 I seem to be
at a loss for words!
Richard Daughty
...the angriest guy in economics
The Mogambo
Guru
Archives
March 23, 2005
- Total Fed Credit expanded by $7.8 billion last week, and after
it gets through being multiplied by the fractional reserve banking
system, another few jillions of dollars of potential money was
created. Now all you gotta do is walk up and borrow some of it
to make it into money!
Enrico Orlandini of the Lasco Report also has been thinking about
this stuff, too, and has a new essay entitled "Panacea."
He writes "Mr. Greenspan has printed more dollars than all
the other Federal Reserve Chairmen put together. It also doesn't
quite capture the fact that the monetary growth seems to be gathering
speed. For the week ending March 7, 2005, the M-3 increased another
$31.5 billion and that's more than $160 billion since the last
week in January. If this pace continues, we are on the road to
a staggering trillion dollars plus growth in the money supply
for 2005. Impressive to say the least!"
But as impressive as that it, life is not all cookies and chocolate
milk. He also notes that history shows that "The implementation
of paper money almost always begins with fiscal responsibility
and good intentions, and it almost always ends in war and the
collapse of social order." A relevant homily is that the
road to hell is paved with good intentions.
"In conclusion," he says, "watch the money supply
and look for larger and larger increases. And remember, you can
print it but someone still has to want it. Every day there are
less and less people willing to hold dollars. I'm seeing a trend
in Latin America that was unthinkable just a couple of years
ago. Stores are refusing to take dollars and companies are now
writing long term contracts in local currencies. That's never
happened before. How far have the Americans fallen? Not nearly
as far as they're going to!"
As mad as that makes me, and as much as that scares me, and as
much as that makes me write long, rambling hate-filled letters
to the Federal Reserve about how they are suicidal idiots who
are killing us all by destroying our money, I was not prepared
for the how much Total Public Debt ballooned here lately. If
you are a spineless coward like I am, then skip the rest of the
MoGu and go have a chili dog, which would probably hit the spot
right about now. But for the rest of you brave souls who laugh--
hahaha! --at danger, the numbers show that the Treasury and the
spendthrift Bush White House and the moronic Congress have borrowed,
in sixteen lousy days, $72 billion! Dollars! $72 billion dollars
in sixteen days!
Now, let me get out that damn calculator and wipe the chili stains
off the keyboard, and notice how my face is a study in concentration
as I first enter amount of money recently borrowed, namely the
$72 billion. The little screen on the calculator reads "72."
So far, so good. Now, divide that by 16 days. With a flourish
of calculator magic, the little screen blinks "4.5."
Now, that doesn't sound like much. And even when you put a dollar
sign in front of it, making it $4.50, it still isn't that much.
A couple of chili dogs and a root beer, maybe a small fries,
tops. But when you add "billion" to it, making it read
$4.5 billion, suddenly we are talking about a LOT of money! Probably
more than you make in a whole month, I'm not sure, because numbers
this big actually seem to fail to register with me. And when
you are talking about $4.5 billion per freaking DAY, then you
are talking big, BIG, BIIIGGG huge freaking sums of money! A
number that is so high that I could actually pay off most of
my bills and maybe have a few bucks left over, with which to
buy something to eat. Chili dogs, maybe.
So now, if they are borrowing and spending $4.5 billion per day,
how much is that per year? I leap up and shout "Is this
going to be a problem where we multiply two numbers together?"
and everyone agrees that it is, so I excitedly plead, "Let
me try! Let me figure it out! I can do it!" And so, with
trusty calculator in hand, I multiply $4.5 billion per day times
365 days a year. I punch the button. Then everything went black.
Unfortunately, that is all I remember, because when I saw that
this meant an annual budget deficit of $1.6425 trillion, I literally
heard neurons in my brain go "zzzt!" and fizzle out.
But I seem to remember that I was in a kind of thick, soupy fog,
and there was a bright light at the end of a tunnel, and I hear
my wife whispering in my ear, "Walk toward the light, you
hateful little twerp!" and then turning to yell at the paramedics
"He says he wants you to pull the plug and let him die!"
and they are explaining to her how I am not hooked up to any
machines at all, and seem to have merely fainted, and then she
said a bad word.
But this is money of such a huge degree that, that, that. Hmmm.
I seem to be at a loss for words! I mean, this rate of borrowing
is 64% of the entire freaking federal budget! It is 14% of the
whole freaking $12 trillion GDP of the whole damn country!
