I am starting
to LOVE this Casey guy!
...the angriest guy in economics
January 6, 2005
- In the last week of the year
the Federal Reserve created $6.1 billion in high-powered money
(the kind that gets multiplied by the banks themselves), the
Treasury printed up $3.2 billion in actual cash, and the foreign
central banks bought $5.6 billion of US debt, which they stashed
at the Fed. This is all in just one freaking week, remember!
The big news this morning (Tuesday the 4th), as I was explaining
to the paramedics who were trying to get my heart started, is
that the official national debt jumped to $7.596 trillion, which
is a jump of over $40 billion in one freaking week! [Editor's note: Got
news for you Your Guruship, it hit $7.601 trill. Tues PM] The entire year-long budget deficit
is supposed to be some horrific $600 billion or so, and here
they are spending one-fifteenth of that in ONE FREAKING WEEK!
The trade deficit is likewise about $600 billion, and here the
damned government is spending that much every fifteen weeks at
- Richard Benson of Specialty Finance Group has added back the
hedonic deflators into the "official" Consumer Price
Index, and figures that the actual rate of inflation is 6%, not
the 3.5% that is advertised. I figure it is at LEAST that, but
then I habitually take the alarmist perspective about everything.
To show you that The Mogambo has a civilized side, I will, as
a courtesy to Mr. Benson, try and keep from going absolutely
ballistic about a 6% inflation rate, because the advertised 3.5%
inflation rate is plenty unacceptable enough. To that end, I
will place my own hands around my own throat, like this, and
choke myself, like this, until I almost pass out, and then the
lack of blood to my brain will make me forget about the 3.5%
infl, ifla, iflana, ummm, 3.5%, ummm, things are fading, fading,
I am starting to black out, yes, I am slipping from consciousness,
my brain is slowly dying, and suddenly Keynesian economics and
the idiot theories of the Federal Reserve starts to make sense
to me and, and, and (fade to black).
While The Mogambo is passed out on the floor like that, my assistant
will take a Magic Marker and write the word "idiot"
on his forehead because that will be a big laugh when he wakes
up and starts walking around, because if there is one thing that
people love to do it is to laugh at The Mogambo and steal his
lunch. While he is finishing up with that Magic Market, the rest
of us will pay a visit to the DailyReckoning.com website, who
have a few words to say about this dollar thing, although like
a bunch of teacher's pet showoffs they say it with class and
erudition and wit, and rub it in the face of The Mogambo who
is none of those things, "U.S. policy makers, analysts,
and the chattering classes seemed to think that the dollar could
fall - thus helping to eliminate the need for the $2 billion
daily fix, and making U.S. business more profitable - without
any nasty repercussions. They thought they could disprove one
of Newton's Laws - they expected an action with no reaction.
But here at The Daily Reckoning, we have faith in the eternal
and essential truths: There would be no silver
lining without a dark and ominous cloud attached to it."
And this brings up that Famous Eternal Truth Of The Mogambo (FETOTM),
namely that all things are connected to all things, and that
is why Chaos Theory is a fact, and thus silver
linings are connected to dark clouds, and dark clouds are connected
to the sky-bone, and the sky-bone is connected to the tree-bone,
and the tree-bone is connected to the ground-bone, and the ground-bone
is connected to everything else, and everything else is connected
to The Mogambo, and connected to you, too, and likewise everything
is connected to everything you love in this world, and that is
why the coming fall in the dollar is going to make you go berserk,
and you will doubtlessly then go online to order a Mogambo Flaming
Torch, a Mogambo Pitchfork, maybe a Mogambo Baseball Bat With
Wicked Imbedded Nails In It, and a copy of The Mogambo's new
bestseller book, "Currency Destruction and Resultant Inflation:
Angry Drunken Mobs And What They Can Do About It".
Also on the Daily Reckoning site, and in keeping with this whole
dollar debasement thing, they asked Doug Casey, "How high
will the price of gold go?" If you had asked The Mogambo
that question, I would have replied "Well, before I can
tell you how high gold will go, I have to know how low with
the dollar will go. You tell me that, and I'll tell you how high
gold will go, you moron! What a stupid
question! I can't believe you asked me such a stupid question!
