...the angriest guy in economics
March 17, 2004
The most unsettling news, to
me, is that Treasury Secretary John Snow has apparently requested
a meeting with all 12 Fed governors. This cannot be good news,
and you can take it to the bank, no pun intended, that they are
going to cook something up to screw us over, in spades, as they
have no options left. As desperate and scared, cornered rats,
they are now reduced to doing awful, economically-suicidal things
in their increasing clutching-at-straws desperation.
Perhaps it has something to do with what Stephen LaTulippe was
writing about on the LewRockewell.com website, who wrote an essay
entitled "That Strange Cloud Over the Horizon." He
writes, "Sooner or later, foreigners are going to look at
the balance sheet and realize that they shouldn't loan us any
more money." He sums up his dour assessment of the American
financial situation, and it is not a pretty thing, and refers
to that cloud approaching over the horizon as "Could it
be a giant flock ofchickens?? Yepand they're coming home to roost."
Those monstrous murderous chickens may be coming, but foreign
central banks gobbled up another $8 billion dollars of US debt
last week and stashed it at the Fed. They are doing this as a
favor to us so that we, as a nation, can go heroically farther
into unfathomable debt to buy things imported from those foreign
nationals, the money for which ends up in their pockets.
But perhaps this Treasury meeting with the 12 Fed governors has
something to do with the rumor that Japan is considering stopping
this loathsome practice of printing yen to buy dollars. And without
Japan taking more and more huge chunks of US debt, who is going
to step up to the plate and absorb the gigantic supply of new
Or the Snow meeting with the 12 Fed governors may have something
to do with the fact that Fannie Mae now has derivative exposure
on its books that exceed one trillion dollars. Or maybe the fact
that Fannie Mae has more than $900 billion of debt, making it,
according to Reuters, "the second-largest borrower in the
U.S. after the federal government, and more than either the French
or U.K. governments."
Or maybe it has something to do with the new Bank for International
Settlements estimates that global derivatives now total $208
trillion, or roughly 700% of global GDP! Leveraged bets that
total more than seven times the total global output of all goods
and services? It staggers the mind! Or it may have something
to do with the fact that the stock market is now as overvalued
as it has been anywhere in US history. Or it may have something
to do with the fact that inflation is roaring along, and that
means US bonds, which are paying negative real interest rates,
are now so overvalued that there is no way that anyone holding
American debt can even SEE value, even standing on tiptoes and
using the Hubble telescope.
So something is going to be done. Something so horrible that
future historians are going to have a field day with it. Trust
me on this one. The part that is so tragic is that everybody
knows the end result of this kind of money-madness excess. Nobody
ever disputes it. Nobody even tries to hide the truth, as the
history of the world is littered with the inescapable evidence.
You will end up with, and you might want to write this down because
it will soon seem very important to you, a high and ruinous price
inflation caused by the high and ruinous monetary inflation.
High price inflation will adversely impact that particular part
of the population whose incomes are NOT growing as quickly as
prices are going up, a demographic cohort whom I classify as,
lacking a better word, "us." And then the part of THAT
population that responds by being angry and sullen, sitting around
in the dirt in the deep woods sharpening and re-sharpening a
bayonet over and over, and muttering dark, sulphurous oaths under
his breath, namely "me," will also be adversely affected.
And the greater the disparity between incomes and prices, i.e.
the farther the fall in the standards of living, the farther
will rise the needle on the old "Grumpy-O-Meter."
The Federal Reserve itself, however, provided less credit to
the banking system last week. Not only that, but the rate of
rise of the aggregate Fed credit has slowed markedly over the
last couple of months. This probably has something to do with
the fact that borrowing for business expansion and rampant speculation
is not, ummm, robust right now. And without a big demand for
money, the Fed doesn't feel compelled to print it up for them.
This is the old "pushing on a string" problem. And
parenthetically, this "pushing on a string" dilemma
is why the Fed is now cornered into creating so very much money
and credit, and the Congress is likewise cornered into astounding
feats of deficit-spending.
But, just to show you who is boss here (they figure THEY are)
and the limits to which they will go (they figure, as a kind
of rough estimate, to infinity), the Fed has kinda sped up its
monetizing of debt by a couple of notches last week, and bought
up over one billion in American debt.
