Theater of the Absurd
weirder and weirder
...the angriest guy in economics
April 14, 2004
Last week, we took our camera into the bowels of the Federal
Reserve and searched out Fed Custody Holdings, and I remember
remarking to myself that foreigners had, for the first time in
a long time, actually decreased their holdings of US debt assets
by, as I recall, $16 billion or so. I remember it because that
$16 billion figure is the exact same amount as the estimated
weekly cost of the tranquilizers that trained professionals want
to prescribe to calm me down and keep me from screaming about
the economic deep doo-doo that we are in. And in saying that
you also probably immediately recognize why I said we were taking
our cameras into the bowels of the Fed.
Well, I am proud to say that these sneaky foreign devils, some
of whom actually drive on the wrong side of the road, I suppose
because the steering wheels of their cars have been installed
on the wrong side, so you can just look at their automobiles
to tell how smart they are, have been reminded who has the most
nuclear missiles, and who are the biggest bullies on the block.
Almost immediately those foreign dudes with their funny-sounding
foreign languages and odd customs have been brought back into
line. To prove it, they bought up $16.7 billion of our debt last
week. This is good news, because the Treasury admitted to issuing
almost $21 billion in debt last week, and they were frantically
parading up and down the street looking for somebody to buy that
mountain of paper.
As an aside, being the kind of slow-witted, low-IQ dude that
I am, nobody ever asks me to do any adding or subtracting, except
when I show off for Uncle Jed, showing him and Ellie Mae that
I can cipher real good. But that is only when, for mysterious
reasons that have professional mental health experts scratching
their heads, I think I am playing Jethro Bodine on TV's "Beverly
Hillbillies," although in real life whenever I actually
do mathematical computations they are always simplistic, sophomoric
things that are too easy for your average third-grade kid, who
can usually do them in his, or her, head. So, as a case in point,
I take the $21 billion weekly issuance of debt, multiply it times
fifty-two weeks, and compare that annual debt issuance to, oh,
let's say, income. Oh, not YOUR income of course, because you
are so smart and handsome and you make the big bucks. No, I'm
talking about the national Personal Income, which is listed as
$9,364 billion, a figure that includes the pathetic contribution
of us ugly little trolls out here slaving away at our pathetic
little low-paying, dead-end jobs, and then coming home at night
to listen to someone else whine about THEIR pathetic little low-paying
dead-end job, although we have no interest in her damn day, and
I think I speak for all us trolls when I say that we seethe with
envy at your good fortune.
Anyway, so when I calculate all that out that, I find that the
federal government, our lackluster elected officials, are putting
us in more debt, to the tune of 11.5% of our income. Just this
year alone! I can see that this little revelation has impressed
you, and in your sudden panic your eyes involuntarily dart toward
the door of the armed and armored Mogambo Bunker, and how your
computer-like brain has instantly calculated that if you can
make it in there and slam the door, that you will be safe from
the coming conflagration. But I gotta warn you; you won't make
it. No, you have to remain out here in the open and live with
your fear, like the Mogambo used to do in the old days, before
he hit upon the plan to use the Second Amendment in the way intended
by the Founding Fathers; forging an impregnable fortress that
can spew out a continuous fusillade of hot lead in every direction
at the slightest provocation.
The purpose of this pointless exercise in mathematics is that
we used to get worried when consumer Installment Debt went up
by a measly ten or fifteen billion a month! And speaking of which,
all is not well in America, land of the Clueless Leftist Bozo
(CLB), as consumer credit growth slowed markedly last month,
which means that total debt only increased by only five billion
bucks, to a 2.5% annual rate. In the USA we have been accumulating
debt at such a tremendous rate, for so long, that five billion
smackeroos a month is chump change, and a measly 2.5% monthly
growth in debt loads is an alarming slowdown. Einstein was right!
It IS all relative! Hahahaha! Five billion a month, versus twenty-one
billion a freaking week! Hahahaha!
realize this is not funny to those of you who cannot appreciate
the humor inherent in Theater of the Absurd, but believe me when
I tell you that for those of us who appreciate such a thing,
this is funny as hell (FAH)!
