The Usual Suspects
...the angriest guy in economics
Foreign Custody Holdings at the Fed ballooned another $12 billion
last week, and the American banks themselves gobbled up another
$11 billion in the same week. When you politely ask, "Hey,
Mogambo! Where did all of this debt come from?" I wink knowingly
and point to Official Treasury Debt, which is, as of 8/27, $7,353.5
billion, which is up $9 billion in the same week, $77 billion
for the month.
Doctor Dinero, and you gotta love the guy's name, wrote an essay
that sounded like something I would write. It was entitled "Screaming
From My Soap Box!" with the subtitle "Or, Premonitions
from the Past." He is one of those guys who can relate two
disparate things to each other, and as such probably did very
well on his SAT exams. You are probably wondering to yourself,
"I wonder what the Mogambo means by that exquisitely enigmatic
Rather than trying to explain and then having you show your intellectual
superiority by verbally fencing me into a corner where I eventually
contradict myself, I merely note that he combines "The Creature
from Jekyll Island," the famous book about the Federal Reserve,
with three classic novels about government gone insane ("Brave
New World" by Aldous Huxley, "Fahrenheit 451"
by Ray Bradbury, and "1984" by George Orwell) and then
compares and contrasts all of that with where we are today. He
notes that "In the book 1984 the newspeak slogans were:
'War is Peace,' 'Freedom is Slavery,' and 'Ignorance is Strength.'"
Then he posits that today, the "New slogans are 'Fiat is
Money,' 'Debt is Wealth,' 'Ignorance is Knowledge.' " Hahahaha!
I couldn't have said it better! Hahahaha!
And how did those three futuristic novels end? Were they happy
endings, where beautiful people traipsed off into the sunset
hand in hand, trailed by darling little puppies and everyone
is laughing and smiling and flowers are blooming and birds are
singing sweetly in the trees and there is economic prosperity
for everybody? No. As I recall, they all ended the same way,
which was "They're all out to get you, Mogambo!" This
is what scientists in white lab coats call "The Mogambo
Death And Destruction Scenario, Where Everything Is In Flames
And Utter Ruin As Far As The Eye Can See Syndrome," but
colloquially known as the TMDADS,WEIIFAURAFATECSS.
In a similarly clever vein, Jim Willie CB wrote his essay, "Alcoholics
Anonymous View of US Financials," conceives of it as a problem
of debt addiction. He writes "If debt addiction is deeply
rooted, and evidence certainly points in that direction, then
veteran treatment centers warn that three outcomes exist as final
destinations for participants." A choice! At least we have
a choice! How nice! And now The Mogambo feels awkward and silly
after screaming and crying about how the end of the world is
here and how the living will envy the dead, and how we will reap
nothing but woe and misery because we acted like idiots with
fiat money and fractional banking! But getting away from me for
a moment, and this pains me more than it does you because I think
that everything is about me and I want to spend all my time thinking
about me, me, me, he says "Gamblers and debt abusers, much
like alcoholics and drug addicts, find an ultimate endpoint in
a cemetery, a prison, or an insane asylum."
These are the three choices? Yow! Okay, maybe I was a little
hasty when I discarded the TMDADS,WEIIFAURAFATECSS, which has
worked so marvelously up to now in predicting the future.
Marshall Auerback is pretty nervous too, and when Marshall Auerback
is nervous, then the rest of us proletariat boobs out here ought
to put down that bowl of popcorn and that TV remote and tune
in to what he says. In his Prudent Bear website essay, he leapfrogs
all of us, and goes right to "An American reckoning is going
to have consequences for the entire world, but harshest consequences
will likely be experienced by US consumers. The vast majority
in the country will experience a major decline in their living
standards to a degree unprecedented since the Great Depression.
This will be remembered as the true legacy of the Greenspan Federal
And if you want to want to get a little taste of what "a
major decline" in standards of living is like, I figure
that 80% of the population would have a permanent 60% cut in
their real, inflation-adjusted incomes, and if you are the scientific
type and want to replicate my experimental results at your own
laboratory, the method I used to calculate that statistic was
to pick numbers randomly out of the air.
