Oil. Gold. Silver. Ommmm.
This is the sound of cosmic
...the angriest guy in economics
August 17, 2005
- I remember that I was still
trying to shake a killer hangover when I read that Total Fed
Credit abruptly fell by $7.4 billion last week, taking the total
back down to $792 billion. The next thing I knew, I was in the
emergency room and doctors were trying to re-start my heart while
trying to restrain my wife, who is screaming "Let him die!
He wants to die with dignity!"
But it wasn't my heart causing
the initial distress. It was my brain, which interpreted this
fall in Total Fed Credit as meaning one of two things; either
the Fed is finally trying to curtail the decades-long explosion
of money and credit, or there are not as many people wanting
to borrow money, and so they don't need to expand money and credit
to accommodate them. Either way, this is what we in the Mogambo
Economics Biz (MEB) officially call The Big Freaking Bell Going
Clang Clang Clang (TBFBGCCC).
Ours is a country that does
nothing but spend every dime it makes, and which continuously
borrows more money besides. Historically, this is a recipe for
disaster. Nobody wants to hear this, especially my family, who
think that money grows on trees, and I keep telling them that
money does not go to all the hassle of growing on trees, which
involves fertilizing and pruning and weeding and applying pesticides
and picking, and then some drunken, stoned-out illegal alien
migrant worker falls out of a tree and sues the hell out of you,
and then they find out how you have been stealing them blind
and selling them substandard food at premium prices, and you
don't have a prayer in court and you know it. Brrrrr. Gives me
chills just to think about it!
But this is not about how Mogambo
International Exploitative Enterprises (MIEE) is screwing over
the poor wretches, just as the government and the Fed are screwing
the poor by destroying the purchasing power of the little bit
of money they get per month. It's just that MIEE, as a prototypical
capitalist-pig company with no scruples or ethics in my mindless
quest to secure profits, demeans the people directly, and they
suffer because they get less. The government does it indirectly,
making them get less by destroying the purchasing power their
money. But my whole case rests on the fact that, in the end,
we both make life miserable for lots and lots of people because
they must pay more and get less.
And the only reason that we
have anything going for us at all is because we spend every dime,
which makes and economy go, to indulge in an orgasmic orgy of
glorious, greedy, gluttonous over-consumption, and simultaneously
grow the size, the grasp, and the bankrupting expense of a huge,
suffocating, inter-locking structure of governments that has,
to use a phrase used in the Declaration of Independence "erected
a large multitude of new offices, and sent hither swarms of officers
to harass our people, and eat out their substance" by which
they mean, in Mogambo-ese, "The government sucking you dry
through your wallet to give total strangers money and services
for the rest of their lives."
The joke goes, "I spent
my entire million-dollar inheritance. Most of it I spent on women,
fast cars, booze and drugs. The rest I spent foolishly."
In our case, the rest we spent foolishly to party party party
Recognizing that this sudden
slowdown in the growth of money and credit would mean the total
collapse of the USA, you will, I hope, forgive me for jumping
up, running in panic, pushing my wife and children out of my
way as I run, as fast as I could, to try and lock myself inside
the heavily-fortified Mogambo bunker (HFMB), which would, theoretically,
protect me from the hordes of scared, angry and desperate people
whose lives are being destroyed as the economy is being destroyed,
including my family, who were already scared and angry about
being related to me in the first place because I seemingly will
And this slowdown may be showing
up in the way that inventories are sort of building. I would
assume that inventories are increasing because people are not
buying as much, which would explain why they are not borrowing
as much, although the producers and retailers are still stocking
as much. Trying to be as philosophical as I can (and you can
tell I am being philosophical by the way I wipe the drool off
of my chin and try to act dignified for a change), this had to
happen sooner or later, as every schoolchild knows that you cannot
continually go farther and farther into debt forever. I, personally,
learned this valuable Mogambo lesson (VML) rather early in life,
and I remember it like it was yesterday, when I went to my dad
and asked to have another advance on my allowance, and how he
laughed, and with acid in his voice asked "Do you think
you can perpetually bring forward future consumption into today?"
and how he spit in my face, and remarked about how he would never
forgive me for being born. Maybe it was HOW he said it, but I
never forgot the lesson about over-consumption via debt, and
I hope you don't either.
