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MN Gordon

MN Gordon

MN Gordon is President and Founder of Direct Expressions LLC, an independent publishing company. He’s the Editorial Director and Publisher of the Economic Prism – an E-Newsletter that brings clarity to the muddy waters of economic policy and targets investment opportunities for acquiring considerable wealth. The Economic Prism is written peering through a prism of free market principles, limited government, and individual liberty.



Articles by MN Gordon

How Uncle Sam Inflates Away Your Life

3 days ago

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

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Is Fed Chair Nominee Jay Powell, Count Dracula?

13 days ago

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,

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How to Survive the Winter

20 days ago

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]
 

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, Nancy Pelosi, Robert Mueller, the Podesta Brothers, all of Congress; the list of political

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The Downright Sinister Rearrangement of Riches

27 days ago

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]
 

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 free drugs from the government, everyone is in fact entitled to their own opinion.

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Tales From a Late Stage Bull Market

October 21, 2017

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
 

Last week, for instance, there was a Bigfoot sighting near Avocado Lake in Fresno County, California.  But it wasn’t just one Bigfoot.  According to a local farmer, there was a family of five or six Bigfoot running across his ranch in the middle of the night.  Paranormal expert Jeffery Gonzalez offered the following Bigfoot sighting anecdote:
 
“One of them, which was extremely tall, had a pig over its shoulder.  And the five scattered and the one

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The Donald Can’t Stop It

October 14, 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.
 
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

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Federal Reserve President Kashkari’s Masterful Distractions

October 7, 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.
 
Minneapolis Fed president Neel Kashkari attacking a block of wood with great zeal. [PT]
Photo credit: Linda Davidson / The Washington Post
 

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 believer’s ability to ‘shut his eyes and stop his ears’ to facts that do not deserve

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Fed Quack Treatments are Causing the Stagnation

September 30, 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. [PT]
 

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 used to treat hemorrhaging.
The practice was simple enough. A surgeon, often a

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Janet Yellen’s 78-Month Plan for the National Monetary Policy of the United States

September 22, 2017

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]
 

In late November 2008, Federal Reserve Chairman Ben Bernanke put in place a fait accompli.  But he didn’t recognize it at the time.  For he was blinded by his myopic prejudices.

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To Hell In A Bucket

September 19, 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 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

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The Government Debt Paradox: Pick Your Poison

September 9, 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.”
 
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
 

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,

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How to Make the Financial System Radically Safer

September 1, 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. 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,

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Calling Mitch McConnell’s Debt Ceiling Bluff

August 25, 2017

Sotto Voce Declarations
Senate Majority Leader Mitch McConnell woke up on the wrong side of the bed on Monday.  Who could blame him?  His summer vacation’s been ruined.  President Trump’s been riding him all month like a pack mule.
 
 
The spoiler of Mitch’s summer vacation. People should generally avoid finding themselves on the receiving end of the master Tweeter’s fire and fury mode if they suffer from conditions such as geographic distance insufficiency or complete lack of nuclear deterrent syndrome. [PT]
 

What’s more, on Monday McConnell had to rise early and put on his suit and tie like an ordinary working stiff.  While his Congressional cohorts were busy vacationing in their summer recess, McConnell had important business to tend to that couldn’t wait until the return of

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Why There Will Be No 11th Hour Debt Ceiling Deal

August 19, 2017

Milestones in the Pursuit of Insolvency
A new milestone on the American populaces’ collective pursuit of insolvency was reached this week. According to a report published on Tuesday by the Federal Reserve Bank of New York, total U.S. household debt jumped to a new record high of $12.84 trillion during the second quarter. This included an increase of $552 billion from a year ago.
 
US consumer debt is making new all time highs – while this post GFC surge is actually relatively tame, corporate and government debt have in the meantime exploded into the blue yonder. Nevertheless, this means consumers are also highly vulnerable to the coming crisis (which will look different from the last one, but will be perceived as just as, if not more devastating). [PT] – click to enlarge.
 

Moreover,

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Prepare for Another Market Face Pounding

August 11, 2017

“Better than Goldilocks”
“Markets make opinions,” goes the old Wall Street adage.  Indeed, this sounds like a nifty thing to say.  But what does it really mean?
 
