Wednesday , December 19 2018
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MN Gordon

MN Gordon

Making sense of the latest economic policy touted by the Federal Reserve or the U.S. Treasury is an exercise in befuddlement. No doubt about it, the economics trade is overcome with an abundance of nonsense these days. This is no coincidence. M.G. Gordon of Economic Prism looks to bring clarity to the muddy waters of economic policy.

Articles by MN Gordon

How Faux Capitalism Works in America

2 days ago

Stars in the Night Sky
The U.S. stock market’s recent zigs and zags have provoked much squawking and screeching.  Wall Street pros, private money managers, and Millennial index fund enthusiasts all find themselves on the wrong side of the market’s swift movements.  Even the best and brightest can’t escape President Trump’s tweet precipitated short squeezes.
The short-term significance of the DJIA’s 8 percent decline since early-October is uncertain.  For all we know, stocks could run up through the end of the year.  Stranger things have happened.
What is also uncertain is the nature of this purge: Is this another soft decline like that of mid-2015 to early-2016, when the DJIA fell 12 percent before quickly

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The Intolerable Scourge of Fake Capitalism

29 days ago

Investment Grade Junk
All is now bustle and hubbub in the late months of the year.  This goes for the stock market too. If you recall, on September 22nd the S&P 500 hit an all-time high of 2,940.  This was nearly 100 points above the prior high of 2,847, which was notched on January 26th.  For a brief moment, it appeared the stock market had resumed its near decade long upward trend.
Chartists witnessed the take out of the January high and affirmed all was clear for the S&P 500 to continue its ascent.  They called it a text book confirmation that the bull market was still intact.  Now, just two months later, a great breakdown may be transpiring.
Obviously, this certain fate will be revealed in good time.  Still, as

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Pushing Past the Breaking Point

November 6, 2018

Schemes and Shams
Man’s willful determination to resist the natural order are in vain.  Still, he pushes onward, always grasping for the big breakthrough. The allure of something for nothing is too enticing to pass up.
Systems of elaborate folly have been erected with the most impossible of promises.  That prosperity can be attained without labor.  That benefits can be paid without taxes.  That cheap credit can make everyone rich.
Central to these promises are the central government and central planning authorities.  They take your money and, in return, they make you a dependent.  They promise you a secure retirement, and free drugs, while running a scheme that’s well beyond anything Charles Ponzi ever dreamed of.

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Tales from “The Master of Disaster”

May 24, 2018

Tightening Credit Markets
Daylight extends a little further into the evening with each passing day.  Moods ease.  Contentment rises.  These are some of the many delights the northern hemisphere has to offer this time of year. As summer approaches, and dispositions loosen, something less amiable is happening.  Credit markets are tightening.  The yield on the 10-Year Treasury note has exceeded 3.12 percent.
If yields continue to rise, this one thing will change everything.  To properly understand the significance of rising interest rates some context is in order.  Where to begin?
In 1981, professional skateboarder Duane Peters was busy inventing tricks like the invert revert, the acid drop, and the fakie thruster, in

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How to Get Ahead in Today’s Economy

May 14, 2018

“Literally On Fire”
This week brought forward more evidence that we are living in a fabricated world. The popular story-line presents a world of pure awesomeness. The common experience, however,  falls grossly short.

There are many degrees of awesomeness, up to total awesomeness – which is where we are these days, in the age of total awesomeness, just a short skip away from the Nirvana era. – Click to enlarge
What is Nirvana, you may wonder? We only know for sure that Nirvana is what the stock market has priced in – other than that, we will have to wait and see
On Tuesday, for example, the Labor Department reported there were a record 6.6 million job openings in March.  Based on the Labor Department’s data, there

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The Oil Curse Comes to Washington

May 5, 2018

Meandering Prices
Prices rise and prices fall.  So, too, they fall and rise.  This is how the supply and demand sweet spot is continually discovered – and rediscovered. When supply exceeds demand for a good or service, prices fall. Conversely, when demand exceeds supply, prices rise.