But this is not about my cruel
life of pain and anguish that I mostly brought on myself for
acting like such a jerk all the time, but about money and the
spending thereof and how rising prices are no fun. Like gasoline
prices. And with gasoline rising dangerously in price, people
do not have as much money to spend on the rest of the silly crap
that we love to indulge in, making things worse.
The proof of this is demonstrated
by the fact that people are going to the movies less, and all
kinds of businesses that depended on the flow of all this frivolous
discretionary spending are finding that sales are down dramatically.
This is another Mogambo Sign That Things Are Not As Good As They
Say (MSTTANAGATS) that highly-trained market technicians use
to chart the markets.
For you who believe that "the
trend is your friend", I will note that the Fed has had
this mindless expansion of credit going gangbusters since 1997.
So, all this sudden and surprising absence of growth in money
and credit is, in a word, ominous. But you probably already gathered
that from the spooky soundtrack, which is all low, wailing horns
in ugly disharmonies that sound like banshees wailing. Or, if
you are deaf, then you can also figure it out from the graph
of Total Fed Credit, which has being growing like a huge, malignant
cancer since 1997, pausing only in early 2000, whereupon the
stock market fell like a stone, which put the Fed back in credit-expansion
mode ever since. Until the last couple of months. Listen to the
soundtrack, which is telling all that you need to know. OooooOOOooooo!
You're going to love the way
I end this! Slowly fade in from black, see? An indistinct, fuzzy
form appears out of the gloom. What could it be? Soon, it looks
like a- what is that? A hand? -yes, it's a hand holding something.
As the lighting continues to come up, we see that it is indeed
a hand, a hand holding a revolver, and it is pointing right (pause)
at (pause) you. Slowly, the thumb reaches up and cocks the gun,
and you can hear it going "click click click" as the
hammer is drawn back. Then the clicking stops. The thumb returns
to its place on the butt of the gun. The forefinger moves to
the trigger. And as the camera pans in closer and closer and
closer, we plainly see that the finger is beginning to flatten
as it begins to pull on the trigger. Of the gun. That is pointed
right (pause) between (pause) your (pause) eyes.
One of the reasons that I use
this gun metaphor is that the latest reports shows that inflation
is running at 0.5% for July, and when you multiply that by twelve
months in a year, you come up with (and you can check me on this)
6%. Inflation, even after all the massaging and tweaking by the
government to make things look good, is running at 6%! This is
terrible, terrible, terrible news! It was within living memory
that Nixon (as I recall) seized dictatorial power and imposed
wage and price controls on the entire economy because inflation
was at an intolerable 4%! So this 6% thing is terrible, terrible,
terrible news! And it demonstrates, one more time, the utter,
utter failure of the Federal Reserve.
- Of course, the Treasury somehow
found the time last week to print up, literally, $1.4 billion
in new cash. In the last year, they have increased the stock
of actual folding money by $29 billion, which works out to a
new $100 bill for every man, woman and child in America. So,
for a family of four, if you check your wallets, you are supposed
to have another $400 in actual cash MORE than you usually have.
If you have more than this, please send the excess to me, as
I sure as hell don't have my share, and my wife is still complaining
that she still doesn't have any money, so I know she doesn't
have her $100 bill, either. That's' two hundred you owe me right
Foreign central banks are really
stepping up to the plate and buying US debt, and the hoard that
they are stashing at the Fed alone expanded by $6.1 billion last
week, bringing their increase in US government debt that they
own up to a princely $1.416 trillion! As staggering as that is,
it is up $205 billion in the last twelve months alone! And an
eye-popping one-seventh of this enormous pile of government debt
was accumulated in one, repeat, one, stinking year! One!
With only 120 million people
with non-government jobs in this country, this means that each
one of us proletariat working stiffs is responsible for paying
some foreigners, some stinking foreigners, some stinking foreigners
with the bad manners who rudely point out that we are a nation
of fat and stupid buttheads, back their $11,800, plus interest!
Alas, part of this rampant
buying by foreigners is explained by the fact that the trade
deficit hit another new record high, which means that more tons
and tons of dollars went overseas to pay for all of these imports,
and those foreign manufacturers got into their cars and went
down to the bank and traded in their dollars for local currency.
