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Sleeping with The Debt

Richard Daughty
...the angriest guy in economics
The Mogambo Guru
Aug 25, 2004

Foreign Custody Holdings at the Fed, where foreign nationals holding foreign passports and speaking with funny foreign accents come waltzing in with bulging suitcases full of money, thanks to the trade deficit, and they have got to do something with all that money. As they struggle into the lobby of the Federal Reserve, knees buckling under the enormous weight of all that cash, they look up at the menu of things for sale in America that is posted there on the wall, and ask "Where can we spend this damn much money?"

Thus they amass big ol' globs of Treasury and Agency Debt to add to the previous massive, huge glob of Treasury and Agency Debt they have been buying for years and years, and then they get back on an airplane and fly back to the foreign country they call home. And then they get back, and their foreign wives meet them at the door of their foreign-looking little house, and they ask "Well, what did you buy with all that money?" and they say "I bought some American Treasury and Agency debt" and she starts screaming "What? We are up to here with American Treasury and Agency Debt! We got Treasury and Agency Debt everywhere! In the cellar! In the attic! In the hall! In the guest room! In the kitchen! We even have stacks of American Treasury and Agency Debt in the bedroom, and I gotta sleep in there all night with it, breathing the stench that permeates the debt of a bunch of half-witted profligate gluttons, in and out, in and out, until my sinuses and nasal passages are clogged and sore, and when I send you off to invest our money you come back and tell me that you bought MORE American Treasury and Agency Debt? What are you, some kind of moron?"

Anyway, ignoring these unseemly domestic problems, foreigners bought another $9.3 billion for the week, which is higher than usual by quite a bit, and stashed it at the Fed. This brings their total holdings at the Fed to (hit the "Total" button) $1.266 Trillion, of which $320 billion of that was acquired in just the last twelve months.

Two adjacent Bloomberg news clips that the clever Doug Noland juxtaposed in his new Credit Bubble Bulletin essay on the Prudent Bear site, entitled "Speculative Finance and Liquidity Bulges," combine into a perfect illustration. The first one, which sets up the joke, was that Bloomberg reports "The Philippine economy expanded as much as 6 percent in the second quarter as manufacturing and services picked up, according to official estimates."

Well, to be fair, this is news to somebody? How could they NOT have an expanding economy? Everybody is having an expanding economy! That is the whole freaking point of deficit-spending and creating excess money and credit via the central banks! It expands economies! Nobody would ever suggest otherwise, and by "nobody" and "ever" I mean that there is not one instance of an idiot ever saying so, in the whole history of idiots, which is a probably a long, long line of really dumb people all genetically related to me somehow, and I am as surprised as you are about that! But, of course deficit-spending will energize an economy, you fool! Tons and tons of instantaneous spending will always energize an economy! And with globalization, when one economy is energized, it tends to leak out into all the other economies after a few iterations of the system.

Okay, that now we know about the world-wide explosive expansion of credit, all of which stem initially from Alan Greenspan and his Federal Reserve, and how it is a tonic for economies. It is usually at this exact point where I usually throw in some verrrryyyyy disrespectful and insulating remarks about either a) monetary policy, b) fiscal policy or c) something entirely unrelated ("Oh, look!" she says. " A puppy with a pretty ribbon tied around its neck!" and I say "Yeah, just like the Federal Reserve has tied a rope around our necks, and pretty soon you are going to see how much fun it will be to have your legs slowly eaten off by inflation in prices!")

But it always comes down, in the final analysis, to price. And price means money. And money means Federal Reserve. And Federal Reserve means Alan Greenspan. And Alan Greenspan means continuous Federal Reserve expansion of money and credit. And expansion of money and credit means expansion of the money supply into "surplus mode." And a money supply in "surplus mode" means all that money will eventually find a home in prices. And that means higher prices.