Bill Buckler, of The Privateer newsletter, is a lot more rigorous
about it, and does not utilize my patented "picking numbers
randomly out of the air" method. He uses real numbers and
real data, and calculates that, "The US can only 'solve'
its twin (trade and budget) deficit problem by facing an internal
contraction of the US economy amounting to about 12 percent."
Now, if 12% doesn't sound like that much to you, probably because
you are so rich and famous and have forgotten what it is like
to not be rich and famous and you can't remember when was the
last time that you went picking through the neighbor's trash
cans, he goes on to say that a contraction of that magnitude
"would cause an economic recession/depression of historic
scale, and all it would do is to bring the US economy back into
global balance and balance the US Federal budget. If, in addition,
the present internal US credit expansion was brought to a halt,
another 11 to 12 percent of the present US GDP, which is currently
being borrowed into existence, would disappear. Combined, these
three items come to an enormous 22-24 percent of the present
US GDP." Didja notice the part about "enormous"?
Rick Ackerman, who writes Rick's Picks, has entitled one of his
essays "First Deflation, Then Gold-Mania" He says "Basically,
then, I agree with those who believe the dollar will eventually
be destroyed by inflation. How could it end in any other way?"
I spill my café latte in my lap as I enthusiastically
jump up out of my seat, shouting "Hurray! Hurray for Rick
Ackerman! Tell it like it is, brother!"
He goes on to say, "I've asserted here many times before
that the dollar is already fundamentally worthless. My disagreement
with the inflationists is not over whether we will have inflation,
but when. I see the prospect of a years-long period of deflation
But since we were talking about inflation, an article in the
8/11-9/3 Economist magazine entitled "Nought To Worry About"
is a case in point. Namely, the debasement of the Turkish Lira
by their central bank has gotten so bad that they are forced
to scrap their old, worthless currency, and will issue a "New
Turkish lira" that will replace the old devalued lira at
a rate of 1,000 to one. The cartoon accompanying the article
was a drawing of a guy slicing zeroes off of a roll of currency,
a roll that looks like a roll of toilet paper! Hahaha! "Not
all poems are written with a pen!"
The Turks figure that they are "the 50th country to pursue
a re-denomination in recent years." Nice going, central
banks! You have destroyed the currencies of fifty countries in
the last few years!
But Mr. Ackerman also went on to talk about deflation. Deflation?
Did he say deflation? So you mean that houses and stocks and
bonds can go down in value? Wow! Who knew?
Well, apparently Stephen Roach of Morgan Stanley knew, and in
fact he is on record as saying "Moreover, by subsidizing
the US interest rate structure, foreign buyers of dollar-denominated
assets are encouraging cut-rate refinancing of sharply appreciating
property. Such equity extraction has been key to the monetization
of the wealth effect of the incomeand saving-short American consumer.
Who could ask for more? The record of history is quite clear
in asking for more. So are the equilibrating tendencies of macro
theory. Ever-widening current account deficits and ever-falling
domestic saving rates are simply not sustainable developments
for any economy. All foreign and US officials can do in such
a climate is step up their efforts in containing sharp adjustments
in asset prices and attempt to buy time."
This "sharp adjustments" means "values go down,"
which means "investors lose money," which is the dreaded
deflation we were talking about.
"Buy time," he says. He says that all public officials
can do at this point is "buy time." I can see by your
face that, being the adorable and curious little grasshopper
that you are, sitting in rapt attention at the feet of The Mogambo,
you would like to know what is the price of this bought time.
Let me steal an old line and tell you that if you have to ask,
then you cannot afford it. No one ever has been able to afford
it, and that is why those idiot countries that tried to "buy
time" all failed in the attempt.
He goes on to say "There can be little doubt as to why foreign
policy makers -- especially those in Asia -- have intensified
their campaign to support the dollar; lacking in domestic demand
and fearful that their external demand support would be eroded
by stronger home currencies, they simply can't afford to face
the alternative. There is a worrisome precedent for this shifting
mix of foreign capital inflows from private to official funding.
The last time it happened in the context of a US current account
problem was in the months leading up to the stock market crash
in October 1987." So the rapid increase in Official Custody
Holdings at the Fed by foreign central banks is a redux of the
market crash of 1987? Gaaahhhhh!