The bears discover Mrs. Locks in their bed and it seems they are less than happy. [PT]
 

Perhaps this means that after a long period of rising stocks prices otherwise intelligent people conceive of clever explanations for why the good times will carry on.  Moreover, if the market goes up for long enough, the opinions become so engrained they seek to explain why stock prices will go up forever.
After nine years of near uninterrupted stock market gains, new opinions are being offered to explain why the stock market will be bathed in sunshine indefinitely.  For example, the late-1990s term Goldilocks is again being used to

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Yanking the Bank of Japan’s Chain

August 4, 2017

Mathematical Certainties
Based on the simple reflection that arithmetic is more than just an abstraction, we offer a modest observation.  The social safety nets of industrialized economies, including the United States, have frayed at the edges.  Soon the safety net’s fabric will snap. This recognition is not an opinion.  Rather, it’s a matter of basic arithmetic.  The economy cannot sustain the government obligations that have been piled up upon it over the last 70 years.
 
Growing wrinkle coefficient… as the global population increasingly ages, the “pay-as-you-go” social security and pension Ponzi schemes of developed welfare states are inexorably careening toward insolvency. [PT]
 

In other words, the post-World War II boom is nearly over and the bills are coming due.  What’s more,

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Views From the Top of the Skyscraper Index

July 31, 2017

Views From the Top of the Skyscraper Index
On a warm Friday Los Angeles morning in spring of 2016, we found ourselves standing at the busy corner of Wilshire Boulevard and South Figueroa Street.  We were walking back to our office following a client wire brushing for events beyond our control.  But we had other thoughts on our mind.
 
Iron workers (the non-distraught variety) atop the 10 ton spire of the Wilshire Grand Center in Lost Angeles. This image is vaguely disconcerting… we can’t help thinking that an unexpected gust of wind  could have proven quite disruptive to this show of nonchalant equanimity. [PT]
Photo credit: Gary Leonard
 

Standing amid a mob of pedestrians, we gazed up at the skeleton frame of what would become the Wilshire Grand Center.  For the first time in several

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Congress’s Radical Plan to End Illegal Money

July 21, 2017

What Constitution?
One of the many downfalls of being the United States Secretary of the Treasury is the requirement to place one’s autograph on the face of the Federal Reserve’s legal tender notes. There, on public display, is an overt record of a critical defect.  A signature endorsement of a Federal Reserve note by the Treasury Secretary represents their personal ratification of unconstitutional money.
 
 
 
There it is, plain as day. The former treasury secretary clearly put his signature on money with highly dubious legal credentials. Evidently he must have found it agreeable though. [PT]
 

If you recall, Article I, Section 8, of the U.S. Constitution empowers Congress – not the Federal Reserve – to coin money and regulate its value.  What’s more, Article I, Section 10, specifies

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Adventures in Quantitative Tightening

July 15, 2017

Flowing Toward the Great Depression
All remaining doubts concerning the place the U.S. economy and its tangled web of international credits and debts is headed were clarified this week. On Monday, Mark Yusko, CIO of Morgan Creek Capital Management, told CNBC that:
 
“…we’re flowing toward the path of 1928-29 when Hoover was president. Now Trump is president. Both were presidents with no experience who come in with a Congress that is all Republican, lots of big promises, lots of things that don’t happen and the fall is when people realize, ‘Wait, it hasn’t played out the way we thought.’ [By the fall], we’ll have a lot more evidence of declining growth. Growth has been slipping.”
 
A famous bad juju moment – the crash of 1929. Two of the annotations require a bit of elaboration. The

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Tales from the FOMC Underground

July 7, 2017

A Great Big Dud
Many of today’s economic troubles are due to a fantastic guess.  That the wealth effect of inflated asset prices would stimulate demand in the economy.
The premise, as we understand it, was that as stock portfolios bubbled up investors would feel better about their lot in life.  Some of them would feel so doggone good they’d go out and buy 72-inch flat screen televisions and brand-new electric cars with computerized dashboards on credit.
 
The Wilshire 5000 total market index vs. federal debt and real GDP (indexed, 1990=100) – mainly there is an ever wider gap between asset prices and the underlying economic output, and although federal debt has grown by leaps and bounds in the Bush-Obama era, it can’t hold a candle to asset price inflation either. If asset prices were an

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Work is for Idiots

June 30, 2017

Disproportionate Rewards
The International Monetary Fund reported an unpleasant outlook for the U.S. economy on Wednesday.  The IMF, as part of its annual review, believes the U.S. economic model isn’t working as well as it could to generate shared income growth.
 