But anyway, as we were saying before I got sidetracked, the other news item, actually adjacent to the other item, was also a Bloomberg news blurb. "Philippine inflation may average more than the government's 5 percent limit this year, an official said at a press briefing in Manila."

Hahahahaha! People recoil in horror as the Mogambo literally falls on the ground and laughs heartily with that famous Mogambo Booming Laugh Until You Think He Is Going To Laugh Himself To Death Because He Is Laughing So Hard (MBLUYTHIGTLHTDBHILSH)- hahahahahahahahahaahahahaha! -- at the object lesson presented so adroitly by Mr. Noland, one that is so, so, so, deliciously profound! It is this! This inflation thing! This is the reason why people don't go around deficit-spending and creating excess money and credit! Because it leads to inflation! It always does! And it always does because it has to! Because where else can all that extra money go?

And if you want to see how much fun price inflation is, just manage to stay alive a few more years, because it ought to get cooking pretty good, right about then. You will be in the thick of it, where prices are rising month after month, year after year, and your after-tax income is NOT rising nearly as fast. And the newspapers are full of heartbreaking stories about more and more misery affecting more and more people, and the television newscasts show scenes of mobs of angry, desperate, starving, bankrupted people marching on state capitols and Congress, demanding free money!

I told you that I would relay some of the horrible things that I am getting out of Laurence H. Meyer's book "A Term At The Fed." I am about halfway through it, and if I was alarmed at the Federal Reserve before, I am shaking with fear now. Mr. Meyer reveals that Greenspan "had already staked out the permanent bliss story- based on his belief in the acceleration of productivity." Permanent bliss! The head of the Federal Reserve believes in permanent economic bliss! I am aghast! My brain has shut down.

Newsday magazine had a nice article entitled "1.3 billion reasons to worry about oil," which is a lot more than I can count, although I can easily rattle off that many reasons, and more, why I should be allowed to have as many cookies and cigarettes as I want. They write, not about the monstrous mistreatment of the Mogambo, but about oil. They report "With 1.3 billion people, a phenomenal rate of economic growth, and an insatiable consumer demand for cars, China will soon come into direct conflict with the United States over oil, the world's most valuable and increasingly scarce industrial commodity."

I am intrigued, and seep inside the Mogambo Bunker the powerful Mogambo Strategic Profit Radar (MSPR) just sent out an emergency bulletin, beep beep beep. It seems that there is something bullish about "phenomenal rate of growth" combined with "insatiable demand." And with these two sizzling demand pressures operating on a multiply-constrained supply paradigm in both the long-run and the short-term, it doesn't take some whiz kid with computers using ridiculous buzzwords like "paradigm" to know that price equilibrates the system. The only question is "Will the new price be higher, or will the new price be lower?"

And once you have made that calculation (and I hate to brag, but I came up with the answer, "higher," right away, just like that!), you gotta ask yourself, "Would a person who owned these things be wealthier when the price went up?" And if you can answer THAT question (and again, the Powerful Brain Of The Mogambo instantly deduced the correct answer!), then the only other question is "Where do I send the money so that in a little while I will be fabulously, gloriously rich so that people will call me 'Mister Mogambo' instead of 'Weird-o'?" My natural helpful reply is that you should convert all your assets to cash, wrap it up in a plain bundle, and send it to "Occupant" at my address, and then just relax and forget all about it. You don't get a receipt, no boring quarterly statements, no pesky tax forms, nothing. I'll call you with any news you need to know.

But if you are like everybody else, you will notice that this is an obvious scam, and your knee-jerk response is that vermin like me ought to be locked up somewhere for my own good so that decent people, like you, don't have to associate with me, and how even talking about this whole Mogambo thing gives you the creeps. But little do you know that my bombshell "surprise witness" is going to be Ben "Unorthodox Measures" Bernanke himself, he of the Federal Reserve, who is backing me 100% on this "unconventional measure," and even I have to agree that proposing blatant investment fraud is certainly "unconventional." But if you listen closely to this tape recording, let me press the button here, you can hear that he is saying "I am Ben Bernanke, and I approve this message" although it sounds more like "Yes, this is Ben Bernanke. Who the hell keeps calling me and waking me up at this time of night?" and then you can hear somebody trying to stifle a laugh. And that is where the tape ends. But that's him alright. You can trust me on this one!