Supply and DemandSupply and demand (the curves usually shown in such charts are unrealistic, as bids and offers in the market are arranged in discrete steps). – Click to enlarge
Producers use the information communicated by changing prices to make business decisions.  High demand and rising prices inform them to increase output.  Excess supply and falling prices inform them to taper back production.
This, in basic terms, is how

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From Fake Boom to Real Bust

April 27, 2018

Paradise in LA LA Land
More is revealed with each passing day.  You can count on it.  But what exactly the ‘more is of’ requires careful discrimination.  Is the ‘more’ merely more noise?  Or is it something of actual substance?  Today we endeavor to pass judgment, on your behalf.

Normally, judgment would be passed on a Thursday, but we are making an exception. – Click to enlarge
For example, here in the land of fruits and nuts, things are whacky, things are zany. Last month, State Senator, Dick Pan, introduced Senate Bill (SB) 1424, which would require California based websites to utilize fact checkers to verify news stories prior to publishing them.
Who exactly these fact checkers would be – the moral servants

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Negative Rates: Rise of the Japanese Androids

April 17, 2018

Good Intentions
One of the unspoken delights in life is the rich satisfaction that comes with bearing witness to the spectacular failure of an offensive and unjust system. This week served up a lavish plate of delicious appetizers with both a style and refinement that’s ordinarily reserved for a competitive speed eating contest. What a remarkable time to be alive.

It seemed a good idea at first… – Click to enlarge
Many thrilling stories of doom and gloom were published across the tops of the finest digital news sites.  The main object of our satisfaction, however, was buried further down the pages, well below the latest Trump tweets and relentless reports on the global war buildup.  Nonetheless, our focus is not

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Trade War Game On!

April 9, 2018

Interesting Times Arrive
“Things sure are getting exciting again, ain’t they?”  The remark was made by a colleague on Tuesday morning, as we stepped off the elevator to grab a cup of coffee.

Ancient Chinese curse alert… – Click to enlarge
“One moment markets are gorging on financial slop like fat pigs in mud.  The next they’re collectively vomiting on themselves. I’ll tell you one thing.  President Trump’s trade war with China won’t end well.  I mean, come on.  China’s outplayed the U.S. at this game for over a quarter century.  They have the upper hand.
“Besides, what’s the point?  If we no longer buy stuff from China, then how will China buy Uncle Sam’s debt?  And the timing for all this couldn’t be worse.

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What Fed Chair Powell Forgot to Mention

March 26, 2018

Son of the Imperial City
What are the chances of Federal Reserve Chairman Jerome Powell being wrong?  The chances he’ll be wrong on the economy’s growth prospects, the direction of the federal funds rate, and inflation itself?  Our guess is his chances of being wrong are quite high.

The new central planner-in-chief. – Click to enlarge
Central banks are facing a special case of the socialist calculation problem pertaining to the financial system. Like the comrades in the former Eastern Bloc, who tried to adjust their plans based on prices they were able to observe in the capitalist West, their best bet is to simply follow market rates. Unfortunately market rates – especially at the short end of the yield curve –

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Haunted by Ghosts of the Old Eastern Bloc

February 27, 2018

Ridiculous Minutia
Jerome Powell, the new Chairman of the Federal Reserve, just completed his third week on the job.  He’s hardly had enough time to learn how to operate the office coffee maker, let alone the all-in-one printer.  He still doesn’t know what roach coach menu items induce a heinous gut bomb.

Photo credit: A. Brandon / AP – Click to enlarge
The perpetually slightly worried looking new Fed chairman Jerome Powell, here seen warily inspecting the Rose Garden at the White House. Everybody wants to know if he has a “better plan” – but there is no better plan, thus no-one has one.
Yet across the planet, folks high and low are already telling him exactly how he should do his job.  What’s more, they’re

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What Kind of Stock Market Purge Is This?

February 17, 2018

Actions and Reactions
Down markets, like up markets, are both dazzling and delightful. The shock and awe of near back-to-back 1,000 point Dow Jones Industrial Average (DJIA) free-falls is indeed spectacular. There are many reasons to revel in it.  Today we shall share a few. To begin, losing money in a multi-day stock market dump is no fun at all.  We’d rather get our teeth drilled by a dentist.  Still, a rapid selloff has many positive qualities.

