Paradocracy

Over the past 21 years, United States nominal GDP has averaged 8.69% annual growth while MZM money stock has averaged yearly growth of 18.05%, a net difference of 9.36%. While the headline GDP figures may look impressive upon first glance, perpetuating frothy confidence in the markets, a look behind the curtain reveals a sobering difference. Now, the math cited above surely illustrates a problematic incongruity between the perceived productive capacity of a nation and what could either be captured through the PCE or else described as sleight of hand by the manipulative money-printers at the central bank. PCE data show an annual increase of 7.19%, leaving an unaccounted 2.17%. So, the PCE data either fail to capture the total increase of general prices or some of this money has been shipped elsewhere, thereby temporarily postponing the eventual rise of prices. As it turns out, the latter scenario is indeed supported by the widening trade deficit , unaccounted price incr...

Housing is traditionally an asset that retains its market value across time, unlike a car which proves to preserve hardly any of its original value over its lifetime of use.  The reason that property is so valuable in the San Francisco Bay Area, for instance, where property values ubiquitously outstrip the values of the homes built on them, is not because the houses are so elegant, but principally because of downzoning and vertical restrictions on development, the sky-high levels of government-backed credit made available at ultra low rates of interest to buyers who foresee untenable rates of real returns or unmanageably expensive total costs of ownership.  Throughout the 1960s, before the end of Bretton Woods and the fiat frenzy that resulted in the dollar losing two-thirds of its real value over the 1970s and even further bouts of massive inflation during the following decades, the median sales price of homes in the United States climbed by a tepid 5% per annum. Since 19...

More economic-illiterate political commentary was released today from the Detroit Free Press, a publication notorious for shortsighted commentary on current events. Their recent article, entitled  Keep job creation top state priority , refreshes the economic air with a splash of more politically-convenient potpourri, covering the lamentable stench of economic decay in the city which once stood as the Arsenal of Democracy , the bastion of productivity , and the economic envy of the world. The article begins by claiming, "The state still needs more good-paying jobs, and it should also diversify its portfolio of industries." Now, jobs are the means to the desired ends of productive and useful goods. Theoretically, jobs and their creation are nothing more than an organic byproduct of necessity, that is until they are rendered superfluous by still further advancements in automation which may relatively inexpensively, reliably and indefatigably produce the same or better output...

The activities of government are made reprehensible not merely by the systematic thievery which sustains their administrations, but by the exhaustion of resources following their execution. In spending some time at the nearby Department of Motor Vehicles, the United States Postal Service or the local police precinct, one is sure to encounter notoriously long lines , dispirited efforts and attitudes of indifference, the total of which would surely translate to opportunity for any competitor in private enterprise. However, in the public sector this is all too familiar and oddly acceptable. This phenomenon is principally due to the complete absence of competition, as government is and has always been the chief proprietor and issuer of monopolization. As it turns out, government is in the business of producing theatrical mirages of value at the expensive exhaustion of human capital, physical resources and the consumer goods that the regular working class competes to earn in the ...

In July of 2015, Vitalik Buterin officially released the game-changing technology of Ethereum, an immediate competitor to its now-popular and relatively better-known counterpart Bitcoin. A cursory evaluation of the following chart might lead the reader to some wild conclusions, so continue reading to acquire a better understanding of the trajectory of this new-age abstraction of online currency that, despite its massive gains in recent weeks, hasn't remotely become a household name in even Silicon Valley, the tech capital of the world. A variety of formal and informal polls suggest a lagging familiarity with the increasingly popular cryptocurrency giants. Those who claim awareness are most likely to recognize Bitcoin, while Ethereum has still flown largely undetected in even the heart of Silicon Valley. One might assume with a chart like this, with its major parabolic upswings and indefinite streams of free money , that awareness of the blockchain medium of exchange would have...

Interest rates, otherwise known as the present price of capital, are perhaps the most important signals to the market, bearing weight on time-sensitive risk-reward calculus, the character of consumer behavior and the true long-run costs of assets such as homes. Ever since the United States endured the so-called Great Recession, from which the nation has hardly recovered, it has embarked upon an assumed stimulative course of near-zero nominal rates of interest, all in an attempt to avail itself of the disrepair caused by the previous boom by expanding the pool of available credit to consumers and producers who might then put it to work . Of course, this sort of wisdom neglects that inherent qualitative signal being delivered to the market while rates are near the zero lower bound. For some context, let's consider Japan in 1989, whose relatively tight monetary policy followed excessively easy, speculation-inducing policy to produce deflation which resulted in a zero nominal rat...

It’s funny how such a basic economic concept as marginal wealth confiscation can be so succinctly summarized by its mere application to sport: assume that you have a pool of athletes who are vying for the grand prize of $1,000 by achieving the 4-minute mile.  Any athlete who completes the event under 4 minutes will be awarded $1,000. What do you suspect will be the prevailing outcome?  My suspicion would be that each of the runners would compete wisely enough to finish the race within a close margin of that 4-minute mark.  The reasons here are simple yet multi-faceted: the runners would benefit from group running by distributing the lead responsibility and reducing wind resistance and perhaps incidentally relieving themselves of the laborious task of pace monitoring, while limiting their exposure to downside risk (of exhausting themselves and failing to finish) by maintaining the minimum pace that would qualify them for the prize.  Of course, thi...

"Through meritocracy, the new capitalism gives a moral cloak to inequality, because seeing gifts as merit, it distributes advantages or keeps in places disadvantages accordingly. Under such a system, the poor person is considered undeserving and, therefore, guilty. And if poverty is the fault of the poor, then the rich are exonerated from doing anything." - Pope Francis The 80-year-old Pope released these statements this week as he condemned the business world for becoming less entrepreneurial and more speculative, also citing an apparent confusion between  merit and  gifts  in the workplace, where he claims that these merits would be better characterized by the privileges enjoyed by those who have benefited from greater talent, education and being born into a family that is not poor. Now, let's give credit where credit's due. This may be the single most ignorant statement ever issued on the subject of economics. And for this reason, Pope Francis may have merited ...