Newsday goes on to say, addressing the quantitative crowd, "Private auto sales in that vast nation have skyrocketed from token levels 10 years ago -- only 220,000 were sold as recently as 1999 -- to nearly 2 million this year. Last year alone, China's automobile sales increased by a staggering 69 percent." Did you notice the use of the word' "staggering?" It's like Newsday is looking down their noses at us proletariat boobs out here who cannot see that selling 69% more cars in one year is not staggering, so they fell it necessary to tell us that it is staggering, because I am simply too stupid to comprehend that a market growing at 69%, which involves millions of high-priced units, is staggering, and here is a picture of me walking down the street humming some tuneless song in my off-key voice and not even realizing that this is staggering, and you can see by the photographic evidence that I thank my lucky freaking stars that Newsday is around to explain how I ought to be staggered.

Well, to make a long story short, this upsets me, and the switchboard at Newsday finally stops responding to my incessant phone calls because every time they answer I scream obscene insults into the phone and demand to speak to somebody in charge, and while the Carl the janitor may certainly be in charge of the housekeeping department, what I really want is to talk to the guy who is in charge of the whole freaking operation so that I can yell at him, or her, or them, and make vague threats against them, but they are not really sure if they are threats or not, so they call in the police, who look at a transcript of what I said and they listen to the tape recording, and they have to admit that they are not sure that it rises to the level where they can arrest me. Like they are playing with an amateur here!

Newsday goes on to say "It's estimated that China could have nearly 30 million automobiles by 2010." Trying to show off my calculator wizardry, I punch in the 2 million cars now and the 30 million cars then, and the time period is six years. Then picking up the calculator, I get up and go out of the room, shutting the door behind me. In a few minutes, I come back into the room, and I stick the calculator under your nose and announce that this works out to a growth rate of 57% a year. Sure enough, you look a the calculator in my hand and you see that the number 0.57 is glowing in the digital readout. Parenthetically, I add that this is still in the "staggering" zone!

Doubting my highly developed mathematical skills, you ask "Okay, Professor Mogambo, if that is your real name, but how about when Newsday goes on to say 'By 2030, China is expected to have more cars than the United States and import as much oil as the U.S. does today?' " So while my beady little rat-like eyes dart side-to-side in panic, I clear the calculator by frantically punching the on-off button over and over and slapping it on the desk. With a shaking finger I again enter the 2 million cars now, the 26 years of growth at 57%, then I again pick up the calculator and leave the room, shutting the door behind me. In a few minutes, just like last time, I come back with "That works out to 247,982.457 cars, and that last .457 is probably a car that was wrecked or something, but not totaled. Or maybe it is some spare parts laying around. We're not sure."

Then they say "The pressure on supply will inevitably jack up prices to levels that would make today's motorists and electricity customers blanch." This is the same result at the Mogambo Profit Sensing and Ranging System (MPSARS) got! So they are stealing my research and not paying me any royalties or sending a lousy "thank you" card!

Bob Wood at Kaizen Management is one of those money manager guys who thinks that because he reads things and I sit around playing with crayons that maybe if I read things, too, then maybe I would not be so embarrassingly ignorant, and that maybe I would feel better about myself if I appeared less stupid once in awhile. Figuring it is worth a shot, he sent me over a copy of an article in the Financial Times entitled "Manufacturers Feel Heat Over Raw Materials." Now, I admit that this is about British manufacturers, but the lesson is clear. Brian Cooke, who is the president of a foundry, says that British companies are "experiencing the worst rise in costs in 40 years," and that others are describing the current run up in prices as "super-inflation in metals prices."