Keeping those loose parameters in mind, the Fed is obviously
within those guidelines, seeing that $1 billion is carefully
treading that fine line between current levels and unimaginable
And here, to show you the breathtaking constellation of talents
of the Mogambo, I have prepared a home movie for you. The opening
scene is the plush offices of the Mogambo, where the handsome
hero, as played by a handsome Big Hollywood Star, is seated at
his huge desk, talking on three telephones at once, surrounded
by anxious world leaders who implore me to solve all their problems,
and some scantily clad vixens (The Mogambo Maidens), who trill
and titter to feel my bulging muscular biceps, which I randomly
flex from time to time, and who, when not leaping tall buildings
at a single bound, can be found writing the Mogambo Guru, a mishmash
of macroeconomic hysteria. With, at no extra cost, lots of paranoid
fear and hostility, born of reading history and then reading
Hazlitt, who, as I recall, showed that all ruinous boom-bust
inflations happen the same way, because people are the same greedy
way, and governments are the same grubby way, and, well, you
connect the dots.
I also, in my few precious moments of spare time, invent, out
of common household chemicals, pills that reverse aging and make
hair stop growing out of your ears and start growing on your
head like it is supposed to, and that cost only "pennies
a day." But the serenity of the Mogambo is suddenly shattered
and he is galvanized into action! With the reflexes of a jungle
cat I leap across the desk, scattering dignitaries and Mogambo
Maidens alike. With an ease of such timeless and graceful beauty
that it defies description by mere mortals, I hit the red panic
button! This sets alarms sounding! Horns blaring! Sirens wailing!
Lights flashing! All signaling, if you are up-to-date on your
Siren Theory, a bona fide Emergency Situation!
Frightened children instinctively
run to their mothers, and ask "Mother! Mother! What is wrong?
Pray, tell us what is to become of us?" and the mothers
hasten to remind them that the sirens merely mean that the Federal
Reserve has created more money out of thin air- bink! --to make
a large purchase of government debt! "Tut, tut," the
mothers soothingly say, "Those sirens only mean that the
Fed has created more money! And simultaneously it activated the
Mogambo Emergency Response System. So, my little darling sweetie-pie
snookums, all the little sirens are saying when they say 'toot
toot' is that we are all going to die horrible deaths of deprivation
and suffering when the Locust Swarms of Inflation swoop down
upon us and eat our guts out. Now, stop worrying and go run outside
and play, my precious sweetie!"
In order to comply with any possible grounds for Equal Opportunity
complaints, I now want to warn those people who are deaf and
dumb, since they cannot hear the sirens and horns and klaxons
going "Ah-ooooooo-gah!" and cannot hear or read or
see the flashing warning lights going blink blink blink. My plan
is to teach volunteers to sign into the hands of these deaf-and
blind-people "This is from the government," and then
punch them in the stomach real hard and take their wallet while
they are doubled over on the ground gasping for breath and puking
up blood. I am sure that the deaf and dumb population will eventually
be grateful for the highly educational metaphor.
Robert Prechter, he of Elliott Wave fame, still sees deflation
in the cards, and points to the action in the money supply, which
is, when I look at the chart, one of three possible scenarios:
1) slowing, 2) lacking in marked advance, or 3) stagnating, which
are all de facto proof of monetary deflation. So, classically,
we have less money chasing more goods, and prices should fall.
Or, as has been noted by others, and probably more appropriately,
more goods are chasing less money, which also means that prices
should fall. So we can easily see where Mr. Prechter gets the
well-founded idea that we are facing a deflation in prices.
But not all prices will fall in a deflation, just as some prices
do not rise in an inflation. But I can easily see where houses,
stocks, bonds, and collectibles and all that kind of thing would
go down in price because they went down in demand. And because
they are being supported at these prices by rampant monetary
goosing by the Fed fostering insanely-low interest rates, and
grossly irresponsible stimulus spending by Congress, these prices
would seemingly fall a long way if demand faltered. This would
be very bad news indeed, because the whole American economy is
being supported by this huge speculative activity, and money
roaring through the pipelines of the global economy. In fact,
it has been pretty conclusively shown that speculative activity
IS the US economy. I sigh and shake my head in weary resignation.