Then the banks say something that sounds like "Ha no hiwa
yama yama" and which means "What in the hell are we
going to do with all of these damn dollars"" and then
somebody says "Wan jo ha no!" which means "Call
the damned central bank and exchange these damned dollars for
real money that we can use to buy whatever in the hell it is
that we Chinese people buy!" by which I would interpret
as meaning "stuff that contains commodities and uses energy",
but that is another story for another time.
But the point is that their
central banks are awash in dollars, and there are so many dollars
flooding into their banking system that they are all spilling
out onto the floor and making it hard to get around and already
there are reports of people being crushed under the piles of
dollars. But if they go to the foreign exchange market, then
the demand for their currency would push up the price, making
their currency stronger. And they don't want that, because they
are an exporting nation competing against other exporting nations,
and so they want a weak currency. Ergo, they attempt to get rid
of some of the damned things by buying US debt, which just delays
the inevitable, and also makes the problem slightly worse, as
all those interest payments we are giving them are also in dollars!
Hahaha! What a world!
- Jim Pulava interviewed Matthew
R. Simmons, who is the president of Simmons & Company International,
who says that oil is cheap even at $60 per barrel! He calculates
that crude oil is "18 cents a pint." How did he get
this figure? Well, if you divide $60 per barrel by 42 gallons
per barrel, you get $1.43 per gallon. Since there are eight pints
in a gallon, if you divide $1.43 by 8, you get 18 cents per pint!
- Kurt Richebacher, everybody's
favorite economist, says that the bursting of a housing bubble
is bad news, from both a theoretical angle and from "Evidence
of sharply slowing economic growth" that is "accumulating
by the week for Britain and Australia, both belonging to the
Anglo-Saxon family of housing bubble economies. Flattened house
prices in both countries have drastically curbed home equity
withdrawal, essentially with prompt, drastic adverse effects
on retail sales." And now everyone is looking at us Americans,
because we, too, are one of these selfsame Anglo-Saxon countries
that is in the midst (or end) of a gigantic housing bubble that
even Alan Greenspan can see (he calls it "froth"),
and he is on record as declaring that neither he or any of his
friends can ever even SEE a bubble until after it bursts! So
this housing bubble must be huge if even Greenspan can see one!
Mike "Mish" Shedlock
at the WhiskeyAndGunpowder.com site have taken a look into the
future, and they turn to me with ashen faces and expression of
shock and say "Massive amounts of announced layoffs in the
banking and telecom industries will start kicking in the second
half of the year. Eventually, this will spill over and affect
housing just as it has in the United Kingdom and Australia. The
United Kingdom has just about finished year one of a housing
bust, and Australia is well into year two." And China is
trying to cool down a housing bubble there, too, which means
that they will have a bust.
And the housing bust may be
starting here, too. As one piece of evidence, in the newsletter
View From Silicon Valley, they write that published reports show
that in the local market "y-o-y volume declining faster
than y-o-y prices are rising." Oops!
And it is not like we are in
for some refreshing little breather from blazing economic growth.
Dr. Richebacher calculates that "the U.S. economy's performance
was by far its weakest of the whole postwar period. Measured
by employment and wage and salary income, it was a disaster.
In real terms, average gross weekly earnings are barely higher
than in 2000."
And it's not like there is
some glorious demand for labor, as Mark Faber can attest. "According
to a research paper by the Federal Reserve bank of Boston,"
he writes, "unemployment is far higher (around 8%) than
what the US government's statistics show." And he underscores
the type of jobs being created lately by saying, "High paying
jobs are being lost while low paying jobs are added."
So, if I understand him correctly
(and there is very little chance of that, so cut me some slack),
Americans have not had any increase in their aggregate standard
of living attributable to income growth. But before I can really
launch into this interesting point with my usual rambling and
shrieking style where I loudly denounce the Federal Reserve and
Congress and us Americans as colossally stupid bozos for allowing
it, and who deserve to have their heads handed to them, Dr. Richebacher
steals my thunder by saying "Given minimal employment growth,
it turns out that for the American public there never was an
economic recovery over the past few years. To increase the family's
living standard, higher borrowing was generally required, which
was done with abandon." Hahaha! I love that! "Done
with abandon"! Hahaha! The next time my wife yells at me
to "Stop acting like a selfish, mentally-ill child!",
I will say "I'm not acting like a selfish, mentally-ill
child! I'm acting with abandon!" Hahahaha! And then I will
say "So shut the hell up!" But she won't.