What are you, some kind of mental defective? Is that why you
are asking me a moronic question like that? Are you some kind
of pathetic, stupid, brain-damaged retard?" which, now that
I read it, probably explains why nobody asks me questions anymore,
which is probably, you know, a good thing, now that I think about
Mr. Casey's reply was much more refined, which explains why he
is a famous and respected guy and I am just an angry and lonely
man whose only wish is to live long enough to get my revenge
on all of you nasty bastards, replied, "There are many ways
of determining what it 'should' be worth, based on fundamentals.
The US Government owns a reported 261.6 million ounces of gold. If they were to back all the dollars represented
by M-1 with gold, based on an M-1 of $1.31 trillion,
it would require $5,000 gold."
Suddenly, my head snapped to attention! $5,000 an ounce for gold? Yow! I am starting to LOVE this Casey guy!
He ignores me as I am dancing in the aisles, and I am singing,
"We're rich! We're rich! Whoopee!" in that ridiculous
falsetto voice I have when I get really excited, and he goes
on to say, "If we use M-3, which is $9.04 trillion, it would
be $34,570 gold." Now I am REALLY dancing up
a storm here! $34,570 per ounce for gold!
"Just to cover this year's foreign trade deficit of $600
billion would require $2,294 gold,"
he says. One lousy year's trade deficit! I have to laugh to keep
from crying, although I end up doing both, and it must have looked
pretty weird, because Mr. Casey actually turned away from me
in disgust. He addressed the rest of the crowd and concluded
his remarks about the trade deficit with, "And that's not
the accumulated deficit, or those that may be run in the future."
So it just keeps getting better and better! Finally, and I am
all out of breath with excitement, he says, "If gold were simply to return to its 1980 high, it would
be close to $2,000 in today's dollars - and the situation is
much more serious now that it was in 1980."
It should be worth $2,000 today? If the telephone were ringing
right now, it would probably be you, calling me up, and asking
"Hey! Mogambo! Did you know you were an idiot?" and
I would say "Yes" and then you would want to know "Why
isn't gold selling for $2,000 today?" And
that, my little grasshopper, is the big question that GATA wants
answered, because it looks like the whole thing is being manipulated,
and if there is one sure-fire lesson about manipulations, they
never last. And that means that, one day, gold
WILL rise to its true value. And then we will see how accurate
Mr. Casey is! If we can stop dancing for joy, that is.
And speaking of gold and its manipulated market, the guy
who writes the LeMetropole.com site is just as bitter about this
manipulation of the gold market as I. He writes "Gold has become unwatchable for me. Constantly witnessing
the blatant manipulation all day long is just not worth it these
days. All I do is get angry at what is transpiring and furious
at the dimwits in the mainstream gold
world who always fail to whisper a peep about the obvious. Thus,
I have taken to stepping away from viewing the market action
not long after the opening." Me too! And although I am as
angry as any, my real reason is that an episode of Bewitched
is on another channel.
- Bob T. from Milwaukee wanted to know a few things, one of them
being the likelihood of Russia attacking the USA with nuclear
bombs, as is all the rage among a certain set of people. The
answer is zero, as there is no advantage to them doing that,
as nobody can make money by creating a radioactive disaster area.
And since everything is about the money, there is no reason for
them to attack us. The whole point is to make it SEEM as if there
were some military threat, so that Congress can spend money on
the military-industrial complex, and confiscate our money and
our stuff and our basic freedoms guaranteed under the Bill of
Rights by appealing to our sense of patriotism. And if that doesn't
work, then they will cram our patriotism down our throats and
our Constitutional freedoms up our butts, like that filthy fascist
bastard Woodrow Wilson did in 1917. And the Russian government
can do the same thing to THEIR people. That's how the thing works.
- Make no mistake about it; the government of the USA is going
to do everything in its power to make sure that the stock market
does not go down. Instead, they are going to do everything they
can to make sure that it goes up. The reason is that they only
get taxes from people and firms reporting profits. If there is
no profit, there is no tax due. If, horror of horrors, there
are losses, they are the old double-whammy to the government's
head; not only do they not collect any taxes, but they have to
let the person or firm deduct losses from gains! And they only
pay tax on that part that is labeled as a "gain."
Theoretically, if the stock market crashed far enough, and losses
were accumulated widely enough, then all the governments that
rule us with an iron fist, a boot of steel and a subpoena of
paper, would collect zero money. And not just for this year,
but for years and years to come, as those aggregated losses are
gradually whittled away, deducted from gains (if any) one by
one. And it will continue until that glorious day, out in the
distant future, when there are no more losses to deduct from
gains. Then, and only then, will the damn governments get back
into the business of taxing everyone at 100% of gains.