A clever guy named Larry Powers has written poem entitled "Miscellaneous
Raving," which is a profound and funny poem about, of all
things, macroeconomics. I hereby include two excerpted stanzas,
although there are many more, and the rest of them are clever
and funny, too, but I choose these because they are the only
two I am pretty sure that do not contain subliminal, hidden insults
about the Mogambo or messages to the FBI to come over to my house
and rough me up a little.
about the dollars that our bankers
Keep printing out of nothing, like the wankers
They truly are? The thing I find surprising
Is the ones who should be recognizing
And warning of this blatant counterfeiting
Are claiming that the whole world's benefiting.
"But paper money's always lost its value
When backed by nothing, and it ever shall. You
Can never print your way out of crisis.
You'll always bring about exploding prices.
But that's exactly what our Fed is doing.
That's why I think that there is trouble brewing."
has posted a nice essay entitled "A Primer on Government
Economic Reports-- Things You've Probably Suspected but Perhaps
Were Afraid To Ask" on their website. They pull extensively
from a guy named, Walter J. "John" Williams, who is
a guy who has been toiling among the vineyards of government
financial reporting so long that he is an expert on them and
the ways that they have been manipulated for decades, by one
Presidential administration after another, and if you want to
know how it just gets worse and worse and worse you should ask
I will skip over that long part about how the government is a
lying bunch of weasels, and get right to the numbers stuff. "As
a result of the systemic manipulations, if the GDP methodology
of 1980 were applied to today's data, the second quarter's annualized
inflation-adjusted GDP growth of 3.0% would be roughly three
percent lower (effectively netting to zero percent or below)."
So, we have zero economic growth, or less!
He goes on to say "In like manner, current annual CPI inflation
is understated by about 2.7% against the pre-Clinton CPI methodology"
and that using the original methodology, inflation would be about
5.7%! That exclamation point is mine, but the revelation seemed
to call for one.
"The unemployment rate is understated by about seven percent
against its ori ginal design" and that actual unemployment
is about 12.5%. The unemployment rate, using the methodology
that was good enough for everybody all the way through time and
space until now, is 12.5%!
In that vein, perhaps it is time to bring up the latest government
release of GDP, and how it is up only 2.8%, whereas they had
been expecting something above 3%, and that was down from expecting
more than 4% at this time last year. So things are even worse!!
Note the TWO exclamation points!!! Now look! There's three of
Well, they also figure that the federal government's 2003 deficit
was an eye-popping $3.7 trillion, "as reported by the U.S.
Treasury, versus the reported cash-basis $374 billion."
$374 billion is bad enough, and causes the Mogambo to seethe
with his patented hostility. But $3.7 trillion is ten times as
bad as that! TEN FREAKING TIMES BIGGER!
This is, of course, both 1) an actual deficit that is ten times
as large as they say, and 2) only possible if we let the government
apply their own rules, which they make up to suit themselves
as they go along, instead of "the application of accrual
accounting and generally accepted accounting principles"
like everybody else in the whole damn world does.
An article in last Thursday's Wall Street Journal entitled "Fickle
Inflation Data Are Quandary For Bush" was instructive on
many levels. First, there is the quote by a guy name Mr. Long,
who says he thinks "The Bush administration could do something
to hold down prices." Yes, they could, Mr. Long! But they
don't want to! They actually want prices to go up more and more!
Unfortunately for you, Mr. Long, and me, Mr. Mogambo, and also
unfortunately for our wives who are known as Mrs. Long and (according
to her T-shirt) Mrs. "I'm With Stupid," it is this
senseless, relentless and destructive creation of money and credit
that makes the damn prices go up! And it is the halfwits of this
world, mostly Democrats because the Democrat Party is the traditional
political party of the laughably stupid and the pathetically
ignorant, who are always bleating that they want the government
to "do something," which translates as "give me
something for free," and which makes prices go up even more!
And as along as there are grubby little people who want something
for free, there will never be a time when there will not be calls
for the government to hand out more free things.
