 Stand back,
I am armed to the teeth!
Richard Daughty
...the angriest guy in economics
The Mogambo
Guru
Archives
March 09, 2005
- Foreign central banks plumped up their account at the Federal
Reserve and poured another $14 billion down the US debt rat hole
last week. Seeing how much fun that was, the Fed itself created
$4.1 billion in new Fed Credit, which is the ultimate in "money
from thin air" as it was literally created at the punch
of a button. After the banks finish multiplying that new credit
by the fractional reserve multiplier that they now use (more
than 100), it has the effect of creating $410 billion in new
credit, just waiting for somebody to walk into a bank and take
out a loan, which would turn the credit into real money.
Of course, I would be remiss
in my Mogambo hissy-fit duties (MHFD) if I did not raise a big
stink about the Treasury burying us under another $100 billion
of debt in the last two months.
- Chuck Butler, who is president
of Everbank, writer of the Daily Pfennig newsletter and is a
guy whose sense of humor is so developed that he actually sent
me a fruit basket because I facetiously said, trying to make
a joke that predictably fell flat, that he never sent me a fruit
basket, writes that "The People's Bank of China (PBOC) announced
today that they had spent 1.6 trillion renminbi ($193 billion)
buying foreign currency in 2004 to keep the renminbi's fixed
exchange rate. For those of you keeping score at home, that's
a 41% increase over the previous year!"
But he does not stop there,
and also writes that things are not so hot in the industrial
sector. "Yesterday the ISM index posted another lower number
of 55.3. A year ago, this number was 62.8! That's what I call
a slumping sector... Not collapsing, but slumping!"
You would not know it from
the US consumer, who went farther into debt by $11.5 billion
in January. To make matters worse, the $3.5 billion debt increase
reported for December was revised up to $8.5 billion. Let's see
here: There are about 160 million adults that went farther into
debt by a collective $20 billion in two months, for an average
increase in indebtedness of $125 each. Now in the last two months
the Treasury has increased national indebtedness by $100 billion,
so on a per capita basis, the average American adult is now on
the hook to pay another $750 each! In just two months! Hahahaha!
No wonder people on other planets come here in flying saucers
to laugh at us! This is crazy!
- Axel Merk, of Merk Investments
writes, "The latest numbers available put the (trade) deficit
at a record $60.3 billion, an annualized $724 billion, over 6%
of the GDP." As an aside, the Economist magazine puts the
trade deficit at $666 billion for the last year, which is a number
that has all kinds of significances and overtones that remind
one of the Biblical Book of Revelations, and now we are on track
for another $60 billion higher next year? Wow! Spooky, huh?
Paul Van Eeden at Kitco has
also looked at this trade deficit fiasco, and opines that "The
US trade deficit is pumping hundreds of billions of additional
dollars into their coffers every year. Even if these countries
keep all the dollars they currently own but just not keep as
high a percentage of the new dollars they continuously receive,
the dollar will plummet. There really isn't any way around it.
Either the dollar falls sufficiently to eliminate the trade deficit,
or the trade deficit will continue to put pressure on the dollar."
Sort of like the old Mogambo Conundrum (MC): People hate me because
I am a hateful, and I am hateful because they hate me. Hacking
through the confusion, we are now sure of two things, namely
1) the dollar will be lower, and 2) I will be more hateful and
more heavily armed. From this we learn two additional valuable
lessons. 1) gold and oil and imported things will go
up in price, as will everything else when domestic producers
get wind of the high prices we are paying, and 2) stay away from
me, as I am armed to the teeth and in a real bad mood about these
high prices, among many other things.
Marshall Auerback of PrudentBear.com
says essentially the same thing, only without that Mogambo Conundrum
thing, when he writes, "With the government and external
deficits both so large and the private sector so heavily indebted,
it is said that satisfactory growth in the US cannot be achieved
without a large, sustained and discontinuous increase in net
export demand. After perusing the trade data from last year,
it is doubtful whether this will happen spontaneously through
a continuous fall in the external value of the dollar, and it
certainly will not happen without a cut in domestic absorption
of goods and services by the US " and then, after a pause,
he goes on to show us the result of that, "which would impart
a deflationary impulse to the rest of the world." Which
could explain why the rest of the world is suicidally stuffing
money into our economy.