So, getting back to Mr. Prechter, you can see where the idea
of deflation comes from. On the other hand, you can see where
the idea of inflation comes from, too. We are a nation that imports
a lot of the stuff it consumes, and a falling value of the dollar
means that the price of imports has to rise, if the foreign exporter
is to achieve a stand-still, profit-wise. I am thinking specifically
of oil, which has not only gone up dramatically in price, but
is destined to keep going up and up in price. And it has a HUGE
impact on everything else in this country, too! And all in a
bad, bad way, too, looking at it from the "price-inflation
side." And US exports of grains and farm produce and raw
materials will go up, thanks to the fall in the dollar, which
makes US agricultural and livestock products very, very cheap
on the world market. Which means that prices, in US dollars,
have "room to rise." Which they will, if I know my
greedy capitalist swine. And so, with the added demand from foreigners,
food will also increase in price, as will, since we are talking
about it, everything else.
And to show you that the indefatigable Mogambo has not given
up hope of winning a Nobel Prize and that luscious million dollars
in prize money, I now submit my latest foray into The Fabulous
World Of Economics According To The Mogambo, and using strict
economic terminology and mathematical mumbo-jumbo that seems
to be so wildly popular, when the yuan (Y) is unpegged (U) from
the dollar (D), and if the yuan rises (large multiplier, or LM)
as predicted (P), then US agricultural products (USAP) and all
things American (ATA) will become instantaneously cheaper (IC)
for those Chinese dudes (CD) and probably everybody else, (EE)
who has a currency (C) that is NOT the US dollar (NTUSD), but
will ruin (DOA) all those who have US dollars (USD) or things
denominated in dollars (TDID).
And now that the Fed has increased the prices you pay for gasoline
and food by virtue of their ruining the dollar, you can understand
where the idea of inflation comes from, and how it will make
the other deflations in the economy seem of minor importance.
And speaking of gasoline, oil is now comfortably over $37 a barrel,
meaning that the price of gas at the pump will be hitting another
record pretty soon, too. And if this plays out like it should,
which I call Mogambo Movement, you will have a front-row seat
to see lots of new records in gasoline prices on lots of days
"pretty soon," and lots of news stories on TV of the
suffering and price inflations, probably referenced as "cost-push"
inflation, and how we have GOT to provide more help to "the
suffering children," which one does by raising taxes or
going into debt, or both. And won't that be fun!
So which will it be? Like a dinner at a Chinese restaurant, I
figure it will be a little from Column A and a little from Column
B. And because the chef is drunk as a skunk, it will also be
a little of something else that you hadn't planned on, and in
fact nobody planned on, except the remarkable Mogambo, who just
now accurately predicted that it will be something that we had
not planned on, and sure enough, it was. Like a virus. Or a terrorist.
Or an asteroid. Or alien creatures in UFO's using some kind of
atomic blasters and shouting out, in their little strange, mechanical
monotones, "Surrender, puny Earth people! Resistance is
He also takes note of the Kondratieff cycle, which is a mysterious
54-year long cycle where the whole shooting match turns to crud.
And it does seem to be that way, when you look at the historical
charts and graphs. And our position on that decades-long curve
is where we are starting to go downhill. Mr. Prechter has also
penned the immortal line, in his book "Conquer the Crash,"
that "For many people, the single biggest financial shock
and surprise over the next decade will be the revelation that
the Fed has never really known what on earth it was doing. Make
sure that you avoid the disillusion and financial devastation
that will afflict those who harbor a misguided faith in the world's
central bankers and the idea that they can manage our money,
our credit or our economy." And on that point we agree perfectly,
although I am sure that Mr. Prechter's lawyers will soon be here
to impress upon me that while Mr. Prechter may or may not agree
with me on anything, he feels "soiled" to be associated
with me in any way, and how all of them want me to stop it. Such
is the life of the Mogambo.
And speaking of Mr. Prechter, while he has been fairly bearish
on gold, in his book "Conquer the Crash"
he said that "If gold were
to move above $400 per ounce, I would probably be convinced that
a major low had passed." Next time I see him, which will
be, if he gets his way, never, I will ask him if he is convinced
that the "major low had passed." In the meantime, you
can use the MoGu as a rough proxy, who says "gold will almost certainly never be cheaper in dollars
than it is RFN." And if you are current with your MoGu-isms,
then you instantly recognize this acronym to mean "Right
Bill Fox, writing a real nice essay entitled "Id Monsters,
Self-Deceptions and $1000 gold, "
references Dan Ascani, who has calculated that the inflation
in commodities from 1933-1997 was, in case you were wondering,
1,013%. Things are not twice as expensive. They are not thrice
as expensive. They are not fice as expensive but they are the
Full Monty, more than ten times as expensive! In 63 short years.