And when you sneer "Screw the Brits! What have those limey bastards ever done for us?" it could be important to heed the anecdotally-used term "super-inflation." This could be nothing. "Don't worry about it. Completely unimportant. Forget I said anything." But it could also be a British colloquialism, their way of saying "hyperinflation," and if it is, then you should immediately do several things, which I will number for you at no extra charge. 1) convert your assets to gold, silver, and get enough firepower to protect them and your family. If you only have enough to save one, you'll have to choose, but I hasten to point out that when you have gold and silver can always drive yourself to the liquor store in your nice shiny car for a six pack of beer and a bag of Cheez Doodles, and maybe some salted nuts. But what is your family gonna do for you? Huh? Carry you piggyback?

Another thing, which I cleverly number 2, is 2) remember the phrase "global economy." This means that what goes around, comes around. And there are a lot of things that are going around that I do not want to come around, especially to me. Like those nasty "Last Notice!" letters and how the mailman makes these laughing sounds when he stuffs whole handfuls of them in my mailbox.

Barry Downs and Bill Matlack wrote a nice little essay entitled "Gold- The Instinctive Protection of Wealth" and posted it at the Kitco site. They write "The world has always been a crime and punishment place, and the Federal Reserve has created the ultimate financial crime, which has been the orchestrated destruction of wealth through inflation."

Well, nothing new here for the Mogambo Heads of the world, and we have said as much since the Laws Of Economics were handed down to the Great Mogambo, while standing on the crest of Mount Mogambo, which was located in Mogambo Land, the exact time in history and position of which are still being debated by scholars.

But they noticed that I was taking valuable class time to use my cell phone to make crank phone calls ("Hello? Federal Reserve? You stink! Hahahaha!"). Perhaps that is why they switched to discussing that one thing that seems to get my interest, making money. They say "The gathering economic storm and approaching money/credit inflection point is providing holders of wealth, dominated in the dollar or any other fiat paper money, a chance to secure protection in the gold arena at historically low price levels."

Not only "secure protection," but to also get it at "historically low price levels!" This is fabulous! I switch to Channel Ten, and I see a commercial. A guy is shouting "Hey! The boat is sinking!" And sure enough, when the camera pulls back you can clearly see that the boat is sinking! Then suddenly, a beautiful girl in a tiny bikini appears, and says "Ahoy, Mogambo! No problem! Lifejackets are on sale in the biggest lifejacket sale we have ever had! We're practically giving them away!"

And they sound like they are quoting me when they say "Whether it be a position in the physical metal (the ultimate) or gold in the ground via a well-chosen portfolio of gold mining stocks, or both, some significant diversification away from a world of pure paper fiat money has never been more appropriate."

And what does he mean by "significant diversification?" I dunno. "A lot," I figure. But when I called them to ask about it, the woman who answered the phone said "Mogambo?", screamed bloody murder, and hung up. And apparently she is the only one there who knows how to work the phone, because the line would immediately go dead every time I called after that.

But I will go out on a limb here and say that this is the Mogambo's Take It To The Bank Implied Guarantee Advice That Is Not Worth The Paper It Is Printed On (MTITTBIGATINWTPIIPO), and it is the best free advice you can get for the money, and I can give you because there is no better advice to give, and if there were, I would give it to you, because I want you to have only the best advice, as that is just the wonderful, darling kind of guy I am, and after I am dead, if they ask you "Hey! What did you think of that Mogambo guy?" you can say "He always gave us the best advice, and because we took his advice we are all fabulously rich and that is why we have the time to sit around on our fat butts and answer your questions, such as why we named all of our children Mogambo. All hail Mogambo!"

But, getting back to the present, my fabulous advice is to buy the companies ("go long, Pilgrim!") that can supply anything that the Chinese might want (but cannot produce themselves!) to own, visit, eat, drink, smoke, swallow, inject, absorb, daub on their faces, lather-rinse-repeat on their hair, rub on their flab, or have inserted into bodily orifices.

