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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

Simple Math of Bank Horse-Puckey

2 days ago

The Raw Deal
We stepped out on our front stoop Wednesday morning and paused to take it all in.  The sky was at its darkest hour just before dawn.  The air was crisp.  There was a soft coastal fog.  The faint light of several stars that likely burned out millennia ago danced just above the glow of the street lights.
After a brief moment, we locked the door behind us and got into our car.  Springtime southern California mornings are exquisitely pleasant.  The early morning drive to downtown Los Angeles, on the other hand, is exquisitely painful.
Nonetheless, we make the best of it like we make the best of a trip to the dentist – or a visit with our accountant.  If anything, it affords us the opportunity to do

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Hell To Pay

7 days ago

Behind the Curve
Economic nonsense comes a dime a dozen.  For example, Federal Reserve Chair Janet Yellen “think(s) we have a healthy economy now.”  She even told the University of Michigan’s Ford School of Public Policy so earlier this week.  Does she know what she’s talking about?

Somehow, this cartoon never gets old… – Click to enlarge
If you go by a partial subset of the ‘official’ government statistics, perhaps, it appears she does.  The unemployment rate is at 4.5 percent, which is considered full employment.  What’s more, inflation is ‘reasonably close’ to the Fed’s 2-percent inflation target.  But what does this mean, really?
According to Fed Chair Yellen, it means that now’s the time to tighten up the

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March to Default

March 25, 2017

Style Over Substance
“May you live in interesting times,” says the ancient Chinese curse.  No doubt about it, we live in interesting times.  Hardly a day goes by that we’re not aghast and astounded by a series of grotesque caricatures of the world as at devolves towards vulgarity. Just this week, for instance, U.S. Representative Maxine Waters tweeted, “Get ready for impeachment.”

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Well, Maxine Waters is obviously right – impeaching the president is an urgent task of the utmost importance. As everybody knows, he is best friends with Vladimir Putin, the shirtless barbarian who rules the Evil Russian Empire (they were seen drinking kompromat together in Moscow, a vile Russian liquor that reportedly

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The Long Run Economics of Debt Based Stimulus

March 18, 2017

Onward vs. Upward
Something both unwanted and unexpected has tormented western economies in the 21st century.  Gross domestic product (GDP) has moderated onward while government debt has spiked upward.  Orthodox economists continue to be flummoxed by what has transpired.

What happened to the miracle? The Keynesian wet dream of an unfettered fiat debt money system has been realized, and debt has been duly expanded at every opportunity. Although the fat lady has so far only cleared her throat (if quite audibly, in 2008) and hasn’t really sung yet, it is already clear that calling this system careening toward a catastrophic failure. – Click to enlarge
Here is the United States, since the turn of the new millennium

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When Trumponomics Meets Abenomics

February 11, 2017

Thirty Year Retread
What will President Trump and Japanese Prime Minister Shinzo Abe talk about when they meet later today? Will they gab about what fishing holes the big belly bass are biting at? Will they share insider secrets on what watering holes are serving up the stiffest drinks? [ed. note: when we edited this article for Acting Man, the meeting was already underway]
Indeed, these topics are unlikely. Rather, what they’ll be discussing is cooperative trade, growth, and employment policies between their respective national economies. They’ll also talk about currency debasement opportunities.
Soon enough, perhaps by the time you read this, you’ll be able to peruse the headlines and garner soundbites of their

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Don’t Blame Trump When the World Ends

February 4, 2017

Alien Economics
There was, indeed, a time when clear thinking and lucid communication via the written word were held in high regard. As far as we can tell, this wonderful epoch concluded in 1936. Everything since has been tortured with varying degrees of gobbledygook.
One should probably not be overly surprised that the abominable statist rag Time Magazine is fulsomely praising Keynes’ nigh unreadable tome. We too suspect that this book has actually lowered the planet-wide IQ – in fact, similar to Marx’ Das Kapital, it has done permanent damage. We have to admit that we have read it ourselves (and what a slog it was!) – contrary to Keynes himself, who once published a scathing critique of Mises’ Theory of Money and