So while you are looking at your credit-card statement and that
big pile of bills emblazoned with large red letters shouting
"Past Due! Last Notice! We're Coming Over There To Get Our
Money, Deadbeat!" and you are wondering how in the hell
you are going to pay off that growing indebtedness without selling
your irritating kids or robbing a bank, or sending that worthless
kid to rob the bank for you, our elected chowder heads are plunging
you farther into debt at dozens of times the rate that you do!
And believe me when I tell you, and pay attention to the look
of deadly seriousness on my face and stop staring in dumbfounded
disbelief at the size of the inflamed pimple on my nose, that
you are going to repay every dime of that borrowed-and-spent
money, in the form of higher taxes and higher prices. Every freaking
penny. Such are the Iron Laws Of Economics.
So, somebody is going to get beaten to a bloody pulp when bond
prices fall as interest rates rise, due to the rise in inflation
rates caused by all the monetary expansion (the "reflation").
So, in typical human fashion, why not let it be guys who we traditionally
regard as "them," instead of us homies? And again I
refer you to the nuclear missiles thing, and here is where the
Mogambo holds up a finger, smiles and winks, and says "And
let your mind focus, young grasshopper, on our recent track record
of invading countries and killing a bunch of them!" Makes
you think. Made them think, too, apparently.
Newsflash to the media of the USA! Dateline: Deep inside the
Mogambo Defensive Bunker. "Flash! A heavily-armed raving
lunatic posing as a Concerned Scientist with graphs and charts
and all that scientific stuff has issued this important bulletin!
He reports that, once again, Alan Greenspan has proved that you
are a worthless collection of childishly-trusting lunatics, and
are raving mental incompetents to boot, as he looks you right
in the eye and tells you that the price inflation that you are
seeing with your own eyes, at least before Greenspan started
looking into your eyes and trying to hypnotize you, is not happening
in front of your own eyes! And you believe him!" If you
read down farther into the article, you will see where I say
"I mean, import prices increased 0.9% last month, yet Greenspan
has, according to the Wall Street Journal, 'discounted that risk'
of inflation! Petroleum prices are up 6.1%, and Greenspan has
probably also 'discounted that risk' of inflation, too! Export
prices rose at the 'fastest rate in nine years,' surging at 0.9%.
Greenspan, of course, has doubtlessly 'discounted that risk'
of inflation, too." And in looking at the back pages of
the Economist magazine at the Dollar Index of their Commodity
Price Index, we note with alarm that, in the last year, All Items
are up 32.8%, Food is up 27.3%, All Industrials are up 40.9%,
Non-food Agriculturals are up 22.6%, Metals are up a blistering
58.5%, oil is up 22.6%, and gold 29.3%!
How in the hell everything can be up between 22% and
58%, and Greenspan and the other Fed pea-brains can claim that
inflation is "low," is beyond me.
Well, the facts are not lost on everybody, as on Monday the Wall
Street Journal had a front-page article entitled "Price
Increases in Asia Fan Inflation Fears in U.S." After using
a lot of ink relating the eyebrow-arching rise prices of everything
that you can name, and even things that I cannot even pronounce,
they quote a lot of Fed officials who are all in agreement that
the Mogambo is an idiot, and if you think that inflation is rising
just because prices are rising, then you, too, are an idiot.
They go on to announce that labor is about 65% of production
costs in goods and services, which makes a kind of weird sense,
since services HAVE no commodity costs inherent in them, which
I can verify because I went to the barber last week and I did
not see a single bushel of soybeans in the whole place.
On a more personal level, I report that the government is, as
you are no doubt aware, out to get me, and sure enough, last
week my washing machine finally quit. It was so old that the
lousy timer to fix it was $61 freaking dollars. But my wife was
getting tired of the rusted exterior, the dripping water, getting
a shock when you touched it, the sparks flying, that smell of
burning insulation, the weird permanent stains on the clothes
when they came out of the thing, the banging and clanging and
blah blah blah, so we bought a new one. It cost $320, tax, tag
and title. But, and this is the part that kills me, the delivery
charge would have been $70!
My mind reels! People can mine, ship and smelt ore, collect,
ship and refine other materials, produce metal and plastic parts,
assemble it into a heavy machine, pack it up, ship it across
country, keep it in inventory, sell it to me, pay sales taxes
of 7%, and all for $320. But to go that last three miles would
cost almost another quarter of that!