And to be fair, the current Bush White House makes the Democrats
look good, and it makes Republicans look really, really stupid
to nominate the irresponsible spendthrift George Bush for a second
term as President, when all we have to take a glance at what
he has done since Jan 2000 to know that this is a huge, huge
Second, the article quoted a woman named Janet Jia is wise beyond
her years when she says "Hourly warehouse workers are hurting
because wages aren't keeping pace with inflation." At last
we have some economic smarts shown by, what I assume to be is
a member of the general public!
That, Ms. Jia, is the whole problem with inflation! And it is
not just wages that are not keeping pace! Incomes in general
are not keeping pace with the rise in prices! But at least the
warehouse workers can ask for a raise, work longer hours, or
take a second job. There are millions and millions of people
whose incomes are similarly NOT "keeping pace" with
inflation who would LOVE to be able to affect their income, but
they can't. In fact, there are lots and lots of people in this
country who make NO income at all, or have an income that is,
for all practical purposes, fixed. And each and every day of
their lives they are going to be more miserable, and able to
buy fewer things, and their pathetic lives will spiral down and
down, every damn day getting poorer and poorer.
And upheavals and revolutions are not caused by a few people
getting rich, but by the legions of people who get poorer. And
that is what we have now, in spades.
To show you how far removed from reality John Snow is (and for
those of you who don't keep up with local politics, this guy
is the Treasury Secretary of the United States), Business Week
magazine sat down with him to listen to him flap his lips in
this optimistic way, and it is from that interview that we learn
that that we should "Give people more control over their
own lives, empower them to take greater responsibility for their
own retirements, health care and economic security." Hahahaha!
Where the hell has this guy been? Take responsibility? We're
suddenly going to act responsibly for our own actions? Now? Hahahaha!
The very essence of government today is that it works day and
night to make up for everybody's mistakes, so that nobody ever
has to take responsibility for anything! But it doesn't stop
there! He goes on to say "People are intelligent in the
U.S.; they can make intelligent trade-offs." Hahahaha! The
Mogambo springs to his feet, and whipping out a Magic Marker,
quickly draws some graphs on the wall. As the security guards
drag me away, you can hear the Mogambo yelling out "When
one charts the apparent IQ of Americans through the decades,
which is shown by this upper line that is sloping down and to
the right, simple extrapolation dictates-- dictates! --that we
are provably, beyond any shadow of a doubt, much more ignorant,
probably because the average IQ has gone down, than at any other
time in American history! I mean, just look at us!"
Well, obviously I was not there for the rest of the interview,
entangled as I was with the security personnel, and I was trying
to gently calm them down by screaming right into their faces
that they can't arrest me because I am The Mogambo, and they
are infuriating me by acting like they never heard of me, and
you should have heard the disrespect they showed for my License
To Kill status! Jerks.
Anyway, so it is to the actual magazine article that we turn,
and we read that Mr. Snow figures that we need to fiddle with
tax policy to encourage savings. So far, so good! The reason
is, and I love this, that he says that it "plays into long-term
growth rates, because if you invest more for the future, you
have higher real wages, higher per capita income, higher prosperity."
This is where we part company on this savings thing, because
I am here to tell you that while we DO want investment from savings,
we do NOT want higher real wages OR higher per capita income.
We want prices and wages to remain perfectly stable! Zero inflation.
If we do that, then the Miracle of Productivity kicks in! Prices
go down while income stays up, and part of the extra money saved
per week (the marginal propensity to save function) lowers interest
rates, and the remainder (the marginal propensity to spend) provides
the extra demand to soak up the additional production! So textbook!
So classic! So deliciously perfect!
And that is the reason why I am dragging my feet as the security
people were dragging me down the hall, screaming as loud as I
could, that John Snow is an idiot, because even a moron as intellectually
impoverished as me can immediately realize that the only real
end result from higher wages and higher per capita income, what
he envisions as our future, is that it necessarily breeds more
income inequality, which is characterized by richer rich, a middle
class that raises its prices to cover its increased costs (and
thus merely offset the inflation in prices), and that leaves
a large, and growing, class of people who do NOT have a higher
income, but have to pay the damned higher prices. These are your
standard categories of your old, infirm, handicapped, homeless,
mentally ill, young, abandoned, weird, anti-social homicidal
lunatics, the unemployed and the unemployable, and various assorted
others, like the Mogambo, who embodies a little of all of these
people, if modern psychiatric diagnostic techniques are as good
as they claim.