Tired of seeing me standing there with my mouth open, at a loss
for words (but still making some weird humming sound) Michael
Hodges of the Grandfather Report jumps in and takes over, and
keeps the show going by revealing that "America has become
more of a debt 'junkie' than ever before with total debt of $40
trillion, or $136,479 per man, woman and child. 66% ($27 trillion)
of this debt was created since 1990, a period primarily driven
by debt instead of by productive activity." And I note with
a shudder that Alan Greenspan took over the Federal Reserve in
1997, just three years earlier.
He identified this debt load as representing "All U.S. debt"
which is the "sum debt of federal and state & local
governments, international, and private debt, incl. households,
business and financial sector debts, and federal debt to trust
funds."
And then when you divide this $40 trillion cumulative debt by
the 70 million people whose jobs are not government jobs or jobs
that are paid with government money, then those poor 70 million
private-sector workers have to work to pay off $571,428 apiece!
Hahahaha! Whose idiotic idea IS this? Hahahaha!
Anyway, I get to thinking about these things, and I wonder how
in the hell we got where we are, which is one of the downsides
of being stupid, as I am always confused as to how I got where
I am. Then I receive a forward from my old budderoo, Phil Spicer,
who thought I would be interested in reading an article entitled
"Burning
Bridges and Halfway Houses" by Antal E. Fekete, who
is the Professor Emeritus at Memorial University of Newfoundland,
dated 21 March 2005.
Prof. Fekete writes about the idea of the liquidity trap. "The
term originated with Keynes himself," says the professor,
"who, in the second half of the 1930's, noted that his contra-cyclical
prescription to inject new money in the economy through central-bank
purchases of bonds in order to combat falling prices wasn't working.
In fact, it produced just the opposite effect of what he had
hoped. Deflation got worse, not better." Bummer, huh? Keynes
and his stupid little economic theory are a dismal failure, and
now everybody looks like a bunch of idiots.
Even Kurt Richebacher has a few choice words in a similar vein
about this same stuff happening today. "The U.S. economy
has been treated with the most opulent monetary and fiscal stimulus
in its own history and also in comparison to the rest of the
world. And what did people in America get out of all that artificial
stimulus? It is, actually, America's worst recovery by far in
jobs and income since World War II or the Great Depression."
What's the problem? Well, Prof. Fekete goes on to write, "As
the ownership of monetary gold was made illegal in 1933, the
only competitor to government bonds was removed from the arena.
Owners of monetary gold were forced by the strong arm of the
government to invest in government bonds - not a very pretty
sight in itself, even if the matter ended there. But the matter
did not end there. As holders of gold were competing for the
limited supply of government bonds, which rightly or wrongly
they considered as the safest thing to have second only to gold,
bond prices were driven to unprecedented heights and interest
rates were plunged to unprecedented depths." Again, just
like today! People today are (and my voice always rises to a
high-pitched whine, like some hysterical snot-faced little whining
girl when I talk about this anomaly) actually buying bonds, and
long-term debt to lock in yields that are less than the rate
of inflation! Which is rising! And it is rising at the same time
as general interest rates are guaranteed, by the Federal Reserve
itself, to keep rising from these historically-aberrant lows!
Everybody is piling into bonds as the government is issuing oceans
of new bonds, and the Federal Reserve is creating the credit
that will be turned into money by everybody borrowing money to
buy the bonds, thus creating a supply-demand imbalance that drives
up prices, which drives down interest rates, which hands a tidy
profit to all the people who borrowed money to buy the bonds,
which makes a bunch of OTHER guys say "Hey! Maybe we ought
to borrow some money to buy some bonds, too, so that we can make
this easy money!" And so they do! And that worsens the supply-demand
imbalance, which makes prices go up more, which makes interest
rates go down more, and everybody is making scads and scads of
money on this scheme! Weird!
Prof. Fekete says, "Deflation is present in the economy
in the first place, in which case it is made worse than it need
be by prompting speculators to buy bonds in tandem with the central
bank. Interest rates fall and through the mechanism of linkage
prices fall, too, as the flow of money from commodities to bonds
accelerates. In the worst-case scenario a vicious circle is activated
and the economy plunges into depression."
Of course, a sane person would have started a large ceremonial
fire in the front yard and danced and chanted "The Mogambo
was right! This is stupid! We MUST go back to gold as money!"