If you think that the US is
going to achieve export muscle anytime soon, he disabuses you
of that notion when he reminds us that "The truth of the
matter is this: Across three decades, only one economic event
has been guaranteed to produce balanced US trade: a recession.
When the economy is contracting, people naturally buy less of
everything, including imports." Which, of course, brings
us back to that "deflationary impulse" that he was
talking about earlier.
- Elsewhere, a report surfaces
that the IMF may sell part of its gold
reserves to help with third world debt relief. This is par for
the course for the International Monetary Fund, which is a group
of secretive communist idiots whose job it is, apparently, to
take money from us to loan to countries that can't make a go
of it because they act like idiots, and then the influx of IMF
money makes it all worse, and when they don't pay back the loans,
then the IMF helpfully suggests that you and I eat the loss and
forgive the debt! This is the level of sophistication that you
get when you appoint communists and idiots to anything, especially
things like the execrable IMF and the Federal Reserve, and don't
get me started on those guys.
- Jeffrey L. Ferguson wrote
a prescient little essay entitled "Is a Secular Bear Market
Inevitable?" on the Kitco.com site. Naturally, The Mogambo
was immediately on the phone, dialing furiously, trying to get
through to this Ferguson person, so that I could give him a little
of that famous venomous Mogambo sarcasm (VMS), something along
the lines of "What are you, some kind of putz? Do you think
that bull markets run forever, you brainless moron? Do trees
grow to the freaking moon, and all we have to do to get some
of that delicious moon cheese is crawl up those trees? Is that
what you think, you stupid bozo?" Well, while waiting for
them to answer the phone and rehearsing my hysterical rant, I
continued reading his essay, and soon realized that he was NOT
a putz, and that, once again, The Mogambo has gone off half-cocked.
Reading farther, we see that he writes, "Given that distortion
of interest rates constitutes the fundamental force driving business
cycles and the fact that interest rates continue to be distorted,
by the Fed and through conduct of finance, combined with historical
evidence indicating that very long secular cycles, punctuated
by interim cycles, have previously developed as a consequence,
the answer seems clear." This is where he paused, and I,
for one, was on the edge of my seat. What was it going to be?
Good or bad? Up or down? Finally, seeing that I was so worked
up that I was straining not to pee in my pants, he takes a little
pity on me and says "Yes, another secular bear market is
inevitable." Naturally I jump to my feet and say "I
knew it! I knew it all the time! You had me going there for awhile,
but I always knew the answer!"
- I was on hand for Greenspan's
testimony Wednesday for about halfway through his prepared remarks,
as most of the time was spent hooking electrodes up to my heart
and wrapping me up in a straightjacket (which was made all the
more disagreeable because it smelled like a sewer and then it
was pointed out that it was me that stinks so bad and then I
figured, well, okay, that explains THAT, although it didn't make
it any more pleasant).
But I heard only half of half
of his prepared remarks, giving, as I figure it, a quarter of
his speech, as half the time I was screaming at the TV screen
"You idiot! You liar! I hate your guts!" and throwing
things at the TV, including my half-eaten sandwich, but it wasn't
a very good sandwich, so it was not a big loss, and most of the
other stuff just bounced off the screen, although with a new
patina of mayonnaise from where the sandwich previously caromed
off the TV. But he was unusually blunt in some areas, especially
in those areas that are not his fault, which is everything, because
nothing is ever his fault. He is sure that he is completely blameless!
The Federal Reserve steadfastly maintains that it has done absolutely
nothing wrong, ever, in the entire history of the Federal Reserve,
even though they have violated every single bit of historical
evidence, anecdote, theory and practice since we were still one-celled
creatures swimming around in the primordial soupy sea saying
"Wow! Our music is crappy and Mozart won't be born for another
30 million years! Bummer!"
Greenspan showed his lackluster
brilliance by saying things that were stunningly obvious, such
as "As the latest projections from the Administration and
the Congressional Budget Office suggest, our budget position
is unlikely to improve substantially in the coming years unless
major deficit-reducing actions are taken." Duh! Ya think
so? After a few decades of budget deficits, you think that now,
right now, the kind of "right now" where you look at
your watch, it is not going to improve by itself? Wow!