If you don't have any money, then a one-dollar loaf bread is
more attainable than a five-dollar loaf of bread. And if you
are homeless, then a studio apartment at $50 a month, utilities
included, is a lot more attainable than an apartment costing
$1,500 per month, plus utilities and security services to keep
the poor people away.
And when you gather all these poor, miserable people into one
place, you will immediately notice that there are a lot of them.
And I mean a lot! Out of a population of 290 million that are
currently living in America, 150 million do not work at all!
Of the 140 million who DO work, fully 22 million of them are
direct employees of a government! And the rest of the country
is merely engaged in selling goods and services to the government
and each other.
So how many people are going to benefit by higher wages and higher
per capital income? Let's find out! I walk up to the microphone,
and announce "May I have you attention please? Stand up
if you think you are going to benefit from a policy aimed at
producing higher wages and higher per capital income. Be honest."
After a lot of shuffling of feet and mumbling and grumbling,
I look out over the audience. With a sneer in my voice I say
"I see the usual suspects standing. Lawyers, politicians,
power-brokers, and of course the damn bankers. Perfect. Absolutely
And all the rest of the people, that vast, engulfing sea of people
who are not playing in the game for one reason or another, are
going to suffer because of somebody else getting higher wages
and higher per capita income, which makes prices go up. And increasing
the suffering of more than half the population of the United
States is not in Mogambo's Definition Of Economic Success (MDOES).
In a similar vein, the Associated Press reported that the Census
Department figures that "The number of Americans living
in poverty increased by 1.3 million last year, while the ranks
of the uninsured swelled by 1.4 million." Well, rising immigration
could explain that, I suppose.
In the same light, "Approximately 35.8 million people lived
below the poverty line in 2003, or about 12.5 percent of the
population. That was up from 34.5 million, or 12.1 percent in
2002." Well, that could be a statistical error, and all-in-all
one could make the argument that things are, roughly, about the
same, and if adjusting by immigration, then things are actually
But there is no escaping dollars and cents, and in that regard
they report that "The median household income, when adjusted
for inflation, remained basically flat last year at $43,318."
And I am here to tell you that the government-massaging of actual
statistics only partially compensates for the real level of price
inflation, and if you fully adjusted incomes for the effects
of inflation, then the median household income went DOWN, and
has been going down for years!
Sprott Asset Management has released their blockbuster report
on the manipulation of the gold market by what is commonly referred
to as the Gold Cartel. You can find it on their website at Sprott.com.
And if you are raising you hand to ask if The Mogambo believes
in these conspiracy theories, then let me answer you with a resounding
"Yes! Yes I do!" There is absolutely no doubt in my
mind whatsoever that if anybody in power has the power to manipulate
things to their advantage, they will do so. And these gold cartel
players certainly have the power. And so, following this to the
logical conclusion, of course they are trying to manipulate the
gold market! And somebody is manipulating the stock market! And
the bond market! And the currency market! And the real estate
market! And the commodity markets! You name it!
Greenspan had a few remarks at the recent Jackson Hole conference
of central bankers and their willing half-witted hangers-on.
He said, "As I have noted previously, the bipartisan policies
of recent decades directed at deregulation and increasing globalization
and the innovation that those policies have spurred have markedly
improved our ability to channel saving to its most productive
uses, and as a byproduct increased the flexibility and the resiliency
of the U.S. economy." He is right. We have channeled foreign
savings into investments in those selfsame foreign countries!
We did this by borrowing their savings and spending it on stuff
that they produce!
He also said, "One policy that could enhance the odds of
sustaining high levels of productivity growth is to engage in
a long overdue upgrading of primary and secondary school education
in the United States." Note to Greenspan: It could, conceivably,
but it won't. A country that is so stupid that it cannot see
the effects of a fiat currency, controlled by fractional banking,
in a system of a gigantic, corrupt government is NOT going to
benefit by education.