So what does this mean for stock investments? Well, they are
hoping that their slimy backdoor manipulations of the stock and
bond markets, plus the forced savings of workers to require them
to "invest" money into the stock or bond markets as
part of the Fabulous Plan to Save Social Security, plus continued
deficit spending may all combine to keep the stock and bond markets
up and producing gains.
And although that dimwitted, ignorant blowhard Larry Kudlow is
convinced of the contrary, it is evident from the fact that it
has never happened before that there is no freaking way that
everybody will prosper by continually investing in the stock
market, and it is lunacy for him to even say it. But he did,
as part of a remark by him that this Fabulous Plan To Save Social
Security is a good one, and that we ought to raise the retirement
age, and then I heard with my own ears that we people are going
to be grateful that we will all be wealthy from investing in
the stock market.
- David Morgan of Silver-Investor.com, in a hypothetical letter,
remarks that he is considering issuing a silver
"round" with the inscription "I stayed Long and
Strong!!" on the face of the coin, indicating that he never
lost faith in silver, and that he kept buying it. But of
course, in our infantile, smirking way, and me and my hoodlum
friends down at the far end of the playground are all huddled
around saying "I stayed Long and Strong" and giggling
and poking each other in the ribs, and we all vowed to get some
of these silver rounds so that we can show the girls
and tell them that we got them as medals in the Love Olympics.
But regardless of what is inscribed on them, one-ounce, pure
silver coins are a nice thing to have, as
you will soon see. And while the delicious sexual innuendo enshrined
in the phrase "Long and Strong" thing doesn't work
that well with any of the girls I know, the silver
will keep you from being destroyed by the coming collapse of
the dollar, and there will be a certain cachet in that!
- Richard Russell of the Dow Theory Letter writes, "My obvious
conclusion is that the US has become a nation of spenders and
debtors. The world has never seen anything like it. Looking ahead
two things must happen. Either we'll print the paper in an effort
to finance all this debt, and that will be highly inflationary,
or we'll be unable to handle all the debt, the dollar will swoon,
and the US will sink into a recessionary deflation. Either way,
it seems to me that the dollar will be in extreme danger. If
we inflate, it will simply be a dilution of the purchasing power
of the dollar. If we deflate, the very viability of the dollar
itself could come into question." In this, he is exactly
right, and there is no painless solution, that is why, heretofore,
all thinking civilizations tried to NOT get into this fix. But
of course we got the morons in Congress to spend borrowed money
and sending us to our well-deserved bankruptcy, and we got a
moron in the Federal Reserve System (Alan Greenspan) to create
the money that they spent, and both of them are, judging by the
results they have achieved, bastions of morons. I mean, look
at us! Does our fatal economic situation sound like something
a competent Congress or Federal Reserve would get us into?
- Scott K. asks, "Where are all of those mindless economists
trumpeting how great disaster is for growth? According to them
Sri Lanka should be an economic powerhouse any day now. Not to
make light of the situation, but shouldn't something like this
end the stupid debate once and for all about the broken window
This is where you made your big mistake, Scott, as you should
not have been asking that idiot Mogambo, but instead you should
have been asking Chris Westley on the Mises.com site, who has
written an essay about that very thing, entitled "Where
are all the guys who say that disaster is good for the economy?
Are Tsunamis Good for the Economy?" He writes that he was,
like you and me, "surprised to hear the Institute for International
Economics' C. Fred Bergsten (known affectionately as See Fred)
this morning (December 29th) on National Public Radio's Morning
Edition explain how this crisis would actually provide long-term
benefit to that region of the world. Bergsten said,
"Like any disaster, you get negative effects through destroying
existing property and people's health, but you do get a burst
of new economic activity to replace them, and on balance, that
generally turns out to be quite positive. Over time, properties
that have been destroyed will be fully replaced, and probably
by better and newer substitutes, so at the end of the reconstruction
process, the countries will probably be wealthier.
War and natural disasters are not good for the economy, regardless
of what anyone tells you, including this Bergsten character.
To even say things like that makes me want to add the Institute
for International Economics to my list of people to whom I send
hate mail to assail their intelligence (For example, my recent
missive to Congress starts out, "Dear Butthead Moron,"
so that they know right from the get-go that I am privy to their
dirty little secret!)