I thought it was weird that
he says, "I want to emphasize that I speak for myself and
not necessarily for the Federal Reserve" which I figure
he has to say because all the rest of the people at the Fed all
say "The Mogambo is right! Alan Greenspan IS a big butthead!"
Well, they probably don't say that, but they ought to, because
Alan Greenspan IS a big butthead! And if they don't, then that
proves that THEY are buttheads, too! Hahaha!
He even let go with a little
statistical information that was probably news to the jerks on
the committee, as he no doubt wowed them when he went on to read,
"Under the intermediate assumptions of the program's trustees,
the number of beneficiaries will have roughly doubled by 2030,
and the ratio of covered workers to beneficiaries will be down
to about 2." Two guys working to support one old guy! These
guys are going to stand around while half of their incomes are
going to be taken away and given to me so that I can retire in
comfort and free of care, and with my Viagra paid for, too? Hahaha!
Like THAT'S going to happen!
"Greenspan
Pounds Away at Broken Budget Process" is an essay on
Bloomberg, written by John M. Berry. He writes "The essential
message Federal Reserve Chairman Alan Greenspan is trying to
pound into the heads of members of Congress in his recent testimony
is that the federal budget process is so broken that it has become
a danger to the nation's long-term economic health."
And last, but not least, if
you have not read Peter Schiff's essay, "Greenspan
Walks Policy Tightrope", then you should, as he righteously
jumped all over Greenspan, and easily shows, point by point,
that Greenspan is a stupid old man who does not comprehend the
basics of economics.
- Caroline
Baum on the Bloomberg.com site wrote "Everything that
could go wrong did go wrong, yet the U.S. economy sailed right
on through. If you consider the litany of negatives buffeting
the economy since the bursting of the stock market bubble in
2000 and the 2001 recession, it's something of a miracle that
it managed to grow 2.3 percent in 2002, 4.4 percent in 2003 and
3.9 percent in 2004 (all on a fourth-quarter over fourth-quarter
basis)."
She does admit that "The
economy expanded in 2001 as well, albeit at a miniscule 0.2 percent
rate."
Yep, and I'll tell you how
it is done, only in Hollywood style. The scene is set in the
swanky offices of your typical CEO, or chairman of the Board,
or majority stockholder, all of them ruthless tyrants whose names
strikes horror in the hearts of the proletariat trash who toil
under my brutal command, night and day, while I am living it
up by seriously under-funding their stupid little pensions that
I am trying to dump on the government, so they will end up with
something, so what in the hell are they bellyaching about?
Suppose I sold a hundred widgets
last year at ten bucks a pop. So total GDP = $1,000. This year,
I sell 98 widgets at $11 each. GDP = $1,078, which is an increase
of $78! The freaking economy is soaring by 7.8 percent! The economy
is white hot! Yow! Buy stocks, any stocks, but especially shares
of Mogambo Enterprises if the SEC hasn't shut them down already.
In normal times, that is to
say, during the entire freaking course of human history until
the last fifty years or so when people really started losing
their minds, probably something in the water, but when prices
go up by 10 percent and sales go up by only 7.8 percent, you
were typically in big freaking trouble. And then you started
drinking heavily, which made everything worse. And especially
so, ESPECIALLY SO, when total production was actually reduced
by 2% to start with! I mean, it's head for the hills time! And
now you gotta finally make that decision whether to take your
family with you, or abandon them to the wolves like they deserve,
the ungrateful little leeches, and now that I think about it
they were nothing but a millstone around my neck in the best
of times, which weren't such hot times to start with, and even
those relatively wonderful days are gone, and now it's every
man for himself, so get outta my freaking way, I'm coming through!
But nowadays things are different.
Thanks to Michael Boskin and the Federal Reserve, those pesky
questions about the ten percent inflation, and how this is supposed
to be such a bad thing, can be easily explained away! Ain't science
wonderful?
It goes (pause for dramatic
effect) like this: The government official looks at you like
you are some kind of lowlife dimwit and who needs to be spoken
to gently, or maybe we'll cry or something, and he says "You
forgot to adjust for quality, stupid asker of stupid questions!