- An outfit in Toronto called
Bullion Marketing Services commissioned a report by Ibbotson
Associates on the "significance of 7 major asset classes
on the returns of conservative, moderate and aggressive investment
portfolios." They back-tested different things "covering
a 33 year period from 1971 to 2004." They chose that time
period as being both more recent, but also so that "during
the relevant time span, all asset classes 'had their turn' or
'their moment in the sun', so to speak, in terms of being in
or out of favor."
This study by Ibbottson Associates
was reviewed by Rob Kirby on FreeMarketNews.com, and they found
"that precious metals performed best when they were needed
the most by providing positive returns during the years that
traditional asset classes had negative returns." Ahhh! Waxing
poetic, I drop to one knee, raise my arm in a noble gesture,
and with a voice dripping with honeyed, dulcet tones, sing the
praises of gold thusly, "A golden friend who
never lets you down! A yellow metal buddy who won't stab you
in the back, unlike some people's hateful little wives who are
always sneaking around putting something in my food when she
thinks I'm not looking and shooting at me because she thinks
I was a burglar. But, I mean, every damned night?"
I see we got off the track.
Sorry. Anyway, Mr. Kirby reports that "Ibbotson determined
that investors can potentially improve the risk-to-reward ratio
in conservative, moderate and aggressive portfolios by including
precious metals bullion with allocations of 7.1%, 12.5% and 15.7%
To sum up, in the words of
Mr. Kirby himself, it was "clearly demonstrating that all
portfolios on the risk spectrum benefit from the inclusion of
precious metals over time."
I bring this up because not
only are gold and silver
at bargain levels given the state of the global economy, but
if even 10% of the world's portfolios heeded this advice, then
the demand would swamp the global supply of gold,
including central bank gold, more
than three times over. And since your keen economic and investing
skills are honed and sharp, you no doubt related the phrase "swamp
the global supply" to the notion that higher demand competing
for a limited supply means prices go up. And that, in a nutshell,
is how profits are made. Buy gold. Lots
of it. And silver. And oil.
- Barry Downs and Bill Matlack
have taken a look at the Baltic Dry Index, which is composed
by a company named Baltic, which asks shippers around the world
"the rate to book various cargoes of raw materials on various
shipping routes." The answers are then used to construct
the BDI. As such, "The BDI provides an assessment of the
price to move the world's major raw materials by sea and insight
into the global shipping market. It is an accurate barometer
of the volume of global trade."
Okay, now that we have the
theory out of the way, what in the hell is the point? Well, they
write that "the BDI chart seems to be predicting a significant
slowdown in global economic activity which, for the world's stock
markets, would mean the end of the cyclical bull market and a
return of the secular bear market, and probably with a vengeance.
Unless the BDI has suddenly become skewed by something which
is not apparent, like an undocumented large supply of new bulk
shipping tonnage, the collapse of the index since April is predicting
a drop in global economic activity and trouble ahead for investors."
And we might not even need
the BDI as an indicator, because they go on to say they are seeing
declines already. "We already know that the European economy
has slowed down appreciably. Britain alone has just reported
the slowest economic growth in 12 years and the German economy
is terribly anemic. Also, in Asia the Chinese economy has become
overheated, and there is concern for the banking industry and
possible negative impact on the Chinese economy."
- Paul Craig Roberts, is a
former Associate Editor of the Wall Street Journal, former Contributing
Editor of National Review, and former Assistant Secretary of
the Treasury during the Reagan administration, and so you figure
that knows something about economics, and he has taken a look
at the employment numbers put out by the Bureau of Labor Statistics.
Out of 207,000 new jobs that the report said were created, 26,000
of them were government jobs. The rest were in the "domestic
service sector" which are food servers, bartenders, health
care workers, social services workers, real estate agents, credit
intermediation, transportation workers, retail clerks and wholesale
trade. He also wryly notes that "There were 7,000 construction
jobs, most of which were filled by Mexicans." But Americans
exploiting the hell out of people is what we do best, so at least
some things never change.