But noooOOOoooo! What did they do instead? Well, they kept that
silly philosophical crap up the whole time, trying and trying
and trying until it was made to work, until now we have, as he
explains "The world center for liquidity-trap studies and
for the inflation-targeting cabal is the Woodrow Wilson School
at Princeton University in New Jersey. Under the leadership of
department head Ben Bernanke a team consisting of Paul Krugman,
Lars Svensson, and Mike Woodford has been busy investigating
the liquidity trap and finding ways to unplug it through inflation-targeting
should it get clogged again."
These evil people are the ones who want to destroy you with inflation
as a remedy for the mess made by this very stupidity! Gaaahhhh!
I'm screaming and trashing about on the floor until I bang my
head on the leg of the desk and then I segue into a phase of
loud crying and whining, and having people look to see if my
head is bleeding, and maybe they ought to rush me to the emergency
room, and maybe we could stop off for a couple of burgers on
the way, and they always say "no", probably because
they want me to suffer and die, and then they turn right around
and want to know why I am so mean to them all the time! I mean,
like duh!
Then Mr. Fekete links this all to an infamous
essay entitled "Can Deflation Be Prevented?" by
Paul Krugman, and written in February, 1999. Mr. Krugman explains
their weirdness like it is the most natural thing in the world.
"Yet here we are, with deflation turning out to be a serious
problem after all - and with policymakers finding that it is
not as easy either to prevent or to reverse as we all thought.
The point is that deflation should - or so we thought - be easy
to prevent: just print more money. How can we get finance ministers
and central bankers, who have spent their whole careers preaching
the evils of inflation and the virtues of price stability, to
accept the idea that price stability may not be an available
option?"
How do you get people to get over the silly notion that shooting
a bullet into your own brain is a bad idea? Is that what Mr.
Krugman wants to know? How do you get people to do something
that is irrational and stupid, when every relevant source, in-freaking-cluding
all of history, the Bible, and common sense, all say it is irrational
and stupid?
Well, Hans Sennholz, famous Austrian economist that he is, says
that it may be a hard sell, because, like me, he sees it again
and again all the way through history. "The popular notion
that an increase in the stock of money is socially and economically
beneficial and desirable is one of the great fallacies of our
time. It has lived on throughout the centuries, embraced by kings
and presidents, politicians and businessmen. It has shattered
numerous currencies, inflicted incalculable harm, and caused
social and political upheavals. It springs forth, again and again,
no matter how often economists may refute it."
While Dr. Sennholz does not mention the Princeton group by name,
he obliquely refers to "American statisticians and economists
want to make us believe that America is a new-paradigm exception
in this respect, being miraculously able to generate unprecedented
productivity growth with zero savings and record-low fixed business
investment. The consensus readily believes it. For us, this is
macroeconomic rubbish."
Mr. Fekete goes on to lay out more bad news. "Without any
hesitation they took the advice of Krugman, abandoned policies
'conventionally regarded as responsible', unilaterally betrayed
their mandate, burnt the halfway house of price stability, and
hit the warpath of inflation, euphemistically calling it 'inflation-targeting'."
I leap to my feet! "Yes! Yes!" I shout! That is EXACTLY
what makes the poor old Mogambo go berserk and is what he has
been screeching about at the top of his voice all these years,
and now he is hoarse and raspy and older, and now thanks to Permanent
Restraining Orders there are whole swaths of the country I can't
even go to anymore because I make such a stink about monetary
policy wherever I go, and now this Fekete character does such
a good job of explaining it without even raising his voice, and
now I feel my life is wasted, and nobody loves me and boo hoo
hoo.
But I was going to try and save a little of my tattered career
as a lovable lunatic by talking about how serious this was, but
before I could even open my damn mouth, Prof. Fekete, Mister
Know-It-All Fekete, Mister Never-Let-The-Mogambo-Get-A-Damn-Word-In
Fekete as we call him around here, was already talking about
it, so I sat back down in a petulant huff and started feeling
sorry for myself again, and I could hear him say "The seriousness
of the problem cannot be overstated. A steep rise in interest
rates at this juncture would be the horror of horrors. Normally
higher interest rates would strengthen the value of the currency
as they attracted foreign investors. Not this time. Apart from
the problem of pricking all the bubbles in the economy starting
with the housing bubble, and ballooning the budget deficit into
outer space, there is an even larger and more immediate problem.
And that is the effect that steeply rising interest rates have
on the value of bonds, widely held at home and abroad. The effect
is inevitable and instantaneous. Higher interest rates make bond
values collapse."