Mike Hoy, who is usually described as a "money manager," is actually more of a "Guy who says profound things," and he has recently said something profound and so easy to understand, which is probably why I call him a "Guy who says profound things." He says "Whether we have inflation, hyperinflation, stagflation, recession, deflation or in the end depression does not matter; they are all coming and several at the same time. There is no way out of the mess that we have thrown ourselves into. The whole world has made its bed and soon will have to sleep in it."

But the best part, for me, is that he provides me with another bit of evidence that the Federal Reserve and virtually everybody who has ever called himself "an economist" for the last sixty years is a big, fat butthead. He says "The failure of the lowest interest rates in decades to produce a thriving economy and country, is proof that the Fed has failed." See! He says! Proof! Read it again! Proof! I rest my case!

Sean Corrigan, who is one of those guys who is so smart about this economics things that I assume that he now just sits around all day reading history and magazines that have pictures of naked ladies in them, ruminating on the philosophical side of things, while mere underlings and minions do the real work, and he gets all the glory and all the money and you would think with that much money sloshing around that maybe a little bit of it would slosh over my way, but nooOOOoooo, not a dime so far.

Anyway, he quotes Howard White in 1882, "Credit never brings a cent's worth of property into existence, except by putting tools and implements already existing into the hands of those who can make use of them, and who could otherwise not obtain them; but, by accomplishing this, it becomes a mighty engine of human progress. All notions implying that credit of itself, in any form whatever, calls wealth into existence by prestidigitation, are fantastic and mischievous." As an aside, it takes a guy from 1882 to use the word "prestidigitation," whereas today we use the word "magic" or "sleight of hand." and if we DO use the word prestidigitation, then somebody is always saying "Press da who? What? And, umm, should I buy stocks for, ummm, you know, like, the long term?" and I say "Whatever, dude," and they say "Gnarly, dude!"

Anyway, to stay one step ahead of this Howard White guy, I will update his remarks to note that what he calls "prestidigitation" we now call "services economy," and if you are as confused by that statement as I am, then I suggest that we both wait a little while and see if it is indeed possible to have a "services economy," when such an asinine notion never occurred to anybody else in all of history.

Didier Sornette who is a professor of Geophysics at UCLA, and a guy named W. X. Zhou just published "Prediction: The future of the USA stock market."

"Based on a theory of cooperative herding and imitation working both in bullish as well as in bearish regimes that we have developed in a series of papers, we have detected the existence of a clear signature of herding in the decay of the US S&P500 index since August 2000 with high statistical significance, in the form of strong log-periodic components." I notice that all the hands went up. Everyone has the same question. Everybody is dying to ask "Mogambo, do you know what a strong log-periodic component is?" and I have to admit that "No, but I can guess it must be important, or they wouldn't be writing a paper on it, and I am, again guessing, that it has something to do with a smart-aleck student whose final grade will be so bad that they think that they have been hit over the head by a log on a repeating basis" and then all the other hands go back down. Mr. Sornette continues, "Since August 2000, the USA as well as most other western markets have depreciated almost in synchrony according to complex patterns of drops and local rebounds."

Well, the markets have to behave in some coordinated, related way. They have no choice. And the word "synchrony" is probably as good as any, although in the circles I run in, nobody has ever uttered or read the word, and to be truthful, in the circles I run in our entire vocabulary seems to consist mostly of laughing and burping and belching and what is politely referred to as "breaking wind," but the money that is coming out of somewhere has to (and this is the genesis of the phrase "follow the money") go somewhere. And so there is, by necessity, and I am using a word I just learned, a certain synchrony in the world's markets and the money comes from someplace and goes someplace else.

