congress may be good at taxing.  But they’re even better at spending.  According to the Treasury Department, the annual budget deficit, the shortfall between tax receipts and spending, for the 2019 calendar year topped $1.02 trillion.  But that’s nothing…

The budget deficit for the first three months of the 2020 fiscal year, which started in October, is up 12 percent over this time last year. Continue reading →

Posted in Government Debt, MN Gordon | Tagged , , , , | 21 Comments