- Mark Rostenko, of The Sovereign Strategist, writes that perhaps
we are being too pessimistic! He writes, "If the dollar
falls in a nice & tidy fashion, if the rest of the world
maintains faith that an effectively bankrupt nation can continue
to meet its financial obligations, if real estate values can
keep rising indefinitely, if Americans can continue to pay increasingly
higher prices for their homes and if they manage to defy the
odds and stay above water despite having no savings whatsoever,
then all will turn out just swell." See? Don't you feel
better now? What were you worrying about?
- Arlo S. sent an essay that quoted Edmund M. McCarthy talking
about the net trade balance of the United States with the rest
of the world. It is not a pretty picture, and if you are familiar
with the concept of compounding, then it is scary as all hell.
And this brings up the point that the next time some snot-rag
halfwit starts crowing about how he never used mathematics after
he graduated from high school and so that proves that math is
useless, remind him that you DO use the math you learned in high
school, and to serious advantage, and that is why you are acutely
aware that when something is compounding against you, it means
that you are doomed as soon as that line starts going straight
up in the air in some blazing asymptotic acceleration, and that
is why you are feverishly buying gold
and precious metals as a defense against it, while he, with this
smug and stupid look on his face, is NOT using the math he learned
in high school, and that is why he is ignorant about the tsunami
of horror that is rushing down upon us that is inherent in the
basic concept of compounding, and that all of this is proof that
Mother Nature despises the stupid and the ignorant. Mr. McCarthy
says, "a sizeable portion of the foreign net position is
invested in debt instruments. Only in the recent past has this
grown to the point that the U.S. not only has the net deficit
position but also now has a net payable of INCOME to foreigners.
This will continue to compound, exacerbated by any increase in
interest rates. Not only will the seemingly impossible to diminish
trade deficit contribute to the increasing net deficit position,
but also now an increasing net income payout. The amount of the
net negative is now approaching the combined GDP's of Japan,
China and India as an illustration of the magnitude! "
We are paying whole countries as much money per year, as interest
payments on the money we borrowed from them, as they collectively
earn from working? Yeah, that gives me a REAL good idea of the
And the Daily Reckoning people sum it up as, "They (mainly
Asians) make. We take. They save. We spend. They lend. We borrow.
They sell. We buy." Very cleverly said! So clever, in fact,
that I am momentarily freed from my usual crushing worrying,
and am happily, although temporarily, luxuriating in the sheer
poetic beauty of it. Then they lapse right back into the ugly
prosaic when they say, "Most observers see a kind of symbiosis
in this arrangement. But what we see is parasitism." If
there is one thing that is not pleasant to think about, it is
parasites, and to prove it, ask my wife, who characterizes me
as some kind of mutant parasite that has sucked her life dry
of any joy.
- Emily W. sent an interesting quote from a guy named Sir Josiah
Stamp, who is, or was, the Director of the Bank of England. This
guy says, "Banking was conceived in iniquity and born in
sin. Bankers own the earth. Take it away from them, but leave
them the power to create money, and with a flick of a pen, they
will create enough money to buy it back again. Take this great
power away from them and all great fortunes will disappear, for
then this would be a better and happier world to live in. But,
if you want to continue to be slaves of the bankers and pay the
cost of your own slavery, then let bankers continue to create
money and control credit."
And the reason that you don't hear much about this guy is that
we are doing exactly what he warns us NOT to do, and so he has
probably gone off to hide in the woods, not far from where I
live in the woods, in a cave, not far from where I live in a
cave, and who also spends his days moaning and groaning about
the horror of having a fiat currency in a fractional reserve
banking system, especially one where the whole banking system
is now merely an arm of the government. And doubly especially
when there are places like Massachusetts that keeps electing
commie pinko bastards to Congress, like that drunken, lying Leftist
coward Ted Kennedy, and that lying piece of Leftist crap John
Kerry, and all the rest of those ignorant Massachusetts buttheads,
and to which I say to hell with Massachusetts, for they have
directly caused our present situation, which is the worst of
all possible worlds. A pox on Massachusetts!
And since it continues getting worse and worse today, so is only
going to get worse and worse tomorrow.
- Contraryinvestor.com commented on how up-scale Nordstrom had
a boffo Christmas, while low-end Wal-Mart did not. They write,
"Clearly, we do not mean to be wealth discriminatory or
elitist in any sense of the word, but we are looking at two retailers
whose clientele are derived from two very differing wealth demographics.