They go on to say "We have proposed to describe this phenomenon using the concept of a log-periodic power law (LPPL) antibubble, characterizing behavioural herding between investors leading to a competition between positive and negative feedbacks in the pricing process." At this point the audience looks at me, and laughs as I shrug "Me dunno neither."

But although I find words confusing and screaming them in my face at loud volumes does not seem to help, the authors provide a graph which shows that the SP500 is rolling over. And if I understand this graph correctly, and there is very little chance of that, it appears that the SP500 has been going down, is still going down, and will continue going down until the graph ends in 2006, although the curve is still apparently going down even at that point, and is, even worse, concave down, which means that not only is it plunging to depths previously unplumbed by Modern Investing Man, but it is picking up speed as it plummets! One is reminded of Slim Pickens riding that atomic bomb in "Dr. Strangelove."

They sum up with "The present values confirm that we are living in a well-established LPPL anti-bubble regime." Well I admit that the local newspaper doesn't call me when they want a pithy and catchy quote about LLPL anti-bubble regimes, but I am able to comprehend what is happening to me, and what is happening to the world, and I can tell you that if this IS a well-established LLPL anti-bubble regime, then I have had about all the LLPL anti-bubble regime that I care for.

Chris Temple, editor of the newsletter "The National Investor" says "High (and rising) energy costs are here to stay. There is nothing 'transitory,' to use one of Greenspan's favorite words, about countries like China and India having embarked on major growth trends not unlike that of the United States at the beginning of our own Industrial Revolution. If and when oil does settle down for a while, it will later be looked back on as nothing but an interlude in what is otherwise a long trend to substantially higher U.S. dollar prices for crude."

"Gold traders also see soaring energy costs; they realize to some extent, however, that such an event has always meant higher eventual inflation." Chris and I stand arm in arm, and as he steps up the microphone to say a few words, I rudely jump in front of him and grab the microphone. "We are suffering soaring energy costs, rampant monetary inflation and stifling governmental interference and taxation," I shout, "and yet there are some people who think that gold will NOT go roaring higher in price? Hahahaha!" The mocking laughter of the Mogambo echoes off the mountain. "For the first time in history, even if faced with only ONE of these huge economic distortions, gold will NOT explode in price? Hahahaha!" Again the derisive and disrespectful hooting of the Mogambo reverberates across the plains, and cows mysteriously stop giving milk. "After countless generations of people saving their butts with gold, and nobody else saving their butts with anything else, suddenly gold will NOT save your butts? Hahahahahaha!" Again the haunting echoing laughter of the Mogambo rattles the cosmos.

But Mr. Temple is not so easily tossed out of the limelight, and before I realized what he was up to, he has grabbed the microphone out of my hand and is saying "I stress U.S. dollar prices because that's another thing seemingly understood by those re-entering gold that is utterly lost on those again willing to loan money to Uncle Sam for 10 years at 4.22%." I look around the audience, hoping that I can spot the guys who are buying bonds, as they are probably slinking down in their seats, thinking to themselves "Boy! This Chris Temple guy is right! Am I am idiot or what?" He goes on to say, "Though the greenback has spent most of 2004 successfully holding its own against most other currencies, it's inevitable that its secular bear market will soon resume (if it in fact has not done so already.)" And here is another Timely Tip From The Mogambo: "Things that are inevitable are always, in the long run, very good bets. Place your bets now."

He goes on to say "The long-term implications for interest rates, therefore, is much less sanguine than bond traders seem to grasp; and could hit us sooner rather than later, depending (among other things) on how quickly China moves to revalue its currency." And if there is a very sanguine crowd, it is that bond-buying crowd, who are happily locking up their money for ten years or more at yields so low that Pollyanna herself is not optimistic enough, or sucker enough, to fall for that lousy investment.