The problem? The problem is,
as he says "Not a single one of these jobs produces a tradable
good or service that can be exported or serve as an import substitute
to help reduce the massive and growing US trade deficit. The
US economy is employing people to sell things, to move people
around, and to serve them fast food and alcoholic beverages."
That's us, alright! And we sometimes dress the younger, cuter
ones in tiny little short-shorts and tank tops to serve us Buffalo
wings, too! What a great country!
- I saw a reprised Financial
Intelligence Report on NewsMax.com, the one with Sir John Templeton,
who founded the Templeton Funds, when he "first warned of
these interest rate hikes and the coming housing bust. Templeton,
considered to be one of the world's greatest investors, believes
real estate prices in some U.S. markets could fall by an astounding
50 percent." Half! And that was a few of years ago!
- To show you how intellectually
barren the modern "science" of economics is, it is
only necessary to read what Glenn D. Rudebusch, who is Senior
Vice President and Associate Director of Research at the Federal
Reserve Bank of San Francisco, wrote in his essay entitled "Monetary
Policy and Asset Price Bubbles". Not once in the entire
report does he make mention of the fact that asset bubbles are
the result of excessive creation of excess money and credit by
the Federal Reserve, which provided the financing for the damn
bubble, and without the financing there would be no bubble in
the first damned place. Although he never postulates a possible
mechanism of how bubbles arise, you are left with the impression
that bubbles somehow, I suppose, spontaneously erupt from, umm,
mutant spores from outer space or something. Once past that sticky
point, however, it is an easy segue to a delightful discussion
of how difficult bubbles are, and even our brave heroes at the
Fed have problems dealing with bubbles, because they want to
merely painlessly deflate the bubbles, so as to not cause a drag
on the rest of economic activity. Meaning a recession, or depression,
To this I say, with the Famous
Mogambo Laugh Of Contempt (FMLOC) that echoes eerily off the
mountains and across the flats and strikes terror in the hearts
of small animals, mostly rodents, "Hahahahaha!" This
is the damned dream of every government in the history of the
world! Painlessly expand money and credit, and reap nothing but
benefits! Hahahaha! That is why they all tried to do it, and
this is why they all failed, too.
But he ignores me, and without
even acknowledging my presence, goes on to write that "As
yet, there is no bottom line on the appropriate policy response
to asset price bubbles." Well, duh! That's because there
ARE no ways to painlessly deflate bubbles, dunce! If there were,
every government on the face of the damned planet would be actively
creating bubbles with both hands, you freaking moron! Any idiot
government can easily inflate the prices of things, and thus
incomes to producers, and thus to the laborers, and then to prices!
And it is this rise in prices that causes the problems, you blithering
idiot! Notice how he doesn't even look at me, even though I am
screaming at him at the top of my voice. Like, these guys are
so smart that with some miraculous waving of some central bank
monetary magic wand or something, they will stop the bubbles
from getting bigger, but still keeping all the increases in profits
and wages without inflation? Wow! It would be magic!
I want to track this Rudebusch
guy down so that I can grasp him by his lapels, pull him up close
to my face so he can smell my stinking Mogambo breath (SMB) when
I say "It cannot be done, you dumb butthead! If it could
be done, IF IT COULD BE DONE, somebody in all of history would
have done it by now!"
But, since we cannot seem to
learn, then we have to pay. Fortunes will be lost and lives will
be ruined. That is how bubbles deflate. And it is ugly, and it
has profound and lasting consequences. And you knew that sooner
or later I was going to get around to another long and pointless
diatribe about how the Founding Fathers took the wise precaution
of actually writing into the Constitution the literal requirement
that money "shall only be of silver
and gold", and the reason they did that
was because the banks cannot create silver
and gold out of thin air, and thus the financing
of bubbles becomes difficult, if not impossible. With gold as money, and no fractional-reserve banking,
the banks and the government are prevented from creating excess
money and credit. No matter how smart they are, no matter how
creative they are, no matter how corrupt they are, no matter
how evil they are, they still cannot create gold
or silver! And thus the money is not destroyed
by over-creation of it, and thus the economy is not destroyed,
and thus America is not destroyed, and everybody is happy, and
the economy is strong, and inflation is zero or less, and people
are smiling and happy, and cute little puppies frolic in the
sun, and darling little children laugh and clap their hands in
glee and delight.
