Economic update

There has been plenty of economic and business data lately to demonstrate that the economy is slowly on the rise.

Some government officials (and members of the Federal Reserve) seem to want to take credit for this improvement, which is a little like the fabled rooster who believes that his pre-dawn crowing is responsible for making the sun come up.

It would be far more accurate to say that the economy is on the rise in spite of the mis-steps of government regulations and stimulus spending, and in spite of the Fed's excessively easy interest rates and previous rounds of quantitative easing. We've written several previous posts over the past year or more which outline the reasons to believe that.

On the other hand, there is also a segment of the media world -- especially the "conservative" media punditry -- which wants to deny that the economy is improving, in order to prevent the politicians from taking credit for it. In a sense, they are falling for the idea that the roosters really do make the sun rise, and in order to prevent them from getting credit for it, they want to argue that the sun is not really coming up. That is not a good position to take, particularly as the evidence becomes more and more difficult to deny. We've made this point on the pages of this blog in the past as well.

We've also explained that we are in the midst of a very important period of major technological transformation, one that is so big that even government would have a hard time messing it up. However, while it is probably beyond the power of the roosters to prevent the sun from coming up in this case, they may be able to make the sky a lot cloudier than it has to be, and prevent the day from being as bright and spring-like as it normally might have been.

In other words, although government should not get credit for making the economy improve, it can, through tinkering, create obstacles to economic growth. The way it does that is through excessive regulation and taxation, and unpredictable monetary policy. In fact, we do not believe government drives the economy at all, beyond its appropriate role of maintaining a stable rule of law and a stable money supply which enables enterprise to function in a predictable environment.

Below is a recent video clip of Taylor Frigon president and chief investment officer Gerry Frigon discussing some of these concerns, as well as some of the recent economic data.

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The "Unstoppable Wave" rolls into 2012

Here's a link to a terrific series of graphs from Bret Swanson of Entropy Economics, showing the amazing and exponential growth of internet traffic since 1990, in a way you've never seen before.

We've followed Bret's excellent analysis of technology-related subjects for many years, and wrote about an important article he authored along with George Gilder in a blog post back in February 2008 (over four years ago now!). While many unpredictable economic and political developments have taken place since then, the "exaflood" described in that article has rolled on as they predicted that it would. In fact, as we have written many times in the past, major paradigm shifts such as the one that George and Bret are talking about here are so big that even the politicians (and some of the players on Wall Street) cannot really derail them.

For a few recent posts on this subject, check out this post and this post.

We believe that every investor should consider this subject very carefully.
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