I know that's you on the end of this phone, Mogambo, you stinking
lowlife dimwit! But for the last damn time, last year the damn
things caused three deaths." Then he holds up three fingers
to make sure that I somehow grasp, with my obviously limited
intellect, the whole concept of the number "three"
and then I say "I'm on the end of the phone, you moron!
I can't see you holding up three fingers!" and then he gets
really huffy like only a dimwitted career government worker can
get. Through clenched teeth he goes on to say "And this
year only caused one person to bite the big one, and too bad
it isn't you, Mogambo, and why don't you be the one to die, you
horrible little man? So anyway, the whole point is that widgets
are getting safer! Don't you get it? So you are," he says,
and I advise you to follow the logic closely here because this
is apparently the nub of the whole thing, as this is the part
where my brain goes "boooinnngggg" so I am not sure
I completely comprehend the whole concept, "getting more
widget for your money!" And so I say, "Huh? I was happy
with the OLD widget, as I never had one where I drank a lot of
beer or took medications that made me drowsy or took shots of
straight liquor, mostly tequila, when I was consuming, operating
or building a widget, and even then only under the supervision
of an adult or a boss who hates my guts as much as I hate him,
and I caution you to never try this at home, as I AM a professional
at this widget thing."
But, somehow, the basic widget
did NOT go up in price, see, and you merely paid extra for the
extra quality! Therefore, and my brain is already reeling from
the paradox, there was no inflation in price! Even though the
price went up! And the explanation for this seeming impossibility
is that you only paid more for the extra quality, sort of like
paying $600 more for a car with a better stereo! But if you bring
up the point that this is a really stupid thing to say because
I never listen to the radio anyway because I am always too busy
yelling at the other drivers on the road and criticizing their
stupid lack of driving skills, and if I had the radio on, then
I couldn't hear their stupid replies (although I can always see
their rude hand gestures, sometimes from the kids!), so a damn
$600 dollar radio means nothing to me. But then they always "Say,
what about the passengers? Wouldn't they like to listen to something
soothing instead of your stupid screaming all the time?"
and I say "Screw them!"
But this is not about some
damn radio, and why the car costs so much, which we wouldn't
even be looking at if the wife hadn't decided that she is suddenly
too classy and "uptown" to hitchhike anymore. No, this
is about how, through the magic of mathematical wizardry and
sheer nerve, then they can prove-- ya gotta love it! --that inflation
was now, magically, zero! Zero percent inflation! Nirvana! Utopia!
Economic perfection! Then (and this is the best part because
the media, and the stock shills, and the bond shills, and the
real estate shills all really eat this stuff up), and after you
adjust GDP for inflation, you still had growth in GDP!
Of course, I gotta come home and listen to the wife moaning about
the high cost of widgets, and then I politely tell her "You
forgot to adjust for quality, you stupid woman! After you adjust
for quality, they are NOT higher in price! Don't you know any
of this stuff, ya old bag?"
- John Ing, who wrote The
Debt Trap" on SafeHaven.com, says "Excessive spending
and borrowing, sustained by cheap interest rates, has kept the
US economy afloat. Despite six rate hikes, real interest rates
remain at their lowest in 15 years." Now, we all know that
the real interest rates are those that subtract inflation from
the nominal (advertised) interest rate. And if inflation keeps
rising (like it should), then no matter HOW high interest rates
get, they will keep being negative! Interest rates of 20% can
still be negative, if inflation is running at 21%!
- From Richard Russell, of
the Dow Theory Letter, we get a great Greenspan analogy. "By
refusing to accept a recession following the market peak at 2000,
Greenspan has now created a dangerous debt-monster. I liken the
situation to a man in a burning building who refuses to jump
out of the first-story window. In an attempt to escape the fire,
the man climbs to the second story, the third, the fourth and
the fifth. But the poor guy is still faced with the same problem
-- how to get out of the building. Now he's got to jump from
the fifth story instead of the first. So thanks, Mr. Greenspan,
you've really done us all a great favor. Now see if you can just
get us out of the building without our breaking both legs and
maybe our neck."