Then he says, right out of the blue, "Investment, however,
cannot occur without saving." Hahahaha! We haven't had a
dime's worth of saving in this country for decades! So it all
depends on your definition of "savings," which, in
this case, I assume he means More Money And Credit Via The Fraud
Of Central Bank Fractional Reserve Lending.
Doug Noland's Credit Bulletin column at the Prudent Bear website
had this intriguing item. "August 27 - Bloomberg: 'Venezuela
President Hugo Chavez said the country's economy must move away
from capitalism and large land holdings must be eliminated.'
" And you thought that communism was dead except in Cuba!
Chavez went on to say "I call on private businessmen to
work together with us to build the new economy, transforming
the capitalist economic model into a social, humanist and equality
economy. The time has come to accelerate the transformation.
The revolution has just begun." The lesson is to get the
hell out of Venezuela because a country so filled with people
so impossibly stupid cannot survive, because it is supremely
stupid to turn right around and again go down the same destructive
socialist road that ruined them to start with, and indeed, Venezuela
does not deserve to survive.
Also thanks for Mr. Noland for doing the work, because now I
can easily report that inflation in China is up, and the government
there is actively trying to slow the economy to fight the dangerous
level of inflation. South Korea has inflation over 4%. Philippines
at 6%. India is "at a three year high." Vietnam is
at 9.9%. It goes on and on, as the decades-long surreal monetary
expansion of the Fed, and of the whole of the rest of the world,
seeps into prices, day after day. And in every one of those countries
are a bunch of guys who are upset at the rise in prices.
I am almost through Laurence H. Meyer's book "A Term At
The Fed." I am repelled and horrified, but I cannot turn
So, what it is like at the Fed? Alan Greenspan makes all the
decisions, and hundreds of eager-beaver economists toil to come
up with new ideas, new theories, new approaches, blah blah blah,
that will further their careers, especially if the new idea encourages
more central bank interference in the economy and glosses over
the startling fact that the Federal Reserve is a nest of incompetent
boneheads. The rest of the people, including Mr. Meyer, merely
hang out and give speeches that parrot the party line.
And then finally, on page 188, a page that will reverberate in
Hell, we get to the revelation of what the Fed plan is. It is
in several parts, and I shall number them to show you that I
comprehend the theory behind numbering things, even if economics
and common sense are beyond my Mogambo Grasp (MG).
1. The central bank should "Move quickly in the face of
continued economic weakness, and in, effect, 'err on the side
of ease.' " This takes out what Meyer calls "taking
out 'insurance' against the asymmetric downside risks associated
with deflation," whatever they are. And the way to do this
is to "implementing a more stimulative monetary policy that
might otherwise be justified." You can't justify it under
normal circumstances, but since you have screwed things up so
badly, you can justify them as a matter of "urgency?"
Now you know why I spend a considerable amount of time locked
inside Mogambo Bunker with the lights off, whimpering in the
dark and nervously flicking the safety of a machinegun on and
off, on and off, on and off.
2. "It is important to have a positive inflation target,"
he says. Finally we agree on something! We should have a target
of zero inflation! But he says no. He wants real, prices-going-up
inflation. And not only that! He wants and I quote, "price
stability plus a cushion. By keeping inflation at some positive
number, the central bank will not have to, theoretically, drop
interest rates to zero." He wants us to suffer constant,
grinding inflation so that it will make it easier for him and
his idiot Fed friends to dig out from a future monetary fiasco?
I scream in horror! I click the safety to "off."
3. This is another one that I am going to quote verbatim, "The
third lesson was that policymakers should move more aggressively
to raise inflation when inflation is below the target than they
would move to lower inflation when it is above the target."
He says that this is because "deflation is riskier than
inflation." Huh? Who says so? He even quotes Lyle Gramley
who uttered a phrase that will come to haunt you and then soon
you will wake up in the middle of the night screaming in fear,
"When you don't have much ammunition, shoot to kill!"