Memorable moments from the annals of dentistry. – Click to enlarge
For example, the days following a market correction are full of restoration and redemption.  Like the prayer of Saint Francis of Assisi, Tuesday’s 567 point DJIA bounce brought hope where there was

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How to Buy Low When Everyone Else is Buying High

February 6, 2018

When to Sell?
The common thread running through the collective minds of present U.S. stock market investors goes something like this: A great crash is coming.  But first there will be an epic run-up climaxing with a massive parabolic blow off top.  Hence, to capitalize on the final blow off, investors must let their stock market holdings ride until the precise moment the market peaks – and not a moment more.  That’s when investors should sell their stocks and go to cash.
Certainly, this sounds like a great strategy.  But, practically speaking, how are you supposed to pull it off?  Specifically, how are you supposed to know the exact moment the stock market peaks?
Is the definitive sign of the top when your shoeshine

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The Donald Saves the Dollar

February 1, 2018

Something for Nothing
The world is full of bad ideas.  Just look around.  One can hardly blink without a multitude of bad ideas coming into view.  What’s more, the worse an idea is, the more popular it becomes. Take Mickey’s Fine Malt Liquor.  It’s nearly as destructive as prescription pain killers.  Yet people chug it down with reckless abandon.

Looking at the expression of this Mickey’s Malt Liquor tester one might initially get the impression that he is disappointed. – Click to enlarge
We assure you that is not the case – this is actually his happy face, he is probably just about to enter Nirvana. Countless taste tests prove it, see this comparison of the “entire bottom shelf” of malt liquors, or these

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Tax Reform and Trump’s Chinese Trade Deficit Conundrum

January 26, 2018

Trade Deficit with China Widens on Trump’s Watch 
Most things come easier said than done.  Take President Trump’s posture on trade with China. Trump doesn’t want a bigger trade deficit with China.  He wants a smaller trade deficit with China.  In fact, reducing the trade deficit with China is one of Trump’s promises to Make America Great Again.

Photo credit: Jonathan Ernst / Reuters – Click to enlarge
We are often willing to give Donald Trump the benefit of the doubt, despite the fact that his delivery needs a lot of work. Considering his enemies and most vociferous detractors, we reckon he must be doing something right; but we vehemently disagree with his views on trade, some of which are unfortunately becoming

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As the Controlled Inflation Scheme Rolls On

January 21, 2018

Controlled Inflation
American consumers are not only feeling good.  They are feeling great. They are borrowing money – and spending it – like tomorrow will never come.

After an extended period of indulging in excessive moderation (left), the US consumer makes his innermost wishes known (right). – Click to enlarge
On Monday the Federal Reserve released its latest report of consumer credit outstanding.  According to the Fed’s bean counters, U.S. consumers racked up $28 billion in new credit card debt and in new student, auto, and other non-mortgage loans in November. This amounted to an 8.8 percent increase in consumer borrowing.  It also ran total outstanding consumer debt up to $3.83 trillion.

US Non-mortgage

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Several Simple Suppositions and Suspicions for 2018

January 4, 2018

A New Year of Symbiotic Disharmony
The New Year is nearly here. The slate’s been wiped clean. New hopes, new dreams, and new fantasies, are all within reach. Today is the day to make a double-fisted grab for them. Without question, 2018 will be the year in which everything happens exactly as it should. Some things you will be able to control, others will be well beyond your control.
Certainly, your ability to stop your neighbor’s cat from relieving itself in your side yard is limited, barring extreme measures. What we mean is each day shall unfold before you – both good and bad – in symbiotic disharmony. You can count on it.
But what are the specifics and particulars for the year ahead? What about stocks, the

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Why Monetary Policy Will Cancel Out Fiscal Policy

January 2, 2018

Remarkable and Extraordinary Growth
Good cheer has arrived at precisely the perfect moment. You can really see it. Record stock prices, stout economic growth, and a GOP tax reform bill to boot. Has there ever been a more flawless week leading up to Christmas?