So the fact that labor is a BIG part of production of goods may
indeed be true. But the Fed boneheads think that because they
can break those costs out of the price means, I guess, that it
no longer has anything to do with inflation! Weird!
Then, to make matters worse, the WSJ had an article by Greg Ip
on Tuesday that caused my blood to run cold. The headline was
"Yellen Is to Head San Francisco Fed Following Parry."
This flaming nincompoop, Janet Yellen, thinks that goosing employment
is more important than controlling inflation, and is on record
as arguing that inflation should not be allowed to drop below
2%! When I read that, all three remaining brain cells in my brain
went into spasm.
This mental midget, and for those of you who have not been paying
attention I remind you that her name is Janet Yellen, actually
WANTS price inflation to rise, which, unless wages also rise
by more than that, will cause a fall in standards of living!
She wants us to have a falling standard of living! And since
wages do not rise across the board, the people at the low end
of the scale pay a heavy price, as their wages always seriously
lag. So remember what I said about Janet "Jackass"
Yellen, as you will find that you will spend a considerable amount
of your time in the future cursing her name.
Greg Ip, bless his heart, wrote "Her appointment continues
an unusual amount of turnover in Fed policy makers." This
may be the biggest understatement of the century, as the Fed
has metamorphosed into an America-killing inflation-machine,
and if I thought Ben "Bonehead" Bernanke was bad, this
Yellen succubus is a horror straight from hell.
In an article in Business Week entitled "Why
Housing Is About to Go 'Pop!'" Mark Weisbrot referenced
a guy named Dean Baker at the Center for Economic Policy &
Research who has looked at national housing prices going back
to 1951. Mr. Baker says "Prices pretty much track the rate
of inflation up until 1995. But since then, average prices on
new and existing homes have soared more than 35 percentage points
beyond the overall rate of inflation. Is that unusual? You bet
And although Mr. Weisbrot did not follow that up with a quote
from the Mogambo, I will include it for you now. "When something
is unusual, meaning that this meteoric rise in prices has never
happened before in the whole history of economics, does it usually
mean that something bad will happen? You bet it does!"
Robert Folsom's Market Watch writes "And while cycle patterns
may not be rocket science, they can be powerful indeed. They
capture when to expect a turn in the trend -- which is to say,
cycles present a timing opportunity."
I'm a big believer in cycles, as things that have been going
up can't keep going up. And so they have to turn down. And they
can't keep on going down, either, so they have to turn back up.
And when they do, you have a cycle.
Noting with satisfaction that I have a rough, tenuous grasp of
what is meant by "cycle," Mr. Folsom says "Our
analysis shows that such a moment has arrived in the Treasury
market." Uh-oh! With a debt market so huge, so pandemic,
so universal in the breadth of it's toxic breath, spanning international
borders, crossing whole time-zones, and at yields that are so
low that it seems impossible that they could get any lower, the
cycle is being renewed. This is bad news, indeed.
But there is some good news to report. A couple of years ago
I predicted that agricultural land would rise in price as the
price of commodities increased. This has turned out to be true,
so the reports indicate. So if you had followed the advice of
the Mogambo, you would still be laughed at for your lack of self-respect
for reading such trash, but your farm would be up in price.
Geocities.com posted "Cycle
Pros" by a guy named Stephen J. Williams, whose philosophy
is the kind of witty profundity that I would get tattooed on
my arm, if I wasn't such a wuss about pain and needles. So tattoos
are a long, long way from where my head is at, to lapse into
the vernacular. Maybe I could have it printed on a T-shirt or
something. Anyway, he says "I would rather be prepared and
wrong, than to be unprepared but right." The message is
that accumulating gold in these modern times of upheavals
is a good idea.
And this is the essential lesson of the Boy Scouts, whose motto
is Be Prepared, although I point out that the damned Boy Scout
handbook didn't say anything about fortifying yourself with gold and large-caliber armaments, which may have
been an oversight or a typo, I don't know.