Supping with the IMF (we recommend trying to avoid invitations to structurally adjusted suppers if possible. Their air of finality is reportedly unbearable). [PT]
 

On the same day, in an unrelated interview on PBS Newshour , billionaire investor Warren Buffett offered a similar outlook:
 
“The real problem, in my view, is — this has been — the prosperity has been unbelievable for the extremely rich people.
“If you go to 1982, when Forbes put on their first 400 list, those people had [a total of] $93 billion.  They now have

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Dudley in a Good Place

June 26, 2017

Crashing Unemployment
Dear Mr. Dudley, Your recent remarks in the wake of last week’s FOMC statement were notably unhelpful. In particular, your explanation that further rate hikes are needed to prevent crashing unemployment and rising inflation stunk of rotten eggs. Quite frankly, crashing unemployment is a construct that’s new to popular economic discourse, and a suspect one at that. Years ago, prior to the nirvana of globalization, the potential for wage inflation stemming from full employment was the main concern.
 

US unemployment rate vs. labor force participation rate. The employment situation may not be as all-around copacetic as the U3 unemployment rate seems to indicate… just a hunch.
 

Now that the official unemployment rate’s just 4.3 percent, and wages are still down in

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Monetary Madness and Rabbit Consumption

June 17, 2017

Down the Rabbit Hole
“The hurrier I go, the behinder I get,” is oft attributed to the White Rabbit from Lewis Carroll’s, Alice in Wonderland.  Where this axiom appears within the text of the story is a mystery.  But we suspect the White Rabbit must utter it about the time Alice follows him down the rabbit hole.
 
Pick a rabbit to follow…
 

No doubt, today’s wage earner knows what it means to work harder, faster, and better, while slip sliding behind.  However, for many wage earners the reasons why may be somewhat mysterious.  At first glance, they may look around and quickly scapegoat foreigners   for their economic woes.
Yet like Wonderland, things are often not as they first appear.  When it comes to today’s financial markets, there is hardly a connection to the real economy at all.

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The Three Headed Debt Monster That’s Going to Ravage the Economy

June 9, 2017

Mass Infusions of New Credit
 
“The bank is something more than men, I tell you.  It’s the monster.  Men made it, but they can’t control it.” – John Steinbeck, The Grapes of Wrath
 
Something strange and somewhat senseless happened this week. On Tuesday, the price of gold jumped over $13 per ounce.  This, in itself, is nothing too remarkable.  However, at precisely the same time gold was jumping, the yield on the 10-Year Treasury note was slip sliding down to 2.15 percent.
 
It looks hungry… once it is finished with this little Godzilla snack, it will probably come for the rest of us.
Illustration by Larry T Quach
 

In short, investors were simultaneously anticipating inflation and deflation.  Naturally, this is a gross oversimplification.  But it does make the point that something

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Recession Watch Fall 2017

June 5, 2017

One Ear to the Ground, One Eye to the Future
Treasury yields are attempting to say something.  But what it is exactly is open to interpretation.  What’s more, only the most curious care to ponder it. Like Southern California’s obligatory June Gloom, what Treasury yields may appear to be foreshadowing can be somewhat misleading.
 
Behold, the risk-free tide…
 

Are investors anticipating deflation or inflation?  Are yields adjusting to some other market or external phenomenon, perhaps central bank intervention?
So far this year, and in the face of the much-ballyhooed prospect of Trumpflation, the yield on the 10-Year note has gone down.  Not up.  On January 1st, the 10-Year note yielded 2.44 percent.  As of market close Thursday, the yield was 2.22 percent.
At first glance, it appears

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The Attack on Workers, Phase II

May 26, 2017

Labors with No Fruits
It’s been a long row to hoe for most workers during the first 17 years of the new millennium.  The soil’s been hard and rocky.  The rewards for one’s toils have been bleak.
 