In as regards the Chinese and their money, a little flicker of light flashes in my puny little brain, and I am reminded of an essay by Chuck Butler, who the Daily Reckoning people say is their favorite currency analyst, but he never so much as sends me a fruit basket. Mr. Butler asks the intriguing question, "Guess who got an invite to the G-7 meeting!" and I jump to my feet and ask "Me?" and he says "No," and I stick out my lower lip in that irritating whining way that I have, and I say "Aww, I never get to go anywhere."

The rumor is that China is going to be invited to the next G-7 meeting on October 1. Mr. Butler asks "Why else would they invite China to a G-7 meeting other than to talk revaluation?" he asks. Well, one reason could be that we are going to fall down at their feet and thank them for buying that mountain of American debt and assets that has allowed us to keep consuming like greedy little children!

But if the Chinese are going to be un-pegging the yuan from the dollar, I strongly suggest that you put down that TV remote and run down to the stores nearest you, and buy everything you will want for the next, oh, five or ten years. I urge this exercise in raw gluttony because prices are going to get a lot higher, and for a long time to come they will continue to get higher and higher. And yes, this is how hyperinflation starts, but it is important to remember that those who are buying at the BEGINNING of hyperinflation fare very well!

GoldMoney Alert has taken a look at this crude oil thing, and notes that "On the demand side, it is claimed that there is a consumption problem, that people are simply using too much oil. On the supply side, it is claimed that oil's present and future availability is constrained because of geopolitical events and other considerations."

But there is more to the story than that. He goes on to say "Higher prices are not resulting solely from issues of crude oil's supply or demand. Higher oil prices also result from problems with the dollar."

Ahh, the dollar again! Problems with the dollar!

But we are not here to talk about the dollar. We are here to talk about oil. They say "Because this uptrend in crude oil's price is so well established, having endured now for nearly six decades, it is completely reasonable to expect that this trend toward higher priced crude will continue." I agree. In fact, he goes farther than that to say "In fact, there is no reason to suggest otherwise, particularly when we take a realistic look at the prospects for the dollar, not even mentioning crude oil's global supply and demand equation."

There's that dollar thing again! They go on to say "In short, higher crude oil prices are inevitable because the purchasing power of the dollar continues to be inflated away." And it is that part about higher prices being "inevitable" that should be grabbing your attention, because that is where money is to be made.

And another interesting thing is when they present a chart that measures crude oil prices using two different currencies, the US dollar and the goldgram (which is defined as one gram of gold) from the period, from December,1945 to July, 2004.

Their own words are "As the chart shows, crude oil prices in goldgram terms are essentially no different today than they were at any time over this nearly six-decade period." So gold has held its purchasing power, in terms of oil, for 60 years in a row. Nice going! Especially since the dollar can't hold its value against oil for sixty seconds.

Peter Schiff, Euro Pacific Capital is obviously on the same wavelength, and writes "As the Federal Reserve has been printing dollars far faster than the world has been pumping oil, oil prices are being bid higher. In fact, higher oil prices in many ways merely reflect the erosion of the purchasing power of the dollar. As the Federal Reserve diminishes the dollar's value by increasing its abundance, oil prices rise to reflect this loss of value."

A New York Times article entitled "Elderly Left With Little To Retire On" by Gretchen Morgenson and Jennifer Bayot reports that "The Employee Benefit Research Institute study found that people in their 60s are still down 8.7 percent on average in their accounts for the four-year period beginning Dec. 31, 1999, and lasting through the end of last year. Participants in their 60s with more than 30 years of tenure on the job are even worse off; their account balances fell 15.5 percent on average during the period."

Of course, these are the same people that keep expecting their money to compound at some ludicrous rate, somewhere between 9% and 15% a year! They say this at the same time that they are down for the last five years in a row! What chumps! And they expect that kind of investing prowess to provide a comfortable retirement!


---Mogambo Sez: I point to a pile of guns and ammo. I point to a pile of gold and silver. I point to a pile of cheeseburgers. I think I have made my point.

Aug 25, 2004
Richard Daughty
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.

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