But as horrible as that sounds, it is "only" 3.72%
inflation per year!
On the Daily Reckoning website, Evan Pickworth has also looked
at the history of prices, and has this to say about this very
indicator of inflation: "Individuals are becoming increasingly
disgruntled with the huge inflationary pressures they've faced
ever since Reserve Banks and governments started printing worthless
paper money. You see, the endlessly increasing money supply (inflation)
we have experienced in modern times decreases the purchasing
power of money." And now we have a little treat, as he gives
us a little compare-and-contrast history lesson, "Consumer
prices that had risen a meager 13% in 114 years since the founding
of America, soared 1,500% in the ensuing 90 years." On an
annual basis, this is one tenth of one percent per year for the
first 114 years, then 3% for the next 90.
There are those, mostly congenital idiots, who say that 3.72%
inflation is not a bad thing. The Fed, which is a bastion of
idiots, says that it is not bad, which only goes to prove that
only idiots think that 3.72% inflation is not bad, using my best
circular logic. These people say that 3.72% inflation is benign,
tame, a trifle, a piffle, non-existent, under control or some
other soothing euphemism. These people say, as hard as it is
to believe, that 3.72% inflation might actually be a GOOD thing!
They are wrong. Let me show you why.
Let's take a personal look at 3.72% inflation. If you retired
today with a retirement income of $50,000, at this rate of price
inflation you would need $100,00 to finance the same lifestyle
in twenty years after retirement. So how much do you have to
save in that miraculous 401(k) plan of yours to finance that
much inflation? How much? Hahahaha! And I am here to tell you
that the precious little financial plan that the mutual-fund
salesman provided you assumes that inflation ceases, instantly,
at the moment you retire! So factor those revelations into your
retirement plan and tell me how you still think that 3.72% inflation
is "benign!" Hahaha!
Mr. Fox goes on to write that "The stagflationary 1970's
provide an important precedent in recent American financial history,
particularly since I believe the decade ahead will echo the 1970's,
only worse." Actually, this guy, for all his gloom and doom,
is actually kind of an optimist compared to Robert Prechter,
who says "The ultimate consequences will be more severe
and more confounding that the consequences of the 1929-1932 crash."
Mr. Prechter goes on to predict that the whole bust phase will
"last a century and comprise two or three major bear markets
with one or two intervening bull markets." A bust that lasts
a whole century. Wow. Mr. Fox continues his case that our problems
really began in earnest when, "After Nixon removed the dollar
from the $35 an ounce international exchange rate in 1971, gold began a run up that culminated at a London PM
fix of $850 an ounce Jan 21, 1980."
Mr. Fox, always the wry wit, defines "bad inflation"
as "This type of inflation typically means an expansion
of the money supply and bank credit ahead of gains from productivity
and asset growth. More money and credit chasing fewer goods and
services typically means higher prices over the long run."
This is the kind of inflation that we have been subjected to
by the Greenspan Fed for as long as I can remember, and I ain't
no Spring chicken here.
"One reason why this is really bad inflation is because
it results in an eventual loss in real purchasing power for the
average consumer. This is a hidden form of taxation. Creating
more money and credit per se does not in itself create any new
wealth any more than a counterfeiting ring."
He doesn't pull any punches about the Congressional deficit-spending
program that has produced budgets deficits that are already over
5% of GDP. He says this "stimulus spending typically creates
the short-term illusion of prosperity at the long-term price
of distorting the economy and debauching the currency."
He has also looked a the historical record and notes that "Price
inflation may also remain initially muted because excess liquidity
can first find its way into stock, real estate, or bond asset
bubbles. It may experience a prolonged delay in running up commodity
and consumer prices." Well, all we have to do is take a
look around us to see that this excess liquidity has already
found its way into stock prices and real estate and bond prices,
just as he has postulated. And it is finding its way into commodity
prices, too, although the government wonks who are supposed to
be looking at this kind of thing are all asleep, or lying, or
Extrapolating on this "bad deflation" thing, he writes
that "This is the kind of environment where gold often outshines all other asset classes, and
merits extended discussion. This is the overall underlying environment
I believe we have been in since the Nasdaq top in March 2000,
and it could last for many more years." So, and this is
the important point, a guy who has been careful to look at the
historical precedents figures that the bull market in gold could last for many more years. Very interesting.