But fortunately for us, Mr. Williams does more than toss off
timeless bon mots and remind me how the Boy Scouts left a lot
unsaid. He also reveals one of the more strategically-oriented
indicators. He writes "The frequency of Help Wanted Ads
seems to be a much more sensitive indicator of economic health,
as compared to quarterly Federal Deficit figures. Right now we
are seeing an extremely low ad frequency rate. This, perhaps
better than any other statistic, demonstrates the recession of
the current employment market."
He is also a very funny fellow, and I figure his Vegas stand-up
routine is a killer. He says that his forecast "is the optimistic
one... DJIA 5600 area by 2010 and 3300 by 2014. In the same timeframe
I expect gold to reach $2000 oz and silver as high
as $90 oz."
This is optimism? Hahaha! What a card! Hahaha! Hey wait! Maybe
there IS an upside to this! Let's take a look at that silver
figure there! Snatching the calculator out of the trash where
I threw it in my frustration from my last exhausting skirmish
with it, my fingers quickly fly over the keyboard, playing that
HP12-C like a master violinist. With silver selling at around
$8 an ounce, then P=$8! FV=$90! N=10! And the interest rate that
makes that these numbers work out, that glorious compounding
interest rate, that fabulous, magnificent compounding effect
that Einstein said was a miracle, and I admit that I am as giddy
as a schoolgirl as the number flashes, is 27.38%! Wow! Talk about
an investment winner!
I know that you remember how the Mogambo heaped scorn on the
whole idea of the Fed creating more money and credit to produce
a reflation. I know what you are thinking. You are saying to
yourself "The Mogambo never said anything about reflation,
because all he ever talks about is how alien beings from another
dimension are tampering with his mail." Well, that is true.
So let me correct that oversight, and say that inflation is always
bad, and that reflation is merely putting a New Age prefix on
inflation, but which results in an added piquancy of a delightful
hint of benefit to it, like a refreshing hint of Spring or something,
as it makes the price of assets rise. But reflation is just inflation
dressed in a frilly hat. So why would any government that had
an IQ above that of a slug do such a thing as try to reflate/inflate
the economy? Ah, my darling quizzical one! My heart soars to
hear you speak with the Wisdom of the Ages! But you are not the
first one to ask that question of the Mogambo. In fact, the only
question MORE popular among the Seekers of Enlightenment that
sit at the feet of the Mogambo is "What is that stink?"
But the Mogambo is now saved from any future threats of exertion
such as thinking or answering questions, as now all I need to
is to smile knowingly, languidly raise my finger, and point to
this website, and the novice can read for himself, or herself,
where Mr. Williams has provided the answer. "Inflation is
a stealth tax and has a very efficient built-in collection scheme...
everyone holding Dollars is affected and everyone's purchasing
power is diminished, therefore the collection of this 'tax' is
100% efficient. And to make it even better, there is no paperwork
to fill out, no check to send in, no harassing telephone calls
from the tax collector, and the government can continue to print
all of the dollars it wants so it can continue a free spending
policy." And, of course, higher prices means, ceteris parabus,
more sales tax collected at the state level, with which to fund
THAT particular cancer.
And although he did not mention it, I will do a little of the
heavy lifting and denounce the $275 billion transportation bill
that is wending its way through Congress as the poster child
for this "free spending" thing. Senator Byrd was wrong
when he declared that Congress was the "greatest deliberative
body in the world." Congress is, to the contrary, the world's
premier bastion of criminal fiscal irresponsibility and abysmal
economic ignorance, and for Senator Byrd to say otherwise marks
him as a real dimwit.
So, do ya wanna know how much money it will take to keep the
reflation going for a year? Me, too. If you asked me how much
money it would take to fund a general reflation for year, I would
avert my eyes and give my usual classical, textbook Mogambo answer,
which is to shrug my shoulders, and mumble "I dunno,"
and then turn it back on you and give you a vicious third-degree
on "Why you want to know? And why are you asking ME that
question anyway? You trying to make trouble? Is that what you
want? You want a piece of me? Huh? Is that what you want? You
want a piece of me, punk?"