- One of the more interesting
things this week is finding out that not everybody is as stupid
as we are. From Business Wire we read "A study published
by a research foundation in Dubai has endorsed the gold Anti-Trust Action Committee's findings that
Western central and commercial banks have rigged the gold market, but have much less gold
than they claim to have, and so are vulnerable to rising demand
for gold." Well, nothing new so far, as
I am the first to see conspiracies in everything, especially
concerning money.
No, the interesting part comes
next, "The study recommends that the oil-producing countries
of the Middle East diversify their ever-depreciating U.S. dollar
holdings into gold."
The study was entitled "The
Role of gold in the Unified Gulf Cooperation Council
Currency," and was written by for the Gulf Research Center
by Eckart Woertz, who is vice president of CFC Securities in
Dubai. The study concludes: "The paper dollar standard is
a dead man walking. Debt, accumulated over the recent decades,
is too high to be effectively repaid. It will either default
or be inflated to such an extent that it will not 'hurt' to pay
it back. Therefore, the accrued imbalances in global finance
and the inherent weakness of worldwide growth models that rely
on a continuance of U.S. deficit spending are likely to usher
in a serious crisis of currency systems in coming years."
Then he gets to the reason
why he is recommending gold in
the first place, and why The Mogambo is always screeching the
same thing whenever he gets the chance, and why the Founding
Fathers wrote into the Constitution that money shall only be
made of precious metals. "gold will
be a suitable means of asset protection and ultimate payment
in such a scenario. It will preserve the wealth of individuals
and central banks alike and will ensure important maneuverability
for the latter."
The author sounds just like
The Mogambo, but without the usual litany of obscenities or actual
gunfire, when he says, "The Middle East's oil-producing
countries are especially obliged to heed the Gulf Research Center's
study because their economies are based on a wasting asset, oil,
whose depletion will leave them with little more than sand if
the payment they receive is substantially depreciated or defaulted
upon. In exchanging a real asset for paper assets that represent
only unpayable debts, oil-producing countries are at imminent
risk of massive expropriation."
They now have oil and sand,
and when the oil is gone they are going to be left with sand
and paper dollars, which, in buying power, will be practically
worthless? Hahaha! Chumps!
- To show you why Venezuela
never won any prizes for economics, consider that Patrick Markey
from Reuters writes (from Caracas, so the news can't be fresher
than THAT), writes "Venezuela on Thursday devalued its bolivar
currency by 10.7 percent to take advantage of high oil prices
and generate more revenue from petroleum sales to bolster its
finances for the year." Huh? The buying power of the currency
is devalued by almost 11% because, and you can tell by the way
my voice is now a high-pitched squeal that makes the dog uncomfortable,
that this is too, too, TOO weird. They get more money (measured
in sheer wads of currency), but having the same buying power?
What's the point? And where are all of the Venezuelan economists
standing with The Mogambo outside, chanting "No! No! The
Mogambo says no!" over and over until the words lose all
meaning?
The adjustment of the fixed
exchange rate is 2,150 bolivars to the dollar, up from 1,920
bolivars. One minute I can get a Venezuelan hamburger for 1,920
bolivars, and the next minute I can get the same hamburger for
2,150 bolivars? On the other hand, and this is your Mogambo Travel
Tip Of The Week (MTTOTW), if you want to go down to Venezuela
and pester the hootchie-coochie dancers and act like a degenerate
deviant pervert like The Mogambo, then this is the perfect time
to do it, as your money will go a long way, until prices catch
up to the increase in the money supply, and then the poor will
rise in anger because they can't afford to buy food anymore and
the streets will run with blood, which really has a chilling
effect on hootchie-cootchie dancers. So, like I said, time is
running out.
- US Senator Harry Reid is
reported to have said, "I'm not a big Greenspan fan. I voted
against him two times. I think he's one of the biggest political
hacks we have in Washington." Hahahaha! Well said! Even
though I knew he was an economics hack, I did not realize he
was also a political hack, too! A double threat!