Now if we have a gazillion dollar's worth of bonds out there,
which we do, and there are owners of those bonds, then what is
the economic effect of a gazillion dollar's worth of bonds collapsing
to those guys? Hahahaha!
The only thing left for me to do, to try and grab a little of
this elusive limelight, is to insult the Fed and Krugman and
Bernanke and all the rest of these crumb-bum losers, but even
HERE this Fekete dude is busting my chops! He goes on to say
"Krugman has convinced us that the money-managers at the
Fed have got rid of their last scruples, if they ever had any.
Paraphrasing him, if you really believe that runaway inflation
is now a global threat, you should also believe that only policies
lying outside of the realm what is conventionally regarded as
responsible will contain that threat. One irresponsible monetary
policy deserves another. The contingency plan to prevent a steep
rise in interest rates will have to involve a conspiracy between
the Fed and the Bank of Japan to punish speculators short-selling
the dollar and dollar bonds. There is nothing else left in the
Fed's bag of tricks but the check-kiting scheme with the Bank
of Japan that could hold back the forces of monetary destruction
waiting in the wings."
Then he sums it up in particularly poetic form. "Never mind
that it is 'conventionally regarded' as irresponsible. Never
mind that it is illegal. Never mind that it is criminal. Nothing
else will defer the day of reckoning."
I guess the lesson is that there may be life left in the stock
and bond markets yet, as the Fed is now reduced to these odious,
market-manipulating remedies.
- While everyone was cheering the seemingly wonderfulness of
the Leading Economic Indicator, which is an indicator of future
production, which was actually a big nothing this month, I'm
riding in my car, careening wildly and almost out of control,
horn blaring, leaning out of the window shouting, "But look
at the Lagging Economic Indicator, which is a proxy for inflation!
It was up a full point, from 98.6 to 99.6! Inflation is going
to kill you, you dumb freaking morons!" and then they always
want to know who I'm calling a moron, and I say "I'm calling
YOU a moron, you moron!" and then, to show them how moronic
they are, I step on the gas and speed out of there real fast,
so that by the time they get to their car and start it up, I'll
be long gone! Hahaha! Morons! The Mogambo strikes again!
- The Indian government has come up with a new policy that would
allow Indians to buy virtual, or "paper," gold in denominations
as low as $2. Currently, they use their money to invest in previous
metals, mostly in the form of necklaces, bangles and coins .
"It is a step, analysts say, toward bringing millions of
poor Indians into the banking system and unlocking the untapped
investment potential of more than $200 billion worth of privately
held gold in India."
Not everyone is convinced that the new policy is as benign as
it is purported to be. Me for one. Another one is Pinank Mehta,
who is an asset manager, asks "What is the reason I'm buying
gold? The reason for my purchase is a lack of trust in the present
institutions. Now why would I buy physical gold and give it back
to the same guys who are the cause of my not trusting the present
system?" Hahahaha! Exactly! You tell 'em Pinank!
He was referring to India's fabled trusting of gold, particularly
in the face of their "long history of turbulence: millennia
of foreign invasions, rising and falling empires, political consolidations
and disintegrations and avaricious governments." In short,
Indians are not stupid, and they have had many front-row seats
to economic catastrophes, and have seen what happens to fiat
currencies, and they have seen what has NOT happened to gold.
And that is why they like to buy and hold gold. And me, too.
And you, too, if you know what is good for you.
The unhappy reason for this change of banking philosophy is that
everyone now realizes that Americans cannot keep going into debt
forever to perpetually buy the world's output. When Americans
start reaching the limits of their financing, then there has
got to be another set of people willing to be remorseless buyers
of stuff (RBOS), and who are also willing to go enormously into
debt to do it. So, the question is, "How to get them to
buy things?" Well, start by getting them to extract equity
in their assets, which, in this case, is gold. It would work
sort of like how Americans are taking equity out of their houses.
Thus, we will soon see if Americans will have the company of
Indians in the loony bin of those who accumulate of un-payable
debt and think that nothing bad will happen to them.
- Ron Paul, the Congressman from Texas and one of the very few
in Congress who actually comprehends economics, has a new essay
entitled "Deficits
Make You Poorer." In it, he sees eerie parallels. "The
economic situation today is reminiscent of the 1970s. The economic
malaise of that era resulted from the profligacy of the 1960s,
when Congress wildly expanded the welfare state and fought an
expensive war in southeast Asia. Large federal deficits led to
stagflation-- a combination of high price inflation, high interest
rates, high unemployment, and stagnant economic growth."