What this chart tells is us is that the lower wealth and income
strata in the US have not benefited from historic Fed and Administration
accommodation efforts as has the upper income strata." In
short, it was the classic "the rich get richer and the poor
get poorer" and yet the butthead Wal-Mart voter keeps electing
and re-electing the same Congressional buttheads time after time
after time! And knowing that they do that, it is getting harder
and harder for me to feel sorry for them and their increasing
poverty, which is directly attributable to their poor choices
at the voting booth.
And apparently Hans Sennholz is on the same wavelength as I am,
and he writes, "In its first term, the Bush administration
increased the Federal debt by $2.2 trillion. Congress raised
the Treasury debt ceiling three times, by $450 billion in 2002,
by $984 billion in 2003, and by another $800 billion on November
19, 2004, to $8 trillion 184 billion. The ready willingness of
Congress to finance such deficits is a clear indication of the
political and ideological mold and make of most members of Congress
and the public that elects them." Look! A mistake! This
gives me a chance to get up out of this uncomfortable seat, and
so I spring to my feet, and I say "Mr. Sennholz! Mr.Sennholz!
You said that Congress is financing the deficit, but the damned
Congress doesn't finance anything! The Federal Reserve is creating
the money, so the damn Federal Reserve is responsible for all
of this mess!" A murmuring buzz went through the crowd!
The Mogambo (usually known as "That big stupid idiot Mogambo")
is challenging Dr. Sennholz!
Well, we'll never know what he was thinking, because I could
see him mouthing the words "Big stupid idiot Mogambo!"
as he stormed out of the place in disgust, complaining in that
precise, clipped Teutonic voice of his about how he has never
been so insulted, and probably thinking about how in the Old
Country he could have had me killed. But notice that I am so
polite that I don't even mention that in THIS country, politicians
and their friends can have people kidnapped and killed, too,
any time they want to, and they do it all the time! And if you
don't believe me, then ask the Afghani people, or the Iraqi people,
or Ron Brown, or Vince Foster, or Randy Weaver, or damn near
any people you want to ask, and they will be happy to get you
up to speed concerning limits on aggression and arrogance of
the American political class.
So get used to it, Wal-Mart shoppers, because the insane inflation
of the money supply by an incompetent, corrupt Federal Reserve
means more and more inflation in prices, and so you will suffer
declining real incomes for at least a decade to come, almost
certainly culminating in a complete collapse of the economic
system. And that is when you will understand why the Founding
Fathers were so careful to write into the Constitution that money
shall only be of silver and gold, because
that was the only way to prevent the banks and the Congress from
doing what they are doing, which is to print up excess money,
which is going to destroy us all. And you can thank the horrible
series of calamities known as the various incarnations of the
Supreme Court, which committed treason against us all and allowed
them to get away with it.
But you may be comforted to know that as long as the Federal
Reserve keeps this crap up, the rich will continue getting richer
while you continue to get poorer and poorer. So at least somebody
is benefiting! It's just too bad it is not you.
- An anecdotal story from Gary North's Reality Check newsletter,
entitled "Saving For A Rainy Quarter Century", ought
to tell you the sad story of inflation. He tells of a guy named
William Jones, who retired and figured he was going to live out
his life having some fun. But in the 14 years since he retired,
he figures he has "lost about 35 percent of the buying power
of his pension." His real income, adjusted for inflation,
has been cut by more than a third by the simple fact that things
went up in price but his retirement benefits did not. This is
the horror of inflation. He had to return to work.
And that is why, when you read that you need $400,000 to retire,
you should laugh. That $400,000 is if you retire today. If you
retire ten years from now, you will need at least double that,
and probably triple that. Or more.
**** The Mogambo Sez: Now that we got those minor holidays
out of the way, it is time to get ready for the Big Glorious
Holiday (BGH), by which I mean, of course, Mozart's birthday,
which is on the 27th of January. So things are not as bleak as
Jan 5, 2005
is general partner and C.O.O. for Smith Consultant Group, serving
the financial and medical communities, and the writer/publisher
of the Mogambo Guru economic newsletter, an avocational exercise
the better to heap disrespect on those who desperately deserve
it. The Mogambo Guru is quoted frequently in Barron's, The
and other fine publications.