The government, in the guise of the Federal Reserve, has been
pounding interest rates into the toilet for a long, long, looooonnnnnggggg
time now. When you woke up yesterday, for instance, interests
rates were being pounded down into the toilet. When you woke
up last year at this time, interest rates were being pounded
down into the toilet. When you woke up one crisp March morning
three freaking years ago, interest rates were being pounded down
into the toilet. And this is the genesis behind my hit new song,
"I Been In The Toilet So Long It's Beginning To Look Like
A Marble Palace With A Built-In Pool, Or At Least I Thought It
Was A Pool, But It Seems To Be A Cesspool For Somebody Named
Alan Greenspan." Oh, I realize that my fabulous song will
be suppressed by the government to keep its stirring lyrics and
catchy beat from "over-stimulating the common clod and inflaming
his animal passions to rebellion and non-compliance."
Mr. Fox has some views on that very subject, as when he writes,
"If the free market were to price a bond, it would probably
take into account this truer long term inflation rate, and add
on top of that a risk premium of let's say a historical average
of around 2.50% . That gives us 10.5% as a rational hurdle rate
for setting a free market floor on expected interest rates. Now,
let's deduct the aforementioned Thirty Year Treasury rate of
4.9%, and we get a possible real negative interest rate of 5.6%.
For individuals in money market funds that pay less than 1%,
the negative spread could be over 9.5%." So he is postulating,
with a precise mathematical proof that astounds us simple folk
to whom simple adding and subtracting constitute computational
wizardry, that people putting money into money-market funds are
actually slitting their own throats to the tune of 9.5% a year?
Wow! Are we morons or what? And is this before-tax, or after
tax? Because if this was the before-tax yield, then the actual
real, inflation-adjusted loss after-tax is MORE than 9.5%! No
wonder foreigners laugh at us! We're idiots!
He says that "British economist Prof. Tim G. Congdon noted
'As the double-digit annual inflation rates of the 1970s came
as a shock to savers, it took them time to catch up with the
new investment paradigm. Interest rates lagged behind inflation
and real interest rates became negative, creating the ideal conditions
for rising prices of gold and other so-called 'hard assets (oil,
real estate, commodities).' " See? He thinks just like the
Mogambo, although I am not sure that he gets it from being an
angry paranoid whacko (APW) like me, but then again, how can
anybody who has looked at what is going on NOT be an angry paranoid
He concludes that, "The magnitude of America's trade deficits
and indebtedness suggest that the US will eventually wind up
with double-digit interest rates and hyperinflation." Check
out that "hyper" in "hyperinflation." Scary
The US dollar has bounced, for varied reasons that have nothing
to do with actual business conditions, and is approaching what
looks like the top of the channel. Theoretically, then, the next
sustained move for the dollar is to resume its downward spiral
John Crudele in the NY Post writes that "For the second
straight month a forecasting outfit called Economic Cycle Research
Institute said its inflation gauges have risen. Federal Reserve
Chairman Greenspan keeps close tabs on ECRI's numbers first because
he trusts them and, second, because the organization was founded
by one of Greenspan's beloved former professors. And, I'm told,
ECRI will start worrying about inflationary pressures and convey
that concern to the Fed if there is a jump in this month's numbers,
which will be reported in early April."
So this ECRI bunch says its "inflation gauges" have,
and let me check to make sure of the correct word, "risen."
In other words, there has been a rise, which I derive from the
root word "risen," that has been detected by some monitoring
sensors equipped with readout functions, otherwise known as "gauges."
And these aforementioned "gauges" have, thus, "risen."
Yet, and you gotta admire their patient courage, as they are
waiting and worrying, and Alan Greenspan at the Fed are walking
around unaware! They do not know of the gauges! The ECRI did
not tell them, and are waiting 'til next month to tell them!
The poor Fed! Rushing towards the waterfall on the log, and completely
oblivious to the fact! But listen to the ominous soundtrack,
which has trumpets blaring and kettle drums pounding!
So there I am, standing outside of the Federal Reserve building,
doing my duty as a citizen, screaming as loud as I could, trying
to be heard, to warn them of the danger, the real and present
danger that the ECRI is withholding from the Fed! I'm screaming
"The gauges! Look at the gauges!" And the police are
frustrated and powerless to stop me because I have taken the
precaution-ha ha! I am truly diabolical! -of chaining myself
to the fence in anticipation of their attempts to get this raving
lunatic someplace where trained professionals can monitor me
and take appropriate action. Then after awhile, just as my voice
was starting to give out from all the screaming, which was also
about the same time as the Fed's mid-morning Medication Time
and then a nice little nap, here comes Alan Greenspan himself,
and he is right in my face, see, and he is telling me "Gauges?