- My sentiments on removing
the ceiling from wages subject to Social Security and Medicare
surtaxes drew the predicable response from high-wage earners
(You're an idiot, Mogambo!") , but (and this is another
case of "The dog that didn't bark" that made Sherlock
Holmes so damn famous but it never does anything for me), I received
no hate mail from low-wage earners, who, I guess, would have
said things like "Stop making the high-wage people pay the
same percentage tax on their wages as we do! It is not fair that
that rich pay the same 15.3% of wages as we do! They should pay
less! And if they start to complain, like we do, 'Hey! This is
a hell of a bite out of my check every freaking week, and liquor
is getting pretty expensive, and if you think I am going to,
cold sober, face my horrid little family and my horrid neighbors
and my whole horrid life, then you don't know the Mogambo!' And
the rich are far too busy and important to have to complain to
their Congressperson about how it is so hard to make ends meet
and how they ought to focus their damn attention on the Federal
Reserve to make them stop creating so much money and credit that
always shows up in higher prices!" Well, to be fair, I'm
not sure that the low-wage earners say that, but they should!
But since we are talking about
Social Security, here is my New Mogambo Retirement Plan (NMRP).
Since Social Security is a scheme to tax our children, then all
you gotta do is, as they say, "think outside the box"!
Suppose you need, oh, say, $60,000 a year to fund your retirement,
including your plan to take several trips a year to the United
Nations building and scream at them "I hate all of you!"
Now, showing off with my awesome calculator skills ("Watch
me cipher, Uncle Jed!") if you could get $2,000 a year from
30 people, you'd have the whole $60,000, right? Now, notice how
every morning there are groups of damn kids, which we are going
to tax one day anyway, standing at street corners all over the
damn place, waiting for their school bus to come and pick them
up so that they can waste their time and my tax dollars by getting
a third-rate education that teaches them to be government-obeying
robots.
Now, I think you will agree
with me that it won't take many groups of these kids to make
up your 30. So merely go up to 30 them, and hand each one of
them their four Mogambo Remittance Vouchers (MRV), so that at
the end of the quarter they have to each send you $500! See how
easy this is?
I mean, they can move back
the date at which we can collect Social Security benefits, requiring
us to retire later. So why can't I move up the date at which
the kids pay Mogambo Retirement Taxes (MRT)? And it goes directly
to the recipient (me) cutting out all kinds of middlemen, thus
achieving complete value for your money! And yet, even when I
explain it to them, they all look at me like I'VE done something
wrong!
- The Bureau of Labor Statistics
announced 262,000 new jobs in February, although the unemployment
rate edged up to 5.4%, percent. Paradoxical, I know, but that
is the way of modern statistics.
George Ure of the UrbanSurvival.com
also noted that "Hours worked in manufacturing jobs declined.
Weekly earnings were unchanged." And then he added, to save
me the trouble of mentioning it,"you'll notice that they
didn't keep up with inflation." The actual BLS quote is
"Over the year, average hourly earnings grew by 2.5 percent
and average weekly earnings increased by 2.2" Which is,
if you have been watching, less than the increases in prices
that you pay for all kinds of stuff.
Safehaven.com is another bunch
of savvy dudes who also looked at the payroll numbers at the
BLS site, and noticed that, "The March 2004 total nonfarm
payroll employment estimate was revised upward by approximately
203,000 or 0.2 percent." Their reaction went like this:
"So folks, on my planet we back 186,000 out of the 262,000
published number and we now have a grand total of 76,000 new
jobs. But we are not done yet. The BLS uses another hedonic measure
called the birth/death model. As you can see here, an additional
100,000 jobs were added to the headline number published."
Now, if you are like me, all
these numbers are making your head swim and you are looking at
your drink and wondering if somebody put poison in it. But we
are spared both the onerous task of re-reading the passage and
sending the drink out for analysis, and they handily summarize
as "So backing this number out of 76k and we actually lost
24,000 jobs without the use of hedonics." Hahahaha! Jobs
were lost!
None of this has escaped the
attention of Frank Barbera, in an essay on Financial Sense Online
website, entitled "Stagflationary Collapse: Prelude to 'The
Greater Inflation' (click)
" He writes, "Few economic observers note the continued
shrinkage in the Labor Force Participation rate, which now ratchets
down to a 17 year low, as more and more workers simply give up
looking for jobs. Never before in America's history has an economic
recovery unfolded against the backdrop of a shrinking labor force."