Here’s what really happened: the government’s minions confiscated everything Santa had on him when he crossed the border and then added it to GDP. – Click to enlarge
You know how it is… if something feels too good to be true…
We can’t think of one off hand. And if we could, we wouldn’t let it detract from the present merriment. Like bellowing out the verses of Joy to the World at a Christmas Eve candlelight service, it sure feels magnificent – don’t it?
The

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The Rug Yank Phase of Fed Policy

December 17, 2017

Bogus Jobs Pay Big Bucks
The political differences of today’s two leading parties are not over ultimate questions of principle.  Rather, they are over opposing answers to the question of how a goal can be achieved with the least sacrifice.  For lawmakers, the goal is to promise the populace something for nothing, while pretending to make good on it.

The short and sweet definition of democratic elections by eminent American wordsmith and political philosopher H.L. Mencken – Click to enlarge
Take the latest tax bill, for instance.  The GOP wants to tax less and spend more.  The Democrat party wants to tax more and spend even more.  We don’t recall seeing any proposals to tax less, spend less, and shrink the size of

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The Complete Idiot’s Guide to Being an Idiot

December 5, 2017

Style Over Substance
There are many things that could be said about the GOP tax bill.  But one thing is certain.  It has been a great show.
Obviously, the time for real solutions to the debt problem that’s ailing the United States came and went many decades ago.  Instead of addressing the Country’s mounting insolvency, lawmakers chose expediency without exception.  They kicked the can from yesterday to today.
Presently, there are no good options left to fix the mathematics bearing down on us all.  Hence, in the degenerate stage of an overburdened nation-state, style over substance is what counts.  Without question, Congress and President Trump played their parts to push the bill with much bravura.
On Tuesday, for

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Lessons from Squanto

November 26, 2017

Standing In Your Way
Governments across the planet will go to any length to meddle in the lives and private affairs of their citizens.  This is what our experiences and observations have shown.  What gives?
For one, politicians have an aversion to freedom and liberty.  They want to control your behavior, choices, and decisions.  What’s more, they want to use your money to do so.

As this by now famous cartoon implies, the State is essentially a gang of criminals waving a flag. – Click to enlarge
We realize that most people have a far more romantic and naïve view of the nature of the State. Some have even swallowed the propaganda slogan asserting that ”we” are the State (hint: no, “we” are not). The misguided

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How Uncle Sam Inflates Away Your Life

November 23, 2017

Economic Nirvana
“Inflation is always and everywhere a monetary phenomenon,” economist and Nobel Prize recipient Milton Friedman once remarked.  He likely meant that inflation is the more rapid increase in the supply of money relative to the output of goods and services which money is traded for.

Photo via mises.ca – Click to enlarge
Famous Monetarist School representative Milton Friedman thought the US should adopt a constitutional amendment limiting monetary inflation to 3% – 5% per year, putting inflation so to speak on autopilot.But why should there be any central bank-directed inflation at all? To his credit, in 1968 Friedman wrote the following in the American Economic Review: “[M]onetary action takes a

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The Downright Sinister Rearrangement of Riches

November 11, 2017

Simple Classifications
Let’s begin with facts.  Cold hard unadorned facts. Water boils at 212 degrees Fahrenheit at standard atmospheric pressure.  Squaring the circle using a compass and straightedge is impossible.  The sun is a star.

The sun is not just a star, it is a benevolent star. Look, it is smiling… sort of. – Click to enlarge
Facts, of course, must not be confused with opinions, which are based upon observations.  Barack Obama throws like a girl.  The Federal Register is for idiots.  Two slices of chocolate cake are one too many.  Are these opinions right or wrong?
The answer depends on who you ask.  What’s certain about opinions, however, is that like bellybuttons, everybody has one.  Moreover, unlike

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How to Survive the Winter

November 7, 2017

A Flawless Flock of Scoundrels
One of the fringe benefits of living in a country that’s in dire need of a political, financial, and cultural reset, is the twisted amusement that comes with bearing witness to its unraveling.  Day by day we’re greeted with escalating madness.  Indeed, the great fiasco must be taken lightly, so as not to be demoralized by its enormity.