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Adventures in Currency Debasement

January 30, 2017

Rekindling the Dollar Debasement Strategy
The U.S. dollar, as measured by the dollar index, has generally gone up since mid-2014. The dollar index goes up when the U.S. dollar gains strength (value) against a basket of currencies, including the euro, yen, pound, and several others. Conversely, the dollar index goes down when the U.S. dollar loses value.
Between July 30, 2014 and December 28, 2016, the dollar’s value, as measured by the dollar index, increased from 79.78 to 103.30 – or 29 percent. Since then, the dollar index has dropped to about 100. In addition, President Trump has said that the dollar is “too strong” and Treasury Secretary Steven Mnuchin has called the dollar “excessively strong.”
President Trump

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With Trump Optimism of Small Business Soars

January 28, 2017

Pledges for Trump
“You boys know what makes this bird go up?  Funding makes this bird go up.  That’s right.  No bucks, no Buck Rogers.”
– Gordon Cooper and Gus Grissom, The Right Stuff (film)

Things are looking up for the United States economy in 2017.  You can just feel it.  Something great is about to happen.

Sam Sheppard in “The Right Stuff” – a 1983 docudrama about the Mercury 7 program and “the seats-of-the-pants approach of the people involved in the space program” (according to IMDB).

Photo credit: Ladd Company – Click to enlarge
Earlier this week, for example, after meeting with the incoming President, Bayer and Monsanto announced they will spend at least half of their agriculture research and

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Trump’s Plan to Close the Trade Deficit with China

January 14, 2017

Rags to Riches
Jack Ma is an amiable fellow.  Back in 1994, while visiting the United States he decided to give that newfangled internet thing a whirl.  At a moment of peak inspiration, he executed his first search engine request by typing in the word beer.
The search results had such a profound impact on Ma that he returned home to China and immediately started his first internet business.  After several tries he hit it big with Alibaba.  So much so that he’s accumulated a net worth of $27.1 billion USD – over 7.3 times more than President-elect Trump.  Not a bad rags to riches story for a poor Chinese school teacher.
Indeed, Ma takes a shrewd, yet casual, approach to business.  Back in 2014, he got a little

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Global Recession and Other Visions for 2017

January 2, 2017

Conjuring Up Visions
Today’s a day for considering new hopes, new dreams, and new hallucinations.  The New Year is here, after all.  Now is the time to turn over a new leaf and start afresh. Naturally, 2017 will be the year you get exactly what’s coming to you. Both good and bad.  But what else will happen?
Here we begin by closing our eyes and slowing our breath.  We let our mind role back into the gray matter of our brain.  We wait patiently for new neurological connections to open up.  Then, ever so subtly, visions of the year ahead come into focus.
Will stocks go up or down?  What about gold and Treasury bonds?  Will the economy expand or contract?  Are we fated for World War III?  Who will win the Super Bowl?

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Why the Fed Destroyed the Market Economy

January 1, 2017

What Have You Done for Me Lately?
Swing voters are a fickle bunch.  One election they vote Democrat.  The next they vote Republican. For they have no particular ideology or political philosophy to base their judgment upon.

Swing VotersSwing Voters – Click to enlarge

Humphrey-Hawkins Act: Fed’s Dual Mandate
The Humphrey-Hawkins Act of 1978 expanded the Fed’s job, charging it with maintaining full employment, too. The Fed shouldered this new responsibility with the lusty enthusThey don’t give a rip about questions of small government or big government.  Nor do they have any druthers about the welfare or warfare state.
In effect, they really don’t care.  What’s important to the swing voter is much simpler.  In

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Wreck the Halls

December 30, 2016

Arrested Development
Despite the best efforts of the bulls to make history happen, they’ve been unable to ‘git-r-done.’  At the time of this writing, the Dow is facing another bout of arrested development; it has yet to notch 20,000 for the very first time.
What a feat it will be when this remarkable, but trivial, event comes to pass.  After a near eight year run, the Dow will likely eclipse this exquisitely round numeric threshold in the very near future.  Shouldn’t such an achievement – and the associated wealth effect – have made us all rich?
Apparently not.  For on the other side of the ledger a distinct, yet somehow related milestone is imminently approaching.  The U.S. National Debt is at $19.9 trillion.