Yeah, and never before in American history is it possible for
so many to live without a job! Hell, I and most of the people
I know have a hard enough time getting along WITH jobs, mostly
because our wives want stupid things like curtains and dishes
and glasses, even though, for instance, when you buy Big Gulp
at a convenience store, you get a perfectly good drinking glass
in the bargain! But I don't know who these guys are, but I am
pretty sure that they are 1) a bunch of geniuses and 2) single!
But he doesn't want to talk
about how he and I are a couple of first-class doofuses, working
away at our boring little jobs, like some tragic ants toiling
anonymously in some grubby ant hill. Ignoring me, he goes on
say "Tragically, few people seem to comprehend the altered
nature of government statistics, wherein unemployed and under-utilized
workers are no longer counted in the unemployment rate, which,
in reality is much higher than the widely touted 5.2%. In fact,
unknown to most, the 'unofficial' unemployment rate stands closer
to the rate seen in major European countries such as Germany
and France, between 9% and 10%."
- I was driving my wife to
the airport and we were talking about the housing market, and
she says how she heard on All Things Considered, and I quote,
I think, "They said that the middle class is stuck in the
middle, as housing is too expensive on both coasts." Hahaha!
Middle class in the middle! Hahaha!
Then I told her how most mortgages
are now adjustable-rate, and how a big part of total mortgages
are for interest-only mortgages, and how this seems so preposterous,
and then we laughed some more--- hahahaha! --and then she said
"Wipe off your chin, stupid" as I always get spittle
on my chin when I laugh, and so I wipe it on my sleeve, which
was harder than it looks because it was a short-sleeve shirt,
and then she's yelling "Not on your sleeve, you idiot!"
conveniently forgetting to compliment me on my lithe agility,
worthy of a circus acrobat half my age, and how I twisted my
head all around like that, WHILE driving, WHILE laughing, WHILE
wiping my chin. But do you think I get any credit? No! I just
can't win around here!
Anyway, this brought to mind
that Thomas Jefferson quote about how if we are so stupid as
to have a central bank and a fiat currency and astonishing levels
of fractional reserve banking, then we would end up as slaves
on our own continent. So, and here is how Jefferson is going
to be proven right; the dollar sinks so low that Chinese guys
and Japanese guys and Indian guys all find that the price of
land in the US is cheap, when computed back into their own currency.
So they start buying houses here, and then their governments
(who hold a lot of US debt and so can extort "favors"
from Congress), start coming over here on special visas and running
their businesses via the Internet and hiring guys like you and
me to clean their pools and shine their cars. And the reason
that we take these stupid low-paying jobs is that the price of
oil, in dollars, is going up and up, and chicks don't like guys
who don't have cars. And that means gas, and that means that
$80 per barrel oil is real important to me, and that is why I
was particularly attuned to the comment that somebody at OPEC
or something said was reasonable to expect oil at $80 a barrel
within two years. And using the postulate that "things proceed
apace" it is reasonable to expect during that time the price
of oil will NOT stay at current levels and then, on the stroke
of midnight two years from now, jump to $80 a barrel. No siree,
young grasshopper! In fact, if you set your alarm go "beep!"
exactly two years from now, you will be able get up from a long,
long nap, and go outside, and opening your bloodshot eyes to
take a look around, look backward through time! And then you
will notice that, while oil is now $80 a barrel, it was $75 a
barrel last month, and it was $70 a barrel for a few months before
that, and it was $65 a barrel for quite awhile before that, and
it was $60 a barrel for a long time. In short, gas got pricier
and pricier the whole freaking time.
But the housing bubble gets
worse than that, as from the DailyReckoning.com we get the news
"Friends are teaming up to buy houses - they have become
too expensive for a single couple to afford on its own."
Fabulous. Now that housing and merely living has gotten so expensive
that grown children are still living at home, America's future
has two families living in one house, and now there are TWICE
as many people screaming at me to please get out of the bathroom,
which is stupid because this is the one damn room in the whole
house where I can get away from those damn people! Why do they
think I am in here, to actually go to the bathroom? When I can
just as well go behind those bushes in the backyard as I usually
do?