But fortunately it didn't come to that, as James Cook of Investment
Rarities, in his article "Boom or Bust," has helpfully
done the math for us, and he figures that about three trillion
bucks ought to do it. Now all we gotta do is ramp up three trillion
smackeroos and have somebody borrow it all, and put that mountain
of money into stocks, and bonds, and houses. See how simple this
economics stuff is? This stuff is easy! I mean, how much do we
overpay this Alan Greenspan character and all those other Fed
guys anyway? A retarded chicken pecking at a computer console,
mindlessly pressing a button emblazoned with the words "Increase
credit" could do every bit as well. And if a mental-defective
chicken WAS appointed as Fed Chairman, whenever this new chairman
gave a speech, the people in audience might even get an egg,
which is, I am sure you agree, a lot better than what the audiences
who listen to Greenspan speak get, which is to have their heads
filled with lies and optimistic mumbo-jumbo, which has no nutritional
value at all. So what do you want? An egg that you can make into
a delicious omelet, or vacuous mumbo-jumbo? The choice is yours.
All it takes, and you might want to pay particular attention
here because this is the crux of the matter, is to convince a
bunch of guys to borrow the money and, for reasons that befuddle
me, invest it in those overpriced assets. Then the prices of
the assets will go up some more. Or, as we say in the economics
And with the right incentives, notably tax-related, there is
no reason to suspect that it cannot initially work. Will Congress
step up to the plate and do something heroic and stupid, a kind
of desperation-induced "clutching at straws" legislative
nonsense? Who knows? Congress knows. And since you know Congress,
you know the answer, too.
Mr. Williams is such a nice guy that he also gives us, as a sort
of going-away present that you can think about on the way home
in the car so you won't have to listen to the wife going on and
on about the egregious social errors of my every word and deed
in the last two months and how she and her loudmouth friends
think I'm such a big jerk, a little tidbit that is interesting.
He reports that "The total value of items sold on eBay in
2003 was $24 billion, up 60% from 2002's $15 billion. "
I forgot where I got this, probably Bloomberg or somebody, but
they reported that "The Senate delivered American companies
more than $80 billion in pension savings Thursday, sending President
Bush legislation that provides additional relief to steel companies
and some airlines that had clamored for the help."
What a deal! Hell, all I wanted was for them to tell the FBI
that if they want to spy on me, then do it with more modern wiretaps
that didn't squeal and pop in my ear, and I can't even get that!
But here these guys are looking for a legal way to screw a lot
of old guys out of their pensions, and the Congress is falling
all over themselves to be accommodative!
"A group of Democrats called it unfair because it failed
to afford the same financial benefits to some smaller union pension
funds." Typical Democrat response, which is spreading a
thick uniformity of pain, which is their definition of "fairness."
But, to their credit, some of the backers of the legislation
admitted that said that it was only a temporary fix, but that
they were holding their noses and voting for it anyway, because
it "would help keep some major employers solvent and competitive."
Which is also, I hasten to add, also "a temporary fix."
To add a little farcical humor, Senator Judd Gregg, who is a
Republican of New Hampshire and which doesn't say much for New
Hampshire, says "It is really the ultimate jobs bill."
It is not. It's an ultimate jobs bill when you pay me a thousand
bucks to hire someone at a hundred bucks. THAT is the ultimate
jobs bill. Screwing a bunch of employees out of their pensions
so that management can have a little more time to extract larger
paychecks and prepare to abscond with golden parachutes is NOT
a jobs bill.
The change is explained as "The legislation, a top priority
of business groups, saves companies substantial amounts on their
pension plans by changing the way their required contributions
are calculated. The legislation ends a requirement that contributions
be tied to interest rates on 30-year Treasury bonds; it substitutes
a rate based on a composite of long-term corporate bonds for
2004 and 2005." So, it is the old Dilbert witticism, "We
changed our projected income by modifying our assumptions."
In this case, the change in assumption is that accounts containing
retirement monies will somehow, in some mysterious way that eludes
me, automatically grow at a faster rate simply because they are
being benchmarked to corporate bonds, which pay a higher yield
than Treasury bonds! Hahahaha! Pension accounts aren't growing
at the old lower rate when they were tied to T-bonds, but now
-- and I'm laughing so hard that I think I made a mess in my
pants here! --they are going to grow faster because, becauseHahaha!
I can't go on! Hahahaha!