Suddenly, a loud clap of thunder
shatters our idyllic scene. But, as the first of a long line
of communist dullard Democrat bastards, Franklin Delano Roosevelt
gutted this crucial provision of the Constitution. With a stroke
of his pen, he eliminated the use of gold
as money, and extorted compliance from a gutless Supreme Court
when this corrupt, lawless act was naturally challenged in court
by outraged Americans.
But this is not about FDR killed
America and how all thinking Americans hate his guts. This is
about the San Francisco Fed bank and the things they write. Composing
myself with a mighty effort, I note that the site itself has
a primer on monetary policy. It should send shivers up your spine
and make you want to run out and buy all the gold
that you can, because it starts off with actually declaring that
they are a collectivist/statist central-planning horror when
they admit "The object of monetary policy is to influence
the performance of the economy as reflected in such factors as
inflation, economic output, and employment. It works by affecting
demand across the economy-that is, people's and firms' willingness
to spend on goods and services."
This is the same central-planning
idiocy that doomed the Soviet Union and all the other collectivist
jackass countries that tried this stupidity. Where in the hell
is the free enterprise, the workings of the free market? Where
in the hell are savings? They are all, alas, dead. The Federal
Reserve has killed our money (having lost almost 98% of its value
since 1913 and about 25% in the last four years alone), and they
have killed the free market. How were they killed? They were
killed by the Fed continually "affecting demand" and
encouraging everyone to go into back-breaking levels of debt!
Hahahaha! This is what passes for Economics As Science, as practiced
in America! And now the world! Hahahaha!
The essay goes on, "While
most people are familiar with the fiscal policy tools that affect
demand-such as taxes and government spending-many are less familiar
with monetary policy and its tools. Monetary policy is conducted
by the Federal Reserve System, the nation's central bank, and
it influences demand mainly by raising and lowering short-term
So this is it! They lower interest
rates to entice you to go into more debt, or they raise interest
rates so that 1) you won't go farther into debt and 2) cause
the debt you just took on to become more expensive to carry!
Hahahahaha! This, this, THIS, THIIIIIIIIIIIIS is the brain-dead
abomination that the economic system of the United States, and
the world, has become!
Why would the banks do this?
To make money! The total stock of actual cash is only $765 billion
dollars. The government, by giving the damned banks the power
of unrestrained fractional banking (which is a horror in itself),
this piddly $765 billion dollars grew to a money supply (as measured
by M3) of $9,754 billion! Every dollar of actual money has been
multiplied by 12.7 times! And whose money is this? The banks'!
The government merely got some ink and some paper and printed
up a dollar bill, and when the money found its way to the banks,
the banks multiplied it by 12.7, and then loaned it all out!
And they keep all the interest! What a racket!
And let's not forget that the
damned Federal Reserve, which is a private bank and is NOT part
of the government, also has all the country's gold,
and this private bank has not been audited by the government
since the 50's! Like I said, what a racket!
Adam Hamilton of Zeal Intelligence
notes that "Since there are no controls whatsoever on the
Fed's printing presses and Washington's voracious appetite to
spend money that it doesn't have, the supply of dollars is destined
to grow until it is eventually inflated into oblivion. But against
this ever-growing supply backdrop, demand is waning around the
world. Foreign institutions and investors are growing tired of
seeing their dollar holdings lose value year after year so they
are diversifying out of dollars. With a growing supply and withering
demand, dollar prices must fall to reestablish equilibrium again."
Dr Richard Appel of Financial
Insights says that this will be bad news for the chumps who have
been buying all those bonds for the last few years. "Given
the fact that the dollar has lost well over 85% of its purchasing
power during the past seven decades, it is reasonable to assume
that purchasers of the new Treasury Bonds will suffer a similar
fate as have earlier bondholders. In effect, when the investors
redeem their bonds the proceeds will purchase far less than the
money would have when they bought them." He is exactly right.
He is wrong, however, when he says "This will accrue to
the benefit of our government and nation, as this debt will be
repaid in cheaper dollars." I got news for you, dude. Money
that does not buy as much is NOT a benefit that will "accrue"
to the nation or the government, as all it does is make a lot
of people poorer.