What gauges? We don' need no steenking gauges!" And then
when the police closed in around me, I feel a sudden attraction,
and was about to say "Are you happy to see me, or is that
a gun in your pocket?" when it suddenly dawns on me that
it WAS a gun in his pocket, and it was pointed right at Little
Mister Mogambo, and I immediately got the drift, as in "not
all poems are written with a pen," and unlocked myself from
the fence and went home, and was grumpy all the rest of the day.
Mr. Crudele goes on to say "The most worrisome thing is
that the inflation is occurring even though the U.S. economy
is showing only modest growth and very little job creation."
This I interpret, as far as I can make out, to mean that if the
prices of things go up, but there are fewer people with jobs
who are thus able to BUY the things, then it is "worrisome?"
You're damn right it worrisome!
He has also taken a look at the budget deficit, and writes, "But
that means that if the government didn't have its own accounting
method and had to record costs like businesses do, the deficit
would probably be more than $750 billion. For one year."
And this ignores, if you are familiar with accrual accounting,
the gigantic wad of accumulated deficits from years past, which
is, using Official Public Debt as a minimum, now over seven freaking
trillion dollars (SFTD).
"These sort of numbers will be a big problem for the financial
markets when they start paying attention," he says. As soon
as he said that, I went on a search of the macroeconomic literature,
not by the dry and boring method of actual research and investigation,
but rather by me reaching up and just picking something out of
the air at random, and tried to find a reference to a situation
where the phrase "big problem" was NOT something bad.
The search came up negative.
Turning our telescope temporarily from spying on the neighbors
as part of our duties as A Loyal American Under The Patriot Act,
we look in regions of the commodities world, in Australia in
particular, and we see that coal prices are up over 100% in the
last year. Doubling in price in one year! And the port of Newcastle
is, as reported, straining under the demand, where ships are
lined up to the horizon to load up on coal.
We, here in America, have coal. Lots of coal. One day it will
seem important to you to remember that.
And that day, which I assumed was a long way away from here when
I said it, as did you, I am sure, is perhaps not as far away
as originally postulated. By this puzzling reference I mean,
of course, the Peak Oil thing, which is that the oil reserves
of the world are peaking, or have peaked. By this, I mean that
the discovery of new pools of oil lags far behind pumping and
using of current oil reservoirs. The surprising statistic is
that we use about four gallons of crude for every one gallon
of new oil that we discover. In short, we are running out of
To this I say, "Well, duh." It has always been known
that oil was not being produced by the selfish Mother Nature
at the rate at which we are using it. In the past, there were
always new discoveries being made to replace those oil wells
that went dry. Now we have apparently slipped over to the point
where we are not finding new supplies as fast as we are using
it. This should impress upon you that Mother Nature is NOT your
friend, as she COULD be making more, if she truly loved us, but
she isn't, and she sends her little animal buddies to bite us
and sting us and crap all over everything, like the car.
Anyway, there is some controversy as to whether the oil is starting
to run out, and, if so, when? The answer is, never. When supplies
fall farther and farther, the price will rise and rise, and each
rise in the price will provide an impetus to create some alternative
energy source, and the high prices will reduce oil usage. And
the higher the price goes, the greater will be the impetus to
invent some new source of energy, or come up with some way to
Ergo, the hydrogen-cell idiocy, which just won't die, which obviously
uses vastly more energy than you can possibly get back out. And
the reason it won't die is because it is one of the few alternatives
we have, and you can make it out of coal, which, if you have
been paying attention, we have in spades, and it employs American
workers, too. And not only in the digging and shipping and processing
of coal, either! But in the babillions of dollars, the gagillions
of dollars, and even all the way out to the zazillions of dollars
it will take to install the infrastructure of a hydrogen-based
society. Just let your mind dwell a little while, gently drifting,
using all your senses, on all the money to be made! Empires to
be built! Fortunes to be made! Grudges to settle! Relatives to
hire! And the government loves it because it's jobs, jobs, jobs
and contracts contracts contracts for everybody! And money money
money, that lovely lovely lovely money, for everybody, too! Wheee!
