Author Archives: MN Gordon

     

 

 

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.

 

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 longer time to affect the price level than to affect the monetary totals and both the time lag and the magnitude of effect vary with circumstances. As a result, we cannot predict at all accurately just what effect a monetary action will have on the price level and, equally important, just when it will have that effect. Attempting to control directly the price level is therefore likely to make monetary policy itself a source of economic disturbance because of false stops and starts.” This is quite correct and was the reason why he thought discretionary central bank policy should be replaced with some fixed rule, while naively adding thatPerhaps, as our understanding of monetary phenomena advances, the situation will change.” Of course the situation will never change – the failure of the bureaucracy to centrally plan money is simply a special case of the socialist calculation problem, which cannot be overcome (as an aside, it is not all clear why students of economic history should accept that central banks have been established for anything other than nefarious reasons). The most elegant solution would of course consist of simply replacing central planning with a truly free market in money. But that would mean abandoning a major tool of political and economic control that benefits the State and its cronies. Moreover, a great many economists would have little to do in such a free market, as central banks have essentially bought the entire profession. Naturally, most economists know better than to bite the hand that feeds them.

Photo via mises.ca

 

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A Date with Dracula

The gray hue of dawn quickly slipped to a bright clear sky as we set out last Saturday morning.  The season’s autumn tinge abounded around us as the distant mountain peaks, and their mighty rifts, grew closer.  The nighttime chill stubbornly lingered in the crisp air.

 

“Who lives in yonder castle?” Harker asked. “Pardon, Sire?” Up front in the driver’s seat it was evidently hard to understand what was said over the racket made by the team of horses that drew their carriage over the Transylvanian collection of pot holes the natives quite audaciously referred to as a “road”. In fact, the thunderous clackety-clack of their hooves was slightly unnerving, not to mention the unsafe speed at which they were moving. “I said, who lives in yonder castle?”, Harker repeated, shouting this time. “Oh!”, Igor said, nodding (Igor was their coachman). “Why Sire, is castle of Count Orlok, of course”. Of course. Good thing we are about to visit Count Dracula and not Count Orlok, Harker thought. “Better known as Count Dracula”, Igor continued, still nodding, as though it needed to be emphasized. Crap. “So which is his real name?” Harker inquired, still shouting. “Depends on who you ask, Sire”, Igor informed him, “Murnau says…” Suddenly, a piercing sound rang in Harker’s ears. It was the howl of a wolf, coming from somewhere in the woods to their left. It could hardly have been louder if the wolf had been sitting in the coach right next to him. Good grief. What’s next?  To Igor he said, “Do you have lots of wolves here?” “Wolves?” Igor repeated, his tone of voice indicating mild concern. “Where wolves?” Why am I not surprised. “You have werewolves? Are there any horrors you don’t have in this shit-hole of a country?” And so it went… [PT]

 

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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]

 

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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. [PT]

 

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Pro-Growth Occurrences

An endearing quality of a late stage bull market is that it expands the universe of what’s possible.  Somehow, rising stock prices make the impossible, possible.  They also push the limits of the normal into the paranormal.

 

This happens almost every time Bigfoot is in front of a camera. [PT]

Cartoon by Gary Larson

 

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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.

 

The DJIA keeps surging… but it is running on fumes (US money supply growth is disappearing rapidly). The president loves this and has decided to “own” the market by gushing about its record run. During his campaign he professed to worry about the “giant bubble”. We happen to think that it is probably best for a president not to talk about the stock market at all, but the Donald evidently couldn’t resist. One thing that continues to be quite satisfying is this quote by Paul Krugman on election night, when stock market futures plunged after it became clear that the Donald would beat Hillary: It really does now look like President Donald J. Trump, and markets are plunging. […]  I guess people want an answer: If the question is when markets will recover, a first-pass answer is never.” Krugman’s predictions are often devastatingly wrong, but rarely this fast. [PT] – click to enlarge.

 

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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.

 

Minneapolis Fed president Neel Kashkari attacking a block of wood with great zeal. [PT]

Photo credit: Linda Davidson / The Washington Post

 

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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. [PT]

 

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Past the Point of No Return

Adventures in depravity are nearly always confronted with the unpleasant reality that stopping the degeneracy is much more difficult than starting it.  This realization, and the unsettling feeling that comes with it, usually surfaces just after passing the point of no return.  That’s when the cucumber has pickled over and the prospect of turning back is no longer an option.

 

Depravity and bedlam through the ages. The blue barge of perdition in the lower middle ferries the depraved and degenerate to their final destination, a small slice of which can be glimpsed above… [PT]

 

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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 federal debtberg, which no-one cares about (yet). We have added the most recent bar manually, as the charts published by the Fed will only be updated at the end of the quarter. The devastation wrought by the recent hurricanes in Texas and Florida gave Congress a convenient excuse to postpone the debt ceiling debate by until at least December and to wave through a more than $300 billion jump in total federal debt without much ado. It is worth noting that while the growth of the debtberg has accelerated over time, growth in US economic output has concurrently slowed down rather dramatically. The main obstacle to maintaining this state of affairs is that it will sooner or later become mathematically impossible. Perhaps the fact that people don’t care reflects a decline in mathematical literacy? Per experience, throwing more money at public education won’t help – and soon it may no longer even be possible anyway. [PT] – click to enlarge.

 

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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.”

 

Rahm Emanuel looks happy. He should be – he is the mayor of Chicago, which is best described as crisis incarnate. Or maybe the proper term is perma-crisis? Anyway, it undoubtedly looks like a giant opportunity from his perspective, a gift that keeps on giving, so to speak. [PT]

Photo credit: Ashlee Rezin / Sun-Times

 

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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. To make this happy outcome easier to achieve, stagnation in real wages was successfully introduced a number of moons ago; forced to work to exhaustion just to keep their heads above water, citizens tend to be more docile in their shrinking free time. [PT]

 

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