But the reason that I called them "eerie parallels"
is revealed when he goes onto say "I fear that today's economic
fundamentals are worse than the 1970s: federal deficits are higher,
the supply of fiat dollars is much greater, and personal savings
rates are much lower. If the federal government won't stop spending,
borrowing, printing, and taxing, we may find ourselves in far
worse shape than 30 years ago."
The bad news is that even if the government DOES stop spending,
then we will ALSO find ourselves in worse shape! Get Alan Greenspan
on the phone: I have a new conundrum for him! This is because
the economy is so distorted by the leviathan of Big Government
that the government IS the economy nowadays. Ergo, and I know
you love it when I say "ergo," if the economy stops
spending, then everyone else stops spending, too! And the reason
is, in case you were not paying attention to the previous sentence,
that the freaking government IS the economy!
This is probably not news to Alex Wallenwein, who is the editor
and publisher of "The Euro vs Dollar Currency War Monitor".
He sees bad news for the dollar, mostly involving the fact that
we have more debts than we can ever hope to repay. He writes
that the demise of the dollar will be either a slow one, or a
fast one.
If it is a slow death, he says that "If it happens slowly,
maybe the dollar in its current fiat incarnation (you can't really
call it an 'incarnation' because there is really no 'flesh' on
its bones) can survive as a currency in some form of use by some
people."
On the other hand, if it is an instant death, then "the
dollar and its underlying economy will disintegrate on impact."
His summary was brief and to the point, and thus constitutes
the soul of wit: "Dead - Either Way."
- If you have filled up the tank of your car lately, you may
have noticed that gas prices are suddenly a lot higher, which
shows how perceptive you are, but you never get any credit for
it, and secretly you are bitter about it. If you think that the
price of oil is going to come down, as do many of the idiots
of the world, perhaps you, and they, should read Marshall Auerback's
new essay "The View from the Summit of Hubbert's Peak"
on the PrudentBear.com site. He says "Last year's increase
of 2.65m barrels a day in global oil demand overshadowed the
modest rise of 700,000 b/d in global refining capacity in 2004.
U.S. refineries are working close to capacity, yet no new refinery
has been constructed since 1976. And oil tankers are fully booked,
but outdated ships are being decommissioned faster than new ones
are being built." So allow me to sum up, if I may; Demand
for oil is increasing, and will continue to increase. Oil is
being pumped as fast as it can be pumped. Even if you could pump
more oil, there are not enough tankers to carry the oil from
one place to another. And even if they could get it to a refinery,
there is not enough spare refinery capacity to do anything with
it! Hahaha! And yet you think that the price of oil is going
to go down, especially when the oil is priced in a declining
currency? Hahahaha! All this laughing is making my sides hurt!
Hahahaha! Stop! Stop! Hahahaha!
His reference to Hubbert's Peak is the idea that there is only
a finite amount of oil in the world, and therefore there must
come a time when the oil is half gone. That point is referred
to as Peak Oil. That date is the subject of quite some debate,
but it looks like old Hubbert was pretty close with his estimate,
which is, checking my watch for the correct time, right about
now, but probably a few days ago, and maybe as long ago as a
decade or two. Who the hell knows? But regardless of whether
or not Peak Oil is now or last year or a decade ago, the result
is the same: We are now on the declining side of that oil supply
growth, and that now we are using more oil than we are finding
in new oil fields. "Clearly, it is not an overstatement
to say humanity's way of life is on a collision course with the
basic facts of oil geology. The descent from the peak of Hubbert's
summit is likely to be far more painful than the ascent, yet
few have offered anything in the way of serious contingency planning
to deal with this oncoming problem."
On that point, I suggest that you buy oil and oil-related stocks.
So there IS at least one guy who has a plan to deal with this
problem; capitalize on the rise in prices and you will have enough
money to buy all the premium unleaded you want, and you don't
care how much it costs to fill up the tank!
Larry Edelson of the Real Wealth Report also has a word to say
about the decline of the dollar, and he says, "Don't count
on the dollar's decline being a gradual descent to a 'soft landing'.
Foreigners who invest in the U.S. dollar are NOT likely to act
with moderation or compassion."
- The Beijing Peoples Daily Online had this intriguing report.
