Earlier this week, an astonishing revelation came to light regarding the fourth quarter of 2012: Instead of growth, the economy actually contracted.
According to a report from the Bureau of Economic Analysis, “Real gross domestic product—the total output of goods and services produced by labor and property in the United States—decreased at an annual rate of 0.1 percent in the fourth quarter of 2012.”
What is happening? Shouldn’t the economy be in recovery mode by now?
In a statement by the Federal Reserve on Wednesday, officials noted, “growth in economic activity paused in recent months, largely due to weather-related disruptions and other temporary factors.”
However, attributing lackluster performance to weather is generally frowned upon in most fields. Yet for the Federal Reserve, such excuses seem to be standard practice. A struggling economy conveniently supports their plan to create $85 billion per month, using nothing more than journal entries, to purchase mortgages and treasury bonds. Continue reading
Posted in Inflation, MN Gordon
Tagged collapse, dollar, federal reserve, GDP, john maynard keynes, paul krugman, QE2, QE3, QE4, treasuries
At first glance, the actions taken by government policymakers may have appeared sensible. Of course, there is no time that seems unsuitable for them to interfere with natural economic processes. In their complacency, they overlook the unintended consequences of their choices, believing they can always introduce another policy to address future issues.
Clearly, the delegates from West Germany, France, the United States, Japan, and the United Kingdom who convened at New York’s Plaza Hotel on September 22, 1985, were unaware they were unleashing a force that would be difficult to contain.
By 1985, fourteen years after Nixon dissolved any remaining ties between the dollar and gold, floating currencies had caused severe distortions in the global economy. The U.S. dollar appreciated by 50 percent from 1980 to 1985 against the Japanese yen, West German Deutsche Mark, and the British pound, which were the currencies of the next three largest economies at the time. This made it impossible for American manufacturers to compete with the higher-valued dollar. Continue reading
Posted in Inflation, MN Gordon
Tagged bank of japan, bubble, business cycle, china, crash, currency, currency wars, debt, government meddling, yen
The stock market is making notable strides, with the S&P 500 hovering close to its all-time peak of 1,565 achieved on October 9, 2007. Should we celebrate?
That’s for you to decide. However, remember what happened following the October 2007 peak: the stock market plummeted into a freefall that lasted nearly a year and a half.
By March 8, 2009, the S&P 500 had hit a low of 676, reflecting a 56.8 percent loss. Since then, the index has surged by over 120 percent. Some experts claim it will continue to rise.
It’s possible. Yet, if you believe the smart approach to stock market investing is to buy low and sell high—not the other way around—then it may not be the best moment to jump in. There’s always a chance you could buy high and sell even higher. But, akin to darting across a busy highway, the risks vastly outweigh the rewards.
Nonetheless, many individuals are eagerly rushing to invest in stocks at an unprecedented pace… Continue reading
[Editor’s note: Portions of today’s Economic Prism have been adapted from a piece published nearly a year ago titled Davos Hootenanny and Salvation Call. Here, it has been updated to reflect this year’s Davos Polka Dance.]
Pockets of Liberty
Despite the relentless efforts of reformers to confine humanity, some individuals still manage to evade their net. In the hidden corners of the Republic, the distant echoes of Saturday night festivities continue to resonate beneath the towering oak trees. Here, in defiance of all that is deemed good and proper, the uninitiated gather in the moonlight, jigging to zydeco rhythms while enjoying drinks made from corn syrup and fermented grains.
These gatherings affirm that even in an era dominated by big government, there are places in the lower 48 where freedom thrives. Undoubtedly, around the globe, there exist pockets of liberty where individuals can choose their own light bulbs without the threat of penalties.
Each of these locations is uniquely special, carrying its own rhythm. However, they all share common attributes: they are spaces where the air is fresh, the water is clean, and the inhabitants can hold their heads high. Continue reading