For those who did not contribute enough to Congressional re-election
campaigns, this largess does not apply to them, which is probably
to teach them a lesson in The Democracy That We Are Forcing Down
The Throats Of The World. But these bit players still get something.
"A separate provision grants an estimated $1.6 billion in
savings to airlines and steel companies with weak pension plans
by allowing them to pay only 20 percent of what they would have
to provide under requirements to bolster their pension funds."
In short, we capitalist swine business owners owe the employee
pension fund a hundred bucks, but Congress says we only have
to pay them twenty bucks. Blatant, but effective.
You know, deep down in the depths of your very soul, that I would
not let the Antonin Scalia flap go by without a rude comment,
an asinine observation, a worthless opinion, a feeble attempt
at humor, a heaping helping of scorn, a lot of ridicule, some
characteristic venom and hatred, and finally ending up with me
lashing out in primordial fury at everybody and everything.
So let's get started, because today I am in just the sort of
mood that is required for me to take on a Justice of the Supreme
Court, a guy who has been doing this for so long that he knows
where a lot of bodies are buried and can get a LOT of favors
done, and who can tear the Mogambo a new one by just making a
phone call, if you catch my drift.
But I stand unafraid, too stupid to comprehend my folly, to take
on the powerful! I laugh -- ha! -- at danger, as I am (trumpets
blow a fanfare as I slip into a handy telephone booth to change
into the costume of the Mighty Mogambo) the aforesaid Mighty
Now garbed in fetching outfit accessories, mostly consisting
of a snazzy propeller beanie and a cape with a big MM on the
back, I spring atop a nearby dumpster. I pronounce, with all
the sincerity I can muster, in a voice that is altogether too
loud and irritating, "The guy should apologize for being
an arrogant jerk!" My reasoning is thus: It is no crime,
after all, to be an arrogant, conceited bastard. He is allowed
to think that, because he is powerful Supreme Court Justice (SCJ),
he is justified in demanding that whole swaths of the Constitution
don't apply to us anymore, and that he can order us about, and
order the confiscation of people's private property to enforce
a paranoid whim that he forgot to tell anyone about.
To my embarrassment, I admit, and notice by the way I am hanging
my head and shuffling my feet back and forth in my discomfort,
that I sorta sympathize with him, in that I have tried that tactic
before. But not anymore! Twice a week I attend the local chapter
of Arrogant Bastards Anonymous, and I stand up and say "My
name is The Mogambo, and I think that I am the center of the
whole damn universe, and I further think that all of you pathetic
losers owe me something."
I don't know what it was that caused the change in my outlook,
but finally, after decades of arguing and whining, court-ordered
professional help, my wife putting something in my food when
she thinks I am not looking, or something, the clouds began to
lift. Now I see that this is, to my everlasting regret, wrong.
I am, and I still find these words difficult to say, not the
center of the universe. But I am receiving treatment, but I still
get no government checks for my disability to pay for my long,
difficult road back to recovery, I am sorry to say. And when
Mr. Scalia is ready to admit that he has a problem, then he will
seek out his local chapter of Arrogant Bastards Anonymous. But,
sadly, until then, there is nothing we can do.
I now turn my wrath, and if you are a big Hollywood producer
I think you should pay me some big money for the rights to the
story of The Mogambo, a story I call "The Wrath of the Mogambo,"
to the nasty little pipsqueak deputy marshal who, single-handedly,
is the personification of American Goon Squad, and who just grabbed
the guy's tape recorder and erased it, although she did not,
I am happy to report, draw her sidearm and get off a few rounds
just to show 'em who's boss around here.
Nevertheless, I hasten to demand criminal penalties for this
arrogant storm trooper deputy marshal who confiscated a reporter's
recording device and destroyed his property, as she operated
as judge, jury and executioner for the crime of some guy taping
a Supreme Court big shot giving a speech, in public, in a high
school, where he has absolutely no expectation of privacy, and
who forgot to post the restriction that he did not want to be
recorded. That crap about "I was just taking orders"
didn't work at Nuremberg, and it ain't gonna work here, either.