"The Ministry of Labor and Social Security of China announced
the third batch of new professions recently. [The] ten new professions
are: credit management specialist, internet editor, real property
planner, professional information analyst, toy designer, analyst
for gold investment, enterprise culture specialist, home textile
designer, micro hydropower technician and intelligent building
automation technician."
George Ure of UrbanSurvival.com noticed what a lot of us noticed
on that list. "Of special note are the gold investment analyst
and micro hydropower technician. Looks like China at least is
getting ready for a shift towards hard currency, and preparing
to maintain an electric lifestyle even in the face of rising
oil costs. Interesting, no?"
Everyone was looking at The Mogambo to see if he considered this
to be interesting, and they noticed that my hair was standing
on end and I was having trouble breathing, so they figured that
yes, this is interesting. VERY interesting!
- Jay Bookman, deputy editorial page editor of the Atlanta Journal
Constitution, has looked at this idea to privatize Social Security
and opines that the Bush plan to privatize won't pass, and he
even titles his op-ed piece, "Bush Plan to Privatize Won't
Pass". He writes, first off, that Bush is unusually forthright
in his assessment of Social Security. He notes that President
Bush actually said, "Some in our country think that Social
Security is a trust; in other words, there's a pile of money
being accumulated. That's just simply not true. The money - payroll
taxes - going into Social Security are spent. They're spent on
benefits and they're spent on government programs. There is no
trust." And you know what? The president's absolutely right!
Although I am sure that there are many people, including that
halfwit Al Gore who was almost elected as President, thinks otherwise,
and spent his entire failed Presidential campaign mouthing such
stupidities, and then he sat around wondering why he lost the
election, while I sat around wondering how Democrats could be
so stupid as to nominate that idiot for the position of coat-room
attendant, and he would probably have screwed that up, too.
Now Mr. Bookman is not interested in my opinion of Al Gore, nor
by the fact that I have lots and lots of other opinions about
lots and lots of people, and so he takes over and writes, "Every
surplus dollar that working people contribute to Social Security
is diverted immediately into the general fund and then spent.
This year alone, $169 billion in surplus Social Security funds
will be diverted to run the day-to-day operations of government,
raising the total debt owed by future taxpayers to the trust
fund to $1.8 trillion. In 10 years, that number is projected
to grow to $4.4 trillion, a truly intimidating number."
And that is using only a $440 billion annual budget deficit,
which is so wildly optimistic that I snort in contempt, which
brings up the point that if you are going to snort in contempt,
then make sure that you don't need to blow your nose, or it gets
real messy and disgusting, or, as we say around here "About
par for the course for The Mogambo."
- Patrick Geryl has taken a look at the The Dresden Codex of
the Maya, and found, as in lots of other places, that it, too,
contains the secrets of the sunspot cycle, which is spookier
than we mere mortals imagine. "The conclusions that follow
are even more staggering. At a certain moment, when the sun's
magnetism reaches a crucial point, the sun's surface will be
subjected to immense storms. Enormous electro-magnetic forces
will then be liberated - with unknown strength - from the interior
of the sun. Giant sun-flames will send a gigantic wave of particles
to the earth. When there is a big change in the magnetic field
of the sun, the earth will turn upside down. Giant quakes will
occur. Earth plates are moving, mountains are rising where first
there was nothing, land parts break open and collapse, mountains
collapse, land is sinking into the ocean, volcanoes erupt in
many places. In short, the most terrible nightmare cannot be
terrible enough to describe this world's destruction."
It sounds exactly like me when I am talking about monetary policy
and the horrible Federal Reserve, doesn't it? But I gotta tell
ya that this may explain why the world's bankers and governments
act like they have lost their freaking minds.
- My association with the American healthcare industry is that
I pay insurance premiums in the range of "kind's ransom",
and then get screwed by the actual providers, too. Enough to
hate them all and swear blood revenge, but hardly enough to qualify
me as somewhat of an expert on the healthcare system of America.
But it happens that I spent the weekend jamming music with my
buddy Bob Snyder, who is both a drummer and an executive at a
hospital, but, in case you were wondering, he can't get us any
powerful psychoactive drugs that will keep my head from exploding
at the economics mess of the world AND maybe let us get a nice
little buzz on, too, so don't bother asking, because I've already
tried it.