4. The fourth lesson that "fiscal policy need to be part
of the stimulus package in a postbubble economy confronted with
the risk of deflation." He says that "fiscal policymakers
have to be prepared to shoulder more of the stabilization burden
than they would otherwise," although he doesn't exactly
say what this "stabilization" is or how it is to be
achieved. He doesn't lay out exactly what in the hell Congress
is supposed to do: Combat the inflation that wide-open monetary
policy causes? Or actually work to augment the monetary insanity?
I guess this is why John Snow is recently quoted as saying "Monetary
policy and fiscal policy continue to work together to accommodate
growth." The biggest laugh I got, although it wasn't really
laughing as much as I was choking in rage and spitting up blood,
is that Mr. Meyer actually thinks that "It is easier to
reduce inflation later than to dig our of deflationary spiral
caused by deflation." Hahahahaha! Hell, Paul Volcker is
still alive today, and this Meyer character could walk over to
the United Nations building where Mr. Volcker is getting the
runaround investigating the pandemic fraud and scandal of the
United Nations' Food For Oil program, and Meyer could ask him
how much fun it was reducing inflation! But he doesn't! Instead,
he says idiotic things like this!
But Mr. Meyer did, however, admit one thing that made my heart
soar like an eagle. It seems that there is someone in the United
States who comprehends exactly what this Fed insanity really
means, because says that he once received a postcard that addressed
him as "Dear Spawn of Satan."
You know that I am a gold bug for the stupid reason that gold
soared in value every other time in history has a country been
so stupid as to do what we have done with our money and out banks
and our government. But there is also a case to be made for silver.
In fact, Richard J Greene, who is a Portfolio Manager with Thunder
Capital Management, calls silver the "investment opportunity
of the decade."
He says "The long run price of gold to price of silver ratio
has been about 16 to 1. Currently, the ratio exceeds 60 to 1,
which suggests that silver should appreciate several times the
rate of appreciation of gold." And when you compound that
by how little gold has gone up in comparison to the debasement
of the dollar, then the potential for appreciation in silver
may turn out to be exactly as he termed it.
Florida, my home state, likes to show that we attract low-IQ
people as well as anybody, and we are preparing to vote on not
only a higher minimum wage, but one that is also indexed to inflation,
so that the minimum-wage will rise in the future.
The big question that rumbles through the news media around here,
for reasons that I cannot comprehend, is whether or not raising
the minimum wage will cause jobs to be lost. The answer is, "Who
All one can say for sure, and this is one of those Famous Mogambo
Moments Of Transcendent Wisdom (FMMOTW), is that, and I will
put it in quotes which gives it that little extra bit of smug
arrogance "Raising the minimum-wage, as when raising any
wages, as will raising any cost of doing business, will increase
the costs that employers must pay." Whether or not that
causes employers to eliminate jobs is an individual question.
The mere mention of rising costs sends the Mogambo into a dreamy
reverie, and in that wispy state of half-remembered ghosts I
reminisce about how all the previous employers I ever had (and
there were lots and lots of them, mostly because the Probationary
Period oddly coincided exactly with some mysterious "last
straw" and then it was, like, "Scram, bozo!"),
and I seem to remember that they were always looking for ways
to cut costs, so that they could make more profit. Now that I
think about it, they all seemed particularly preoccupied with
the whole idea of profit, as a matter of fact! Anyway, their
usual method of cutting costs was to work me harder by dumping
more work on me, and to keep coming into my office and waking
me up in the middle of the day, or calling me on my cell phone
while I was out playing golf with my hoodlum friends, and always
yelling, yelling, yelling about something, as I recall.
So I think back to my string of employers and their single-minded
zeal for higher profits, and then I think about costs being higher
thanks to the higher minimum wage. And then I think about how
employers wanted bigger profits. And then I think about the higher
costs of paying higher wages. Since they don't have the Mogambo
around anymore to kick and blame for everything, whether it was
my fault or not, and sometimes it wasn't, then the employer will
have to 1) cut some other costs, and/or 2) raises prices. And
his costs are somebody else's income, and so the extra money
that the minimum-wage worker is getting is coming out of somebody
else's pockets if the employer elects to cut costs that way.
So, there is no change in total aggregate income at this first
iteration of the system.