Symphony grotesque in Washington [PT] – Click to enlarge
Of particular note is the present cast of characters.  Could Bill Shakespeare himself have come up with a more flawless flock of scoundrels to take the plotless narrative from comedy to tragedy?
There’s President Trump, Hillary Clinton, Paul Ryan, Mitch McConnell, Maxine Waters, Chuck Schumer,

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The Donald Can’t Stop It

October 15, 2017

Divine Powers
The Dow’s march onward and upward toward 30,000 continues without a pause.  New all-time highs are notched practically every day.  Despite Thursday’s 31-point pullback, the Dow is up over 15.5 percent year-to-date.  What a remarkable time to be alive.
President Donald Trump is pumped!  As Commander in Chief, he believes he possesses divine powers.  He can will the stock market higher – and he knows it.  For example, early Wednesday morning he blasted out the following Tweet:

“Stock Market has increased by 5.2 Trillion dollars since the election on November 8th, a 25% increase.” 

Four minutes later, he sent out another Tweet:

“…if Congress gives us the massive tax cuts (and reform) I am asking

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Federal Reserve President Kashkari’s Masterful Distractions

October 9, 2017

The True Believer
How is it that seemingly intelligent people, of apparent sound mind and rational thought, can stray so far off the beam?  How come there are certain professions that reward their practitioners for their failures? The central banking and monetary policy vocation rings the bell on both accounts.  Today we offer a brief case study in this regard.

Photo credit: Linda Davidson / The Washington Post – Click to enlarge
Minneapolis Fed president Neel Kashkari attacking a block of wood with great zeal.
Minneapolis Federal Reserve President Neel Kashkari is a man with strong convictions.  He is what the late Eric Hoffer would have classified as “the true believer.”  According to Hoffer:

“It is the true

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Fed Quack Treatments are Causing the Stagnation

October 3, 2017

Bleeding the Patient to Health
There’s something alluring about cure-alls and quick fixes. Who doesn’t want a magic panacea to make every illness or discomfort disappear? Such a yearning once compelled the best and the brightest minds to believe the impossible for over two thousand years.

Instantaneous relief! No matter what your affliction is, snake oil cures them all. – Click to enlarge
For example, from antiquity until the late-19th century, bloodletting was used to treat nearly every disease. Reputable medical references recommended bloodletting as a cure for acne, asthma, cancer, epilepsy, gout, indigestion, insanity, leprosy, pneumonia, scurvy, tuberculosis, and everything in between. Bloodletting was even

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US Debt: To Hell In A Bucket

September 20, 2017

No-one Cares…
“No one really cares about the U.S. federal debt,” remarked a colleague and Economic Prism reader earlier in the week. “You keep writing about it as if anyone gives a lick.”
We could tell he was just warming up. So, we settled back into our chair and made ourselves comfortable.
“The voters certainly don’t care about the federal debt,” he continued. “They keep electing the same spendthrifts to office. And the politicians know the voters don’t care. They also know that making more and more promises is the formula for getting reelected.
“Deep down, the aging masses know they need massive amounts of government debt to pay their social security, medicare, and disability checks.  On top of that, many of the

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The Government Debt Paradox: Pick Your Poison

September 12, 2017

Lasting Debt
“Rule one: Never allow a crisis to go to waste,” said President Obama’s Chief of Staff Rahm Emanuel in November of 2008. “They are opportunities to do big things.”
At the time of his remark, Emanuel was eager to exploit the 2008 financial crisis to raid the public treasury. With the passage of the American Recovery and Reinvestment Act in February 2009, Emanuel’s wish was granted. The Obama administration had the opportunity to do big things.
Politically, the passage of the Recovery Act was a huge success. Washington was able to dole out funds to their preferred projects like never before. What could be better for a Congressman than to direct massive amounts of funds to infrastructure, healthcare,

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How to Make the Financial System Radically Safer

September 7, 2017

Preventing the Last Crisis
Clear thinking and discerning rigor when it comes to the twisted state of present economic policy matters brings with it many physical ailments. A permanent state of disbelief, for instance, manifests in dry eyes and droopy shoulders. So, too, a curious skepticism produces etched forehead lines and nighttime bruxism.

The terrible scourge of bruxism and its potentially terrifying consequences. Curious skepticism can lead to the darnedest things, which is why Big Brother strongly recommends that citizens remain in a medication and cable TV-induced apathetic stupor. – Click to enlarge
To make this happy outcome easier to achieve, stagnation in real wages was successfully introduced a

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