But during one of the lulls, mostly spent by everyone commenting
to me, "Hey, jerkface! You really suck as a musician!"
we got to talking amongst ourselves. But they soon tired of comparing
my limited musical talents with those of various animals, mostly
rodents, and the subject finally got around to how business is
going. As for me, I tell them that chicks aren't attracted to
guys who scream and get hysterical about the enormous amounts
of debt, and how we are all going to die horrible deaths because
of the Federal Reserve and their constant creation of more money
and credit, and so this economist gig ain't exactly what I had
hoped for, since it does not involve driving around in convertible
cars, honking at pretty girls and offering them rides and alcoholic
beverages. And so I say, "And how about you? Boinking any
cute nurses lately? Hahaha!" and he tells me to grow up,
which really ruined my little joke, and everybody said "Yeah!
Grow up, Mogambo! And eat with your mouth closed! Yuck!"
But Bob did note that while services rendered at the hospital
are up, the number of customers that they call "self-pay"
are up 40% over last year. 40%! Now, you and I know that when
you are a "self-pay", it means (wink wink, nudge nudge)
that you are not privately insured, you not a Medicare patient,
you are not a Medicaid patient, and you are not anything, which
equals zero, which also equals, by sheer coincidence, the amount
of money that these patients are going to pay on their hospital
bills, AND it also equals, by sheer coincidence, the amount of
money that they have with which they COULD pay their hospital
bills, even if they wanted to. And there is a quite a bit of
controversy about that, too!
To compound the problem, the private physicians in the area are
grumpy that Medicare and Medicaid are not reimbursing them at
the rates with which they think they deserve, and so are dumping
these patients onto the hospitals, too!
The bottom line? Revenues down, costs up, which is the predictable
result of the damn Congress ruining healthcare by passing more
and more laws requiring hospitals to provide services to anybody
who shows up at the door, whether or not they can pay.
- As an interesting aside, the Members of the NYSE sold a huge
clutch of stocks last week, amounting to 137,724,000 shares,
which is a lot of shares, even for them.
- Paul Craig Roberts' essay, "America's Has-Been Economy",
says it all pretty well when he writes "Falling pay and
rising prices of foreign made goods will squeeze US living standards
as the declining dollar heralds America's descent into a has-been
economy."
The declining dollar is what made the price of imports go up,
especially gasoline prices, and now from Yahoo News we get the
report "Nationwide gas prices soared over 12 cents during
the past two weeks to reach a record high and an analyst predicted
more sticker shock at the pump in the days ahead. The average
retail price for all three grades increased 12.74 cents to $2.13
per gallon between March 4 and March 18." That comes out
to a six percent increase in prices, which is pretty hefty inflation!
- Another scary thing is that Bill Bonner of the Daily Reckoning.com
site notes that the stock of General Motors says that the company
is worth, all told, $15 billion. "But it owes bondholders
$300 billion," says Mr. Bonner. It owe twenty times its
entire capitalization? And people buy the stock? Hahahaha!
- Recent Federal Reserve data show the ratio of interest payments
compared to household income has hit 13.3 percent. To put this
number in perspective, in 1994 (the start of the last tightening
cycle) interest payments consumed only 11 percent of income.
We have indeed hit new records in total indebtedness, both in
terms of sheer dollars, and also as a percentage of income. Ugh.
**** The Mogambo Sez: The action in gold lately has me
scratching around under the cushions on the couch to try and
find some money to buy more gold. Any pullback in price is an
opportunity to buy. Especially since Eric Fry, who writes the
Rude Awakening column, figures that "Gold will recover its
footing later this week, as surprisingly strong PPI and CPI readings
cross the newswires." With a newly ascendant gold market,
Mr. Fry goes on to conclude that "The current 'buying opportunity'
offered by the gold market may prove to be more remunerative
than most, simply because the gold market has quite a bit of
catching up to do." Ain't life sweet?
Richard Daughty
email: RichardSmithGroup@verizon.net
 Daughty
Archives
Provided as a courtesy of Agora Publishing and 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.
Recent Gold/Silver/$$$ essays at 321gold:
Apr 19 Gold: Ignore Sell Signals & Buy Morris Hubbartt 321gold
Apr 19 Doctor Copper Has A Message on Inflation Tom McClellan 321gold
Apr 19 Gold's Remarkable Breakout Adam Hamilton 321gold
Apr 16 Gold Stocks: Good Times Are Here Stewart Thomson 321gold
Apr 12 Gold & Silver: The Start Of Something Big? Morris Hubbartt 321gold
Apr 12 Gold, Miners Overboughtness Adam Hamilton 321gold
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