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Has the Fed Turned “Hawkish?”

December 18, 2016

Juiced
Stimulus, in a general sense, is something that causes an action or response.  A ringing alarm clock may prompt someone to exit their slumber.  Or a fist to the gut may force someone to gasp for breath.
Stimulus can come in many forms and varieties.  It can come in the form of a stick; do this and you won’t get whacked over the head.  So, too, it can come in the form of a carrot; do that and you’ll get a reward.

A classic case of gut-punch stimulus application. Now, all you have to do is imagine that the big person being stimulated is the economy. What should be your next question? Right! Will it achieve escape velocity? – Click to enlarge
Other forms of stimulus can produce a short, burst like, reaction.

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Smart Programs of Capital Destruction

December 12, 2016

Too Smart to Think
These days everything must be smart.  There are smart cities, smart grids, smart policies, smart TVs, smart cars, smart phones, smart watches, smart shoes, and smart glasses.  There’s even something called smart underwear.
Before long everything around us will be so smart we’ll no longer have to do one critically important thing.  We’ll no longer have to think; smart algorithms will think for us.  What’s more, the possibilities for not thinking are seemingly limitless.
Just this week, for instance, in an effort to sound smart, Chicago Fed President Charles Evans indirectly advised President elect Donald Trump that fiscal policy must be “smart.”  Presumably, what Evans means by this is that

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Smart Programs of Capital Destruction

December 12, 2016

Too Smart to Think
These days everything must be smart.  There are smart cities, smart grids, smart policies, smart TVs, smart cars, smart phones, smart watches, smart shoes, and smart glasses.  There’s even something called smart underwear.
Before long everything around us will be so smart we’ll no longer have to do one critically important thing.  We’ll no longer have to think; smart algorithms will think for us.  What’s more, the possibilities for not thinking are seemingly limitless.
Just this week, for instance, in an effort to sound smart, Chicago Fed President Charles Evans indirectly advised President elect Donald Trump that fiscal policy must be “smart.”  Presumably, what Evans means by this is that

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Attaining Self-Destruct Velocity

December 3, 2016

Bad Monday
Some Monday mornings are better than others.  Others are worse than some.  For one Amazon employee, this past Monday morning was particularly bad.
No doubt, the poor fellow would have been better off he’d called in sick to work.  Such a simple decision would have saved him from extreme agony.  But, unfortunately, he showed up at Amazon’s Seattle headquarters and put on a public and painful display of madness.
From what we gather, upon arrival, he blasted out an email to hundreds of coworkers, including Chief Executive Officer Jeff Bezos, outlining several reservations he had with the terms of his “Performance Improvement Plan”.
After that, he executed a flawless swan dive off Amazon’s 12-story Apollo

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Celebrating this Land of Absurdity

November 26, 2016

Myths and Legends
“Myths and legends die hard in America,” remarked Hunter S. Thompson in The Great Shark Hunt, nearly 40-years ago.
Uncompromising independence, rugged individualism, and unbounded personal freedom were once ideals essential to the American character. According to popular American folklore, they still are. We have some reservations.
In practice, the principles that gave rise to the great myths and legends of America died long ago. Freedom. Liberty. Independence. Limited representative government. Sound money. Private property rights. A humble and esteemable populace. Avoidance of foreign entanglements. Rafting down the Mississippi River.

Money Sucking Vortex
These concepts, in reality, faded away

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Putting an End to the Regulatory Industry

November 22, 2016

Gross Regulatory Overburden
Corporate life in America these days is fraught with tedium.  First the MBAs imposed their silly six sigma processes and reduced workers to mere widgets. Then the regulators went through and squashed out any fun that remained.
Gone are the days when shrewd eccentrics could get rich using techno-babble to hawk the Turbo Encabulator.  Alas, there are rules and regulations stymieing all creativity.  In fact, as a matter of law, such restrictions are shoved in the workers’ face each morning as they fill up their morning cup of coffee.