And if there is no change in aggregate, total income, then the
country is not better off, in terms of income! So why in the
hell are we raising the minimum wage? And since, in the end,
prices will have to rise, this depresses real, inflation-adjusted
incomes! Which means that we are WORSE off than before!
How much better it would be if prices did NOT go up in the first
place! The minimum wage worker would not need a raise because
prices did not go up! And to achieve this happy result, all you
gotta do is abolish the central bank and fiat money. If money
is gold and gold is money, and the banks were forced to survive
on prudent lending, then that is exactly what you would have.
Verizon Business/Finance News had an item entitled "Stocks
Dip on Consumer Income Report News", by Michael J. Martinez
. It was about the Commerce Department's report of that showed
a rise in consumer spending for July, but also reported that
growth in incomes was nearly flat. He says "While consumer
spending bodes well for short-term economic growth, the anemic
rise in incomes cast a pall over longer term prospects, since
rising income is key in overcoming inflation in consumer costs."
Well, duh! And how do you raise the incomes of people living
on Social Security? How do you raise the incomes of people who
do not have jobs? How do you raise the incomes of people living
on fixed annuities?
At the website of New Scientist, Fred Pearce wrote an interesting
article about "Asian Farmers Sucking The Continent Dry."
His research suggests that Asians are pumping 200 cubic kilometers
of water to the surface each year. "But only a fraction
of that is replaced by the monsoon rains."
In China, they are pumping out 30 cubic kilometers more water
to the surface each year by farmers than is replaced by rainfall.
The upshot is that "Chinese officials warned this week that
water shortages will soon make the country dependent on grain
In India, water tables are dropping by 6 meters or more each
year. Investment Tip O' The Day: start going long on commodities,
because water, like oil, is being permanently depleted, and foodstuffs
don't grow without water.
Daniel Denning of Strategic Investment writes that "Over
35% of U.S. Treasury debt has a maturity date of less than one
What does this mean to you and me? Let's find out! I reach out
and pick up the Mogambo Phone (MP) and I call him up. The receptionist
answers the phone. I say "Hello. This is Mr. Denning's uncle,
in town for just a few hours. May I speak to him, please?"
and she yells "No you're not! You're that horrid Mogambo!"
and I am yelling back at her "No I am not! " and she
is yelling "Yes, you are!" and then I scream "No,
I'm not, you nasty little woman!" and she is screaming and
crying, and then Mr. Denning himself comes out of his office
to find out what all the fuss is about, and he grabs the phone
from her and asks "Hello? Who is this?" And I say "Mr.
Denning, what is the significance of the Treasury's debt having
a maturity of less than a year?" and with barely disguised
sarcasm in his voice he says "If you had bothered to read
farther in the article, you irritating little twerp, you would
notice that I already told you the significance of that."
So I go back and look, and sure enough he said "That means
any rise in interest rates makes it almost instantly more expensive
for the government to borrow money. Bottom line: The interest
expense of the federal budget -- already more than 20% -- is
about to skyrocket." Yikes!
The jackasses of the world who raised the taxes on cigarettes
are now reaping the predictable result. The GAO says that counterfeit
cigarettes are now the most seized item by Customs. What to do?
Well, if you are an idiot and you work for the government, then
of course your response is to act like a zealot, which Ambrose
Bierce defined as "someone who redoubles his efforts after
losing sight of the objective." In this case, they want
to pass The Prevent All Cigarette Trafficking Act, so that the
ATF can increase their budget and maybe get some spiffy crime-fighting
gear to Combat The Scourge Of People Trying To Get Cut-Rate Cigarettes
Because Taxation Has Made Them So Expensive.
And if the ATF catches more crooks, what to do with them? Put
them in prison? Hahahaha! We are already bankrupting ourselves
from locking up more people, per capita, than any other country
in the world, and now you want to compound that folly by imprisoning
MORE people for the crime of desperately trying to circumvent
onerous over-taxation of cigarettes? Hahahaha! Morons!
The only answer is to cut the damn taxes! But will they? Hahahaha!
*** The Mogambo Sez: The nearer to election day that we
get, the weirder and weirder it will get, as hard as that is
September 1, 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
and other fine publications.