Niall Ferguson, of The Telegraph UK, writes "Americans Have
Not Learned the Lessons of History." He has written a book
that is due to be released soon, with the intriguing
The Price of America's Empire." His thrust is, after
I have massaged his remarks to better illuminate my own thinking
and thus twist his words to my personal vindictive agenda, that
we Americans are an arrogant, dimwitted bunch who contribute
nothing to the collective society except to prove that the USA
has the worst educational system in the developed world, and
which accounts for the profound observation that US policy in
Iraq, US policy in fiscal and legislative matters, and in monetary
policy are " in the hands of a generation who have learnt
nothing from history except how to repeat other people's mistakes."
"Muni Underwriters Set to Hang Out Help-Wanted Sign"
article by Joe Mysak, who writes, "States and municipalities
are using the bond market more, to build bridges and schools
and to fill holes in roads and gaps in budgets, among other things.
More bonds are a fact of life. From 1993 to 2003, municipal bond
issuance has averaged $276 billion, up from $150 billion the
previous 10 years.
"Last year was a record year for issuance, $384 billion.
It topped the previous record, which was posted the year before:
$359 billion." Now that's a big ol' heap of debt that us
taxpayers are going to have to repay in higher prices and higher
taxes. But that is all ancient history. How is it going in the
couple of months of this year? Worse. He says, "So far this
year, $84.6 billion in municipal bonds have been sold, according
to The Bond Buyer newspaper."
According to Eamonn Fingleton on his site at Unsustainable.com,
who has been more vocal than most on the nightmare that awaits
a country that has such an outsized trade deficit, "Figures
to be published in March will show that expressed as a percentage
of GDP the current-account trade gap has now topped the psychologically
important 5 percent level. This is the worst performance since
American economic records were first published in the 19th century.
By comparison, the notorious U.S. trade crisis of 1971-72 was
a mere blip. The trade deficit in 1972, at 0.5 percent of GDP,
was less than one-tenth the current level. Yet the 1972 trade
deficit seemed so troubling in prospect that President Nixon
was forced to devalue the dollar and cut its erstwhile 'sacred'
link with gold."
He goes on to say, "Not only is a 5 percent current account
deficit unprecedented in American economic history, but it is
shocking by all previous world standards. Other major nations
have incurred percentage deficits approaching this scale only
at times of extreme economic distress, most notably during the
two World Wars and in their immediate aftermath. The only time
any of the six most economically important nations ever ran a
trade deficit of more than 5 percent of GDP was Italy in 1924
- hardly an auspicious precedent given that economic problems
helped pave the way for Mussolini's seizure of dictatorial powers."
Then he endears himself to my heart when he jabs at Greenspan,
and urges him to resign.
"By making a graceful exit now, Greenspan can hope to be
remembered for his intellectual courage in admitting his mistakes.
On the other hand, if he hangs on, the result will be certain
obloquy: he will be fated to be remembered as the man who lost
On the Lew Rockwell.com site,
Jim Grichar wrote an interesting article entitled "Cutting
the Federal Budget to Prevent U.S. Bankruptcy - Part I."
The thrust is that the size and cost of the government has got
to be greatly reduced or we will go bankrupt. Or worse. And that
now, he figures, teetering on the edge of the abyss, is the perfect
time to do it. He writes "An independent presidential candidate
needs to state that the welfare-warfare state concept on which
the U.S. government has been run for more than a century has
got to come to an end. Otherwise, the U.S. will plunge into economic
It ain't a-gonna happen, Jimmy my boy. Not the chaos thing, which
WILL happen, but the thing about ending the welfare state. Almost
one in five people with jobs in this country work directly for
a government. All those jobs, all those suppliers, all those
sub-contractors, and whole multitudes of people are going to
make sure that THEIR precious little jobs and income streams,
which all stem from government, will not be affected. If you
try, the parasite class will rise up and, drooling with fury,
make a big stink, as is happening in Germany. This is one of
the many, many, many reasons why it is so necessary that you
NOT get into that Bankrupting Big Government Crapola Mode (BBGCM)
to start with. And the only way to prevent it, and you knew that
I was going to bring this up because that is the kind of simplistic,
one-track mind that I have, is to prevent the damn government
from getting the money and power to grow in the first place.