To prove it, I received some
more old German Reichmark money from a reader who sympathizes
with me about the horror of money debasement. One bill is a million-Reichmark
note. There was a time, just a few years earlier, when a mark
was worth about a dollar. So a million marks was a big freaking
potload of money. Then, in less than a decade, a million-mark
note became, literally, worthless. And those stupid Americans,
oops, I mean Germans, who had their wealth in money lost all
their dollars, I mean, marks. This is the indelible lesson of
what happens when you create excess money and credit. Just like
the Germans, oops, I mean us Americans, are doing, and have been
doing for half a freaking century! And then you wonder why I
am armed to the freaking teeth, screaming in fear and panic,
and define "warning shot" as "fusillade"!
- Addison Wiggin of the Daily Reckoning
has written a new book, "The
Demise of the Dollar", and if it is anything like the
other books he has had a hand in, it will give you nightmares,
and then tell you how to make plenty big bucks on exploiting
the fallout from the collapse of the dollar, which will be just
another in the long history of the thousands and thousands of
fiat currencies that became worthless.
- The Treasury got up in front
of the cameras and announced that the U.S. federal budget deficit
totaled $52.79 billion in July, and that the deficit for the
past 10 months totaled only $302.6 billion, and how that is some
good news because that means that the budget deficit is down
by, so they say, 23.6% from the same period in 2004. Which was
the worst on record. Whoopee. And which was made possible by
extracting more taxes out of the economy, which helped offset
Of course, this blatant lie
can only come from a budget that has been so foully corrupted
by off-budget accounting and strange definitions. To get a real
idea of how things are going, just take a look at the level of
national debt. It is up by $575 billion over the same period!
Ergo, the budget shows an $18
billion improvement (mostly because of higher tax collections),
but our total national debt has increased by $575 billion over
the last year! Hahahaha! Things are getting better? Hahahaha!
If I tell my wife that I took
the lunch money of some schoolchildren and thus increased my
income by ten dollars, but I neglect to tell her that we are
$30 more in debt because I took all my hoodlum friends out for
pizza and beer, will the media tell the story of how this ungrateful
murdering harpy killed her darling husband because he worked
harder and made more money? Hahahaha!
- The amazing rise in the price
of commodities is not surprising to Martin Weiss, and he extrapolates
that "We see nothing on the horizon that can overturn the
growing imbalance between demand and supply. Nor is the growing
demand just a passing phase: We are smack in the middle of one
of the most dramatic population explosions this planet has seen
since the agricultural revolution in the early days of civilization."
But prices and sales cannot rise forever. So when will we see
an end to this huge growth spurt in the world population? "Probably
not before the middle of this century." And connecting this
with the demand for commodities, he says "So if you're waiting
for the population-driven demand for commodities to ease, you'd
better be both patient and young. Because it could take at least
another 45 years."
- There was a 1.8% increase
in July retail sales, although the bulk of the gain was from
a 6.7% jump in auto sales as the desperate automakers launched
their now-famous deeply-discounted "employee prices."
And let's not forget the back-to-school tax holidays on notebooks
and pencils and clothes and shoes and protractors and compasses
for the tykes returning to classrooms. Subtracting all of this,
sales on all the rest of the stuff we are making an economy out
of were down.
- The August 13 issue of the
Economist magazine exhumed the rotting, stinking corpse of the
old IS-LM model of the economy in the "Economic Focus"
column, this week entitled "A Working Model". This
silly piece of economic nonsense has, as even the Economist recognizes,
"gone out of fashion." And rightfully so.
One of the weird things about
it is that it has failed to adapt to the real world, especially
when the authors say "By definition, global savings must
equal global investment." Wrong, dudes! In the past, this
identity was not only true, but necessarily so, because somebody
had to save money before someone could walk into the bank and
borrow the money for investment. Ergo, savings equal investment!
Nowadays, however, that is
no longer true. Money is created every damn day of the week by
the banks of this world, and without anyone saving anything.
And when people DO save something, the banks use that to multiply
the amount of money lent out! So, obviously, savings does NOT
have to equal investment, and in fact investment routinely takes
place despite NO savings whatsoever these days!