So the SEC is issuing a subpoena to Dick Grasso, the disgraced
head of the NYSE, who arranged with his pals to award him and
themselves with hundreds of millions of dollars in outrageous
paychecks, fabulous benefit packages, and perks perks perks,
very dime of which is gouged out of the fees and commissions
and surcharges and custodian fees and administrative fees and
transfer fees, all charged to all of the rest of us bozos out
here, as a huge cost for merely trading stocks with each other,
or merely owning them. It is just another example, as if we needed
one, of the greedy, grubby and bankrupting mess you get when
you give somebody the power to simultaneously set their own wages
and benefits, and the power to confiscate the money of other
people with which to pay said wages and benefits.
The local example around these parts is that my county is looking
for a new district administrator for the lackluster school system.
The position pays $300,000 a year, which is ludicrous, especially
to a guy who has PhD in, get a load of this, "Educational
Leadership," which is more worthless than a PhD in "Early
Mesopotamian Interpretive Dance," as far as I can tell,
as it mostly involves schmoozing people and gouging the taxpayers.
At least with Early Mesopotamian Interpretive Dance you get beautiful
scantily-clad ladies doing a cool dance.
On the Investment Rarities website, the Commentary of the Month
is a March 10, 2004 essay by Daan Joubert entitled "An Exercise
in Hedonic Alchemy." He takes a very clever and illuminating
example to show you how the Boskin Commission, which I have always
characterized as evil incarnate, showed the government how to
make GDP growth appear as if by magic using price inflation,
and then turn right around and showed how some more mathematical
magic can prove that there was no inflation to start with! Amazing!
In other words, they measure rising GDP with rising prices, and
then deny that prices are rising! I recommend this essay highly,
and I would put it on your Required Reading List if I could,
but I am sure that you will voluntarily go there and read it
if you want a real education in how the government is a lying
bunch of monsters who are out to get you and kill us all. And
if you do NOT want an education in how the government is a, well,
lying bunch of monsters who are, as I said, out to get you and
kill us all, then I am sure you do not own gold,
and your own folly will come to punish you.
A few years ago the State of Florida instituted a health-insurance
program for the few "needy children," and now that
program provides the health insurance for half of the state's
kids. Half! This is just another fine example of how people all
want to live at the expense of everyone else. And many of them
do, thanks to complicit and corrupt governments and the lame-brain
government employees who measure their job performance by the
number of people "served."
Perhaps the best recent example lame-brain government employees
(LBGE) is that of Senator Charles Schumer, D-NY, who is blaming
all our economic problems on Bush's not successfully filling
a government post ("jobs czar") that is charged with,
get this, addressing manufacturing employment! Hahahaha! What
a moron! And the people of New York who elected this horrible
little man should be embarrassed to have someone of his low caliber
representing them in Congress, as I am embarrassed as an American
to have this guy representing American governmental competence.
But he is not alone in saying laughable things that give thinking
people a splitting migraine headache and a bad attitude toward
politicians, as Barney Frank, another mental-midget Democrat
who somehow got elected to Congress against all odds, says that
the problems of America could be addressed if only government
was bigger! We are in the mess we are in, according to this horrible
little man, because government is not big enough! I know what
you are thinking: "This jerk is a Congressman?" Sad,
But perhaps I am being too harsh. After all, Frank and Schumer
are mere politicians, and as such are assumed to be shallow,
corrupt, incompetent knuckleheads. But there is no excuse for
Paul Krugman, the horrid little man who bills himself as an economist,
but works as a columnist at the NY Times proving that he has
no idea what he is talking about. For example, he writes, in
his ridiculous article entitled "President Bush Out Of Excuses
on Jobs," that "Franklin Roosevelt, in his efforts
to combat economic woes, was famously willing to try anything
until he found something that worked. George Bush, by contrast,
seems determined to try the same thing, over and over again."
His own execrable Leftist proposal, which he calls "My Economic
Plan," is, and get a load of this, "Extended unemployment
benefits, temporary aid to state and local governments, and rebates
for lowand middle-income workers." In other words, give
money away to anybody with a hand out, which is the Leftist answer
What this prancing, preening dweeb doesn't bother to say is that
George Bush has been doing exactly those things, and has also
done everything that Paul Krugman and his brain-damaged Leftist
buddies have been screeching about for the last seventy years,
and how if FDR had only done those things, then the Great Depression
would not have happened. To wit, massive Keynesian deficit-spending,
flooding the world with liquidity, pounding interest rates to
literal nothingness, growing the size and scope of government,
and tax cuts galore. In short, there is nothing that the Leftist
yahoos have ever even suggested, even in an offhand way, that
Bush and the Fed have NOT done, in order to get the economy moving
But has all been for naught, as the economic deterioration continues
unabated, just as the Austrian School of economics said it would.