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Bud Haggert presents the ground-breaking Turbo Encabulator! This thing has practically everything. Unilateral phase detractors!

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The One Thing that Will Change Everything

November 6, 2016

Ticking Time Bomb
“There are more things in heaven and Earth, Horatio, than are dreamt of in your philosophy.”
– William Shakespeare, Hamlet

The American populace counts down to Election Day with impatient intent. Will their party man occupy the White House come January 21, 2017? Or will their party woman occupy a federal prison cell?
These are questions that only the good wisdom of time can answer. Here at the Economic Prism we watch with indifferent curiosity. We don’t think either candidate’s worthy of high office. But we’re eager to know the election outcome, nevertheless.
The real noteworthy thing taking place today, that will have a real impact on your life, has nothing to do with who will be the next

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Shrewd Financial Analysis in the Year 2016

September 4, 2016

[unable to retrieve full-text content] “Markets make opinions,” says the old Wall Street adage. Perhaps what this means is that when stocks are going up, many consider the economy to be going great. Conversely, when stocks tank it must be because the economic sky is falling.

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Yarns, Mysteries, and the CPI

August 22, 2016

No CPI Change
Several ill-defined economic data points were unveiled this week.  Namely, the Labor Department’s July consumer price index report.  According to the government data, on whole, consumer prices for the month didn’t change one iota.
Reportedly, energy prices went down, food prices were unchanged, and all other items slightly increased.  So when the official number crunchers tallied them all up, the subtractions washed out with the additions.  Thus, the reported CPI came in at exactly 0.0 percent.
This number is strictly scientific, of course.  Independent teams of research grunts could easily replicate it with precision.  No guess work.  No fudge factors.  All seasonal adjustments and hedonic

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The Great Stock Market Swindle

August 15, 2016

Finding and filling gaps in the market is one avenue for entrepreneurial success.  Obviously, the first to tap into an unmet consumer demand can unlock massive profits.  But unless there’s some comparative advantage, competition will quickly commodit…

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Visions of Tomorrow from the Permanently High Plateau

August 1, 2016

Somewhere, someone first said “bull markets don’t die of old age.”  We suppose this throwaway phrase was first uttered in a time and place much like today.  That is, in the midst of a protracted bull market where stock prices had detached from the as…

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More Signs the End is Nigh

July 22, 2016

“What has been will be again, what has been done will be done again; there is nothing new under the sun,” explained Solomon in Ecclesiastes, nearly 3,000 years ago. Perhaps the advent of negative yielding debt would have been cause for Solomon to rec…

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Bank of Japan: Destination Mars

July 18, 2016

One of the more preposterous deeds of modern central banking involves creating digital monetary credits from nothing and then using the faux money to purchase stocks.  If you’re unfamiliar with this erudite form of monetary policy this may sound rath…

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Larry Summers Wants to Give You a Free Lunch

July 10, 2016

The existing capital stock continues to be frittered away at the expense of savers and retirees.  Nonetheless, central bankers don’t give a doggone about it.  This, after all, is one consequence of roughly eight years of near zero interest rate policy.

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Quitting the Cucumber Affair

June 27, 2016

Vince Lombardi, the famous American football coach, once said, “Winners never quit and quitters never win.”  Maybe he meant that winners overcome obstacles to reach their goals while quitters give up and fall short… or something to that effect.

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Down Go the Hopes and Dreams of Three Generations

June 19, 2016

On Wednesday, Janet Yellen pressed on the broken buttons again.  After the two day FOMC meeting, the Fed Chair announced they’d continue pressing the federal funds rate down to just a ¼ to ½ percent – effectively zero.  What type of insanity is this?

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A Darwin Award for Capital Allocation

June 10, 2016

Distilling down and projecting out the economy’s limitless spectrum of interrelationships is near impossible to do with any regular accuracy.  The inputs are too vast.  The relationships are too erratic.

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Guided By Nonsense

June 3, 2016

“Read the directions and directly you will be directed in the right direction.” — Lewis Carroll U.S. consumers are at it again.  After a seven year hiatus they’re once again doing what they do best.  They’re buying stuff.

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