But this does deter the economics
editor of the Economist, who persists in running us through that
tired old crap, what with little graphs rigidly fixing economic
output on the X-axis and interest rates on the Y-axis, and here
is the IS (Investment/Saving) curve moving up and down, and the
LM (Liquidity/Money) curve moving up and down, and there is some
so-called "equilibrium" or something where these two
lines cross, and you can read across to the axes of the graph
and pinpoint exactly, EXACTLY, what the interest rate and the
economic output of the nation will be! Hahahaha! What crap! No
wonder it has "gone out of fashion!" (Everywhere but
in the universities, however, will still tend to hew to this
- Phil Spicer saw the news
that "On July 6, one ounce of gold
purchased fewer than seven barrels of crude oil for the first
time in recent history. July's monthly average ratio of 7.23
barrels per ounce was also a record, and showed a whopping one
third decline from the recent monthly average high of 11.03bbl/oz
set last November. July's monthly average ratio of 7.23 barrels
per ounce was also a record, and showed a whopping one third
decline from the recent monthly average high of 11.03bbl/oz set
Actually, the report notes
that "The all-time high in the ratio is 48.65bbl/oz recorded
more than three decades ago in June 1973." So, to be fair,
there is room for things to get worse, meaning that gold will remain cheap, which means that you can
leisurely buy gold.
But maybe not, as the report
goes on to say "Based on the long-term average ratio going
back to January 1970, the implied price for gold
is $1,161/oz and the price for oil is $25.56/bbl."
This has not escaped the attention
of Big Hoye of InstitutionalInvestors.com, who writes "In
June 2003, the gold/crude ratio was 11.7 and only a few
months ago it reached 7.2, which was something like a 15-year
low. As of yesterday (Aug 12) , it was at 6.72, which makes energy
very expensive relative to gold. Going
the other way, to get the big perspective for investors, gold is exceptionally cheap relative to crude."
Bill Murphy at LeMetropoleCafe.com
sees us talking about this and smoking cigarettes and putting
our feet on the table and having fun, and he joins in with, "The
price of gold vis-à-vis its historic relationship
to oil is hugely undervalued by more than two standard deviations.
The logical play is to load up on gold
at these cheap prices, especially with a number of the speakers
at Gold Rush 21 predicting the price of gold to rocket far, far higher than $1,000 per ounce."
- At FreeMarketNews.com we
get the depressing news that the Russians, who, not that long
ago, were just a bunch of stupid communists, are throwing off
that collectivist nightmare, and are now in a position to rightfully
get on our case about the unbelievably expensive, pork-laden
transportation bill that Congress just passed and Bush signed.
As FMNN writes, "A recently published PravdaRU article calls
the $286 billion U.S. transportation appropriations bill 'remarkable'
and claims the staggering size can only be justified if U.S.
leaders are fearful that the country is heading for a Great-Depression-type
scenario and have decided to revert to good, old fashioned Keynsian
'pump priming' of the 1930's variety.
"PravdaRU explains it
this way, 'When massive unemployment put the USA on the brink
of survival during the Great Depression of the 30s, the government
started funding the development of the transport infrastructure.
Highways, on which the government spent billions and billions
of dollars, rescued the entire nation. When Adolf Hitler came
to power in 1933, he mobilized thousands of the unemployed to
build autobahns, which Germany is proud of still. The road construction
gave a very powerful impetus to the revival of the German industry.'
The article, by guys who were
dumb commies not that long ago so their criticism of us stings
bitterly, "makes the point that the U.S. economy may be
in much worse shape than the American mainstream media has reported,
with higher inflation and much higher unemployment than the official
figures recognize - 'stagflation' might be an apt description."
The article concludes that
"The White House is desperately looking for measures to
find employment for crowds of unemployed American citizens and
- According to the Mail&Guardian,
"The Japanese prime minister on Monday apologised for atrocities
committed by his country during World War II, on the 60th anniversary
of the end of the conflict." Hahahaha! Yeah, like THAT is
going to appease the Chinese for what the Japanese did to them
in WWII! Hahahaha!
***The Mogambo Sez: Repeat after me: Oil. Gold. Silver. Ommmm. This is the sound of cosmic
Provided as a courtesy of Agora Publishing and The
is general partner and C.O.O. for Smith Consultant Group, serving
the financial and medical communities, and the writer/publisher
of the Mogambo Guru economic newsletter, an avocational exercise
the better to heap disrespect on those who desperately deserve
it. The Mogambo Guru is quoted frequently in Barron's, The
and other fine publications.
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