And the only way to do that, and I am sure that you are waaayyyy
ahead of me on this one, is to have a money that is gold, as the government cannot print gold. And I am sure that you remember from reading
the Bonner and Wiggin Book "Financial Reckoning Day,"
every country in the history of countries that has allowed their
idiot governments to print as much money as it wanted ALWAYS
ended up in -- what was that phrase Jim used? -- economic chaos.
And as much as Jim would love to save America, as much as I would
love to save America, it is too late by a long, long shot. Your
only option is to make money on the knowledge. Buy gold.
Peter Schiff, the intellectual powerhouse at Euro Pacific, has
taken a look at the economic tea leaves, and sees that "Since
bond prices have not been supported by legitimate investor demand,
but by leveraged speculators and foreign central banks, when
the former tries to unwind its bets in an environment where the
latter is no longer an aggressive buyer, bond prices will collapse
and interest rates will surge. Given the high degree to which
American consumers, U.S. corporations, and the Federal Government
are dependent on low interest rates, a sudden and severe rise
in rates will crush the economy."
Although Mr. Schiff is too polite to say it, the Mogambo is,
among other things, genetically politeness-impaired, and I prove
it as I spring to my feet and rudely interrupt Mr. Schiff to
say not only are these agents dependent on low rates, but they
have acted like dimwitted morons and borrowed and leveraged themselves
so much that any small, incremental, tiny, little smidgen of
a hint of a move toward higher rates will have all those deleterious
effects, and more.
Now, it is one thing to look at tea leaves and see things, but
it is another to remain calm when one extrapolates, as he does,
the results of such things. The inescapable conclusion is, as
he says, "As various forces interact in a series of self-perpetuating,
vicious circles, the U.S. economy will enter a perfect storm
of rising interest rates, consumer prices and unemployment, falling
asset prices, and economic contraction." Exactly.
John Ing, who is the president and CEO of Maison Placements Canada
and has a reputation for being a real gold
bug, was written up in the National Post, and the title of the
article was "Is It Back To The '70s For Gold?"
Says Mr. Ing, "My sense is the big move is coming for gold. I've been saying consistently that US$510 is
my target, but I think it will be easily surpassed this year."
He notes that gold is starting to move out and break
out against the euro and the yen. "In other words,"
he says, " gold is going to start to outperform all
currencies." He also figures, as I do, that the primary
driver of gold will continue to be the debasement
of the dollar, which we both a say is merely a symptom of a sick
and twisted U.S. economy, which is, in turn, the result of having
a sick and twisted Federal Reserve.
"One of the reasons I'm bullish is that China has less than
2% of its reserves in gold,"
he says, noting that China and Japan hold a lot of US debt, but
they may not want to hold U.S. dollar-denominated debt for the
long term. He figures that "They are starting to look at
diversifying," and one of the time-honored ways is that
wonderful yellow metal we all love, gold.
The Chinese did recently allow the Chinese citizens to own gold after all these years of suppression, and there
is a lot of pent-up demand, so the theory goes.
But regardless of any of that, he is not optimistic that the
Greenspan Fed has this inflation thing under control, even though
Greenspan wakes up in the morning and screams "If there
is a God, then please let the Mogambo be blind to the inflation
I am causing!" Therefore, he is pretty confident when he
says, "I can guarantee you interest rates are not going
The coming economic chaos is perhaps exemplified by the horror
that is unfolding in South Africa, laid out in a new book by
Dr Philip Du Toit, "The Great South African Land Scandal."
According to the book, desperate poor people are invading and
taking over private farms, robbing and killing the few South
African farmers who are not similarly destitute, and the entire
economy is spiraling down to complete collapse. In short, the
farms of South Africa are disintegrating under pandemic corruption
And these people are poor and destitute in large part because,
as the South African President himself says, "They are unemployable."
And considering the abysmal educational achievement of graduates
of American schools, who consistently test out as the most ignorant
and poorly educated knotheads in the developed world, we are
not far behind them.
Perhaps this is why the International Data Corp. issued a report
that showed "23% of all spending on U.S. white-collar technology
work will be offshore by 2007."
--Mogambo Sez: It just keeps getting weirder and weirder,
and I am struck by the fact that there has never been a published
theory of economics that postulates that the basis of economic
prosperity is monetary and fiscal stupidity.
April 13, 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
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.
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