Some individuals never seem to learn. Hand a klutz a hammer, and he’ll inevitably smash his thumb. Provide a heavy drinker with a bottle of Strawberry Boone’s Farm, and he’ll consume it until he’s in dire straits. Similarly, appoint a Princeton professor as chairman of the Federal Reserve, and he’ll print money until the economy collapses.
Printing free money can be an appealing position, especially during prosperous times. During such periods, a Federal Reserve Chairman may appear to be a genius. However, when the economy falters – as it tends to do – the façade is stripped away, revealing a central banker as a mere charlatan.
As of the first half of 2011, economic growth stands stagnantly at 0.7 percent. When inflation is taken into account, the economy is not advancing; instead, it’s regressing. Many individuals are feeling the pinch.
This week, we learned that the Consumer Confidence Index for August plummeted by 14.7 points, or nearly 25 percent, landing at 44.5. The last occasion when consumer confidence was this low was in April 2009, during the depths of the recession.
Recently, stock market movements have appeared to reward astute investors. With the exception of a notable 120-point drop yesterday, the market has been on the rise. After dipping below 11,000 last Friday morning, and despite yesterday’s troubling decline, the DOW has managed to increase by 571 points. Continue reading
While yesterday’s stock market seemed indifferent, an important revision was made last Friday. A crucial economic indicator was adjusted downwards, steering the economy closer to a recession.
According to the Commerce Department, the U.S. GDP grew at a scant 1 percent annual rate in the second quarter, down from the initial estimate of 1.3 percent. Though this is an improvement from the 0.4 percent increase in the first quarter, it leaves economic growth for the first half of 2011 at a mere 0.7 percent. Additionally, year-over-year GDP has decreased by 1.5 percent.
Historically, nine of the last eleven recessions in the post-World War II era have followed periods of GDP growth hovering at 1 percent or below. It appears we are on the brink of making it ten out of twelve. The unmistakable truth is that the economy is slowing, and awareness of this fact is widespread.
Last Friday’s Michigan Consumer Sentiment Index also painted a grim picture, dropping eight points to 55.7 in August from 63.7 in July, marking its lowest level since November 2008. Alarmingly, this index has declined nearly 20 points in just three months. Given that consumer spending constitutes 70 percent of economic growth, it is likely that GDP will follow the downward trend in consumer sentiment. Continue reading
Currently, we find ourselves in San Francisco, taking a break from our daily routines to ride the iconic cable cars along Powell Street and explore the city’s diverse neighborhoods, including Chinatown, North Beach, and Fisherman’s Wharf, accompanied by our wife and son.
As we observe our surroundings, signs of economic distress are scarcely evident. People bustle about, hotel rates are steep, and restaurants are full. A stroll through the Tenderloin might offer a different perspective, but that neighborhood has always struggled.
The weather here is cool and fog-laden. It’s said that inhaling the moist air of the bay can inspire thoughts and creativity that might otherwise elude us. We were reminded of one particular night in 1905 when 11-year-old Frank Epperson left a stirring stick in a drink he was concocting on his porch. The next day, he found the drink frozen to the stick, resulting in the invention of the Popsicle.
With that inspiration in mind, we inhaled the cool, damp air last night, hoping to tap into our inner Kerouac or Jack London in the thick bay mist. Yet, regardless of where we roam, we ultimately find ourselves unchanged.
Once again, our thoughts drift to gold. Continue reading
Our travels have led us to Pueblo, Colorado. Until recently, this place was off our radar. However, here we find ourselves, taking in life outside the Los Angeles Basin while writing to you from the banks of the Arkansas River.
For those unaware, Pueblo is situated about 45 miles south of Colorado Springs. Established as a trading settlement in the mid-19th century, the area faced raids from Utes and Jicarilla Apaches. However, for the Native Americans, their victory was short-lived, as steel mining and milling soon sparked a boom, forever changing Pueblo’s landscape.
Just yesterday, we traveled along the historic Royal Gorge railroad route beneath towering granite walls, soaring over 1,000 feet, adjacent to the winding waters of the Arkansas River. Today, our journey will take us to the over 700-year-old Anasazi dwellings leading to Pikes Peak.
Interestingly, Pikes Peak was pivotal during one of North America’s most significant gold rushes. In 1859, the rallying cry was “Pikes Peak or Bust!” as approximately 100,000 gold-seeking “Fifty-Niners” flocked to the Southern Rocky Mountains, driven by a fervent desire for wealth.
Back in those days, gold was the currency of choice. There was no Federal Reserve to print paper notes. To acquire money, one had to either trade a product or provide a service to obtain it. Continue reading