But the problem is not confined
to America, as we learn, when we read on, that "But the
phenomenon is not limited to America. Real estate bubbles have
been spotted all over the world. And money supplies are bubbling
up as well - particularly in Asia." Terrific. Not only are
those dumb foreigners doing that same silly thing as we, when
they could be practicing their English so that when they talk
we wouldn't say "Ha! They speak with funny accents!",
but they don't even have any illegal Mexicans immigrants to do
the lawn work and watch our kids and work for coolie wages and
thus keep those labor costs down so that we can buy stuff cheap.
I mean, what are they thinking about?
But this shows, and notice
how this again proves that all things are connected to all things,
and this is especially so for how money things are connected
to all money things, how the Federal Reserve, acting like the
profligate morons that they are, has produced a glut of money
all over the world, which has to go somewhere or it wouldn't
have gotten borrowed to start with. And when more money starts
chasing a fixed basket of goods, then prices go up. It's as simple
as that!
- The Washington Times article
entitled "Watch
Your Wallet" by Bill Bergman ought to give you something
to think about if you are thinking about having money during
your retirement. They write "The Consumer Price Index (CPI)
has now gone up every year since 1955. Last year, it rose 'just'
3.3 percent, following a 1.9 percent increase in 2003. During
the past 15 years (1990-2004), the CPI has increased 51 percent."
Up close and personal, they
offer the analogy that "The best data available indicate
a family earning $50,000 in 1990 would have had to earn about
$72,250 last year to maintain its 1990 standard of living. That's
the cost of inflation."
I bring this up because that
precious little financial plan prepared by your darling little
mutual fund salesman always assumes that inflation goes to zero
at the moment you retire! Hahahaha! The reality is that, if the
inflationary idiocy of the last fifteen years continues when
you retire, whatever stash of money you have will lose half its
buying power in 15 lousy years!
I can see that you are not
convinced, and that maybe the inflation of the last 15 years
is an aberration of some kind. My Mogambo Mind (MM) starts screaming
"Not so!" But before I can get the words out of my
mouth, Mr. Bergman shoves me away from the microphone and says
to the class, "Since abandonment of the domestic 'gold standard' in 1933 and the subsequent official
suspension of gold redeemability in 1971, the CPI has
moved in one direction only: up, more than 450 percent since
1971." That comes out to "only" 4.5% a year.
And speaking of inflation,
the CRB Index is the highest since January 1981. As Reuters comments,
"The index gained 7.1 percent in February, the most in any
month since August 1983." Seven percent in one freaking
month? Yow! And gas is back over two bucks a gallon? Double yow!
- I saw Ted Kennedy on C-Span
arguing about the minimum wage and how this is so vital, because
people cannot survive on minimum wage. Then I got to see John
Sununu informing that Kennedy butthead ("Yay, John!")
that raising the minimum wage prices low-wage workers out of
the marketplace. He did not even mention that increased labor
costs drive up prices because the employer has to maintain his
profitability, and if profitability does not increase, then this
is one MORE damn job that The Mogambo got fired from, so you
can bet your sweet butt that prices are going to increase, and
pronto. And since the working poor pay prices, too, the working
poor wind up back where they started; their paychecks are not
enough to live on anymore because prices rose higher than their
incomes.
Senator Sununu did not ask
the jackass from Massachusetts why these people are so poor,
nor did he ask the people of Massachusetts why they keep electing
this laughable moron. But the poor are poor because prices are
high. And why are prices high? Because the damnable Federal Reserve
created so much money and credit that all that wonderful, magical
money chasing the same basket of goods and services will bid
up prices until all that money is incorporated into prices. Ugh.
**** The Mogambo Sez: The action in gold
is impressive, and I am sure that you are glad you got some,
and gold mining stocks, too. And oil is knocking
at the $55 a barrel level, too, and I am likewise sure that you
are glad you got some of those stocks. And if you are not glad,
then it is not too late to get some, and then one day YOU will
be glad, too.
Mar 08, 2005
Richard Daughty
email: scgcjs@gte.net
Archives
The
Daily Reckoning
Richard Daughty
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
Daily Reckoning
and other fine publications.
321gold Inc
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