Ergo, Paul Krugman is one of those poor unfortunates who let
their collectivist mindset get in the way of their education.
Just like Schumer, and just like Frank, and just like Ted Kennedy,
and all the rest of those Leftist losers, or as the Chinese say
"Badgers from the same mound," whose asinine, foul
"Big Government" philosophy got us into this mess,
from which there is no escape.
Bill Buckler of the Privateer newsletter writes, "Since
the money prices of real physical commodities and all the means
with which to transport same are now soaring, and since all these
COSTS are the input costs for all producers of real physical
economic goods, it is only a matter of a few months, or even
weeks, before the spectre of PRICE INFLATION raises its head
especially in the United States."
But the Chinese economy is perking right along, and Mr. Buckler
reports that "The lengthy Chinese coast line looks like
the beaches of Normandy in 1944 because of the ships waiting
at anchor and hoping to load or to unload as Chinese ports struggle
with the export/import surge." And the Mogambo stands up
and helpfully adds that it is bound to get worse and worse, as
there has been recent movement of credit card companies setting
up shop in China. As I have long said, all that is needed is
a way for the Chinese peasants to bring consumption forward to
today. And now they are getting it.
He also reports the gloomy statistic that "Chinese steel
production is bigger than the US and Japan combined." Since
the Chinese also have a bigger population that the US and Japan
combined, it makes you wonder what OTHER future statistics will
end with the phrase, "bigger than the US and Japan combined."
Most of them, I figure.
Martin Weiss of the Safe Money Report, has done a little skull-work
and figures that "The Dow is embarking upon a 1148-point
decline; the Nasdaq, a 465-point plunge."
"Last year, the government injected the economy with the
heaviest dose of steroids in history. So nearly all the muscle
growth you've seen since is fake and unsustainable. And despite
all the steroids, there is almost no job growth, no export growth,
nothing even vaguely sustainable. But there is plenty of additional
And if you are acquainted with the problems of crushing debt,
then you see why he is figuring on a big fall in the stock markets.
Gerard Jackson, economics editor for BrookesNews.com, wrote a
cogent article entitled, "Why the Clinton Boom Burst."
He writes, in his usual flowing style, "As credit expansion
is part of the money supply, it is the responsibility of the
Federal Reserve to control it. Instead it allowed a reckless
if not criminal expansion of credit to take place. It's now doing
all it can to repeat its mistake. It was this credit expansion
that fuelled the boom, triggered hi-tech stock mania, blew the
current account out and encouraged reckless borrowing.
He doesn't see much to recommend the future, either, when he
says "Credit has much in common with a house flooded by
burst water pipes. Even though the water is turned off, it will
still take time to drain the remaining water out of the structure
and dry the place out. In other words, there is a time element."
There are many intelligent people who are predicting a long,
long and a painful, painful economic recovery, because, using
Mr. Jackson's metaphor, it is not just the house that is flooded.
It is the whole damn neighborhood, stretching to the horizon
in every direction, because it was the dam that burst.
James Turk of the Freemarket gold And
Money Report has taken a look at the new international gold-sales agreement in his article, "8 Reasons
to Ignore the New Central Bank gold Agreement,"
which was posted on the Goldseek.com website. He examines the
exact wording of the agreement, 147 words long, and found it
to be, well, duplicitous, in that it is filled with half-truths,
lies and omissions. In his words, "Central banks deserve
our scorn, and for that matter, our enmity too for the interventionist,
statist policies that they inflict upon us in order to sustain
the fiat currency that they create, which the politicians then
debase to our detriment." In short, Mr. Turk figures that
the whole thing is a charade, designed to persuade you to not
exchange your increasingly-worthless fiat money for gold and thus make them look bad. Ugh.
---Mogambo Sez: Things are seriously amiss, and getting more
amisser by the hour. You should be scared. You should be buying
gold, and silver, and commodities, because
that is what the future will look like very soon.
March 17, 2004
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
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.
The Daily Reckoning
Reckoning Day: Surviving the Soft Depression of the 21st Century"
by Bill Bonner
and Addison Wiggin.
You can buy
online from Amazon.