Ma and Pa farm worker lean against one of their recent productions to mug for the  daguerreotypist. Their happiness at a job well done is marred by misgivings about their remuneration in real terms.
Photo credit: Maple Valley Historical Society
 

For many, laboriously dragging a push plow’s dull blade across the land has hardly scratched enough of a rut in the ground to plant a pitiful row of string beans.  What’s more, any bean sprouts that broke through the stony earth were quickly strangled out by seasonal weeds.  Those ‘green shoots’ that persisted bore pods that dried out on the vine

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Warnings from Mount Vesuvius

May 19, 2017

When Mount Vesuvius Blew
 
“Injustice, swift, erect, and unconfin’d,
Sweeps the wide earth, and tramples o’er mankind”
– Homer, The Iliad

 
Everything was just the way it was supposed to be in Pompeii on August 24, 79 A.D.  The gods had bestowed wealth and abundance upon the inhabitants of this Roman trading town.  Things were near perfect.
 
Frescoes in the so-called “Villa of the Mysteries” in Pompeii, presumed to depict scenes from a Bacchus cult (Bacchus is the Roman version of the Greek god Dionysus, essentially a party god, responsible for alcoholic supplies, fertility and the arts). He was thought to bring divine joy and ecstasy, but also blind rage (reflective of the dual nature of what happens when people get high on wine). Bacchus and his followers could not be fettered. The

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How to Stick It to Your Banker, the Federal Reserve, and the Whole Doggone Fiat Money System

May 13, 2017

Bernanke Redux
Somehow, former Federal Reserve Chairman Ben Bernanke found time from his busy hedge fund advisory duties last week to tell his ex-employer how to do its job.  Namely, he recommended to his former cohorts at the Fed how much they should reduce the Fed’s balance sheet by.  In other words, he told them how to go about cleaning up his mess.
 
Praise the Lord! The Hero is back to tell us what to do! Why, oh why have you ever left, oh greatest central planner of all time. We are not worthy.
 

We couldn’t recall the last time we’d seen or heard from Bernanke.  But soon it all came back to us.  There he was, in the flesh, babbling on Bloomberg and Squawk Box, pushing the new paperback version of his mis-titled memoir “The Courage to Act.”  Incidentally, the last time we’d heard

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The Coming Debt Reckoning

May 6, 2017

Licking the Log
American workers, as a whole, are facing a disagreeable disorder.  Their debt burdens are increasing.  Their incomes are stagnating.
 
There are many reasons why.  In truth, it would take several large volumes to chronicle all of them.  But when you get down to the ‘lick log’ of it all, the disorder stems from decades of technocratic intervention that have stripped away any semblance of a free functioning, self-correcting economy.
 
Happy workers from the distant past…
 

The financial system circa 2017, and the economy that supports it, has been stretched to the breaking point.  Shortsighted fiscal and monetary policies have propagated it.  The result is a failing financial order that has become near intolerable for all but the gravy supping political class and their cronies.
Take consumer spending.  This is the primary driver of the U.S. economy.  Yet it requires vast amounts of credit.  In fact, American consumers presently hold $1 trillion in revolving credit.  At the same time, they have nowhere near the income needed to finance these debts, let alone pay them off.
Remember, the flip-side of credit is debt.  Obviously, the divergence of increasing debt and stagnating incomes is a condition that cannot go on forever.  But it can go on much longer than any sensible person would consider possible.

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Ludwig von Mises’ Century of Validation

April 28, 2017

Seeing the Light
It has been said that “the definition of insanity is doing the same thing over and over again and expecting different results.”  No one quite knows who first uttered this remark; it has been attributed to Albert Einstein, Mark Twain, Benjamin Franklin, and has even been said to be an Ancient Chinese Proverb.  What is known is that this cliché has been repeated over and over again so often that its mere mention substantiates its own definition.
 
Several of the ladies and gentlemen above wanted to let us know that they’re merely eccentric,  and if they want to do things all over again and again and again, we should let them…
 

Nonetheless, we repeat it again because it’s particularly fitting to today’s deliberations.  Here we begin with a look back to the past in search of edification.  For the miscalculations of the past continue to dictate the insanity of the present.
Many years ago, a bright minded and well intentioned Italian pursued a devious undertaking.  His efforts aimed to conceive a pure theory of a socialist economy.  His objective was to take the sordid teachings of Marx and pencil out the mechanics of how a centrally planned economy could bring a life of security and abundance for all.  What follows is an approximation of how the dirty deed went down.
In 1908, Italian economist Enrico Barone suffered an abstraction.

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