The gun-wielding gold bug
raving lunatic is back
...the angriest guy in economics
September 14, 2004
- For those of you who pay close attention to these kinds of
things, there was no Mogambo Guru last week. It was not, as is
rumored, because I was responding to a rising popular clamor
to just shut the hell up and seek professional help. No, it was
because Hurricane Frances came through my home town and tore
up the electrical grid, leaving me powerless for four long, hot,
miserable days, which didn't do my attitude any good, which is
always foul even on the best of days. Naturally, I was heroically
braving the terrifying winds and flying debris to stay constantly
on the phone to the power company demanding to be put at the
top of the list for instant repairs, even as the brunt of the
hurricane was still passing overhead. But as my reward for demonstrating
Magnificent Mogambo Manliness (MMM) I had to listen to that tired
song and dance about how hospitals and orphanages were being
given top priorities. Naturally, I'm screaming "I don't
care about no stinking hospitals or orphanages! I am The Mogambo!
I am the only thing standing between us and the economic Armageddon
that the idiots and halfwits at the Federal Reserve and Congress
are unleashing on us! Can't you understand that, you stupid little
But as you can guess, there were storm-related problems with
the phone lines, too, and every conversation with them ended
the same way, with me saying "Hello? Hello? We must have
- The government is still on a huge, unbelievable spending spree,
and consequently the Treasury Gross Public Debt took another
big rise of, and I hope you are sitting down for this, $22 billion
last week alone! Total federal debt now sits at, let me check
that number again, $7,376.5 billion, which is only a lousy $7.5
billion short of the statutory limit of $7,384 billion. You and
I are not the only ones who are flabbergasted by this, and Barb
at 321gold could not restrain herself from adding the comment
"Jeepers!" to the link, which deserves some kind of
award for understatement.
Just to show you that they are real Players, too, the Treasury
also released another $6.3 billion in real, actual cash last
week, which is, I suppose, being used to bribe Iraqis and keep
things from appearing as bad as they really are, so close to
the election and all.
Of course, the Custodial Holdings at the Fed shot up another
$8.3 billion last week, as foreign central banks continued to
underwrite our profligate consumerist stupidity by buying our
debt. Warren Pollock, in an essay on the Prudent Bear site, notes
"The US runs such large deficits that it needs buyers for
its Treasuries willing to accept a rate of return that does not
compensate for risk." If you are looking for evidence that
foreigners are even more stupid than we are, keep this factoid
handy. "US dollar purchasing power relies almost entirely
on the difference between interest rates in Japan and the higher
rates in the United States." This means that the poor Japanese
people who save their money are having low interest rates crammed
down their throats, which is, I assume, their way of paying us
back for what we spent fighting them in World War II.
Mr. Pollock goes on to say "Let's recap: Japanese savings
are invested in banks; banks purchase Japanese Treasuries; the
Bank of Japan buys US Treasuries yielding a relatively high rate
of interest and thereby making a profit. It is an intentionally
contrived relationship that skims value from savings and encourages
unproductive debt and investment. It puts Japanese savings at
risk for the benefit of the US government, the US consumer, the
Japanese worker, and politicians everywhere. Everyone gets a
piece of the action. Risk is ignored so the United States has
access to imported savings at below market cost."
And to show you that it is not only governments that are so stupid
that they enjoy plunging themselves into unpayable debt, Americans
got out their credit cards and charged up a storm, driving total
Consumer Installment Credit up by another $8 billion in July,
which translates to another $57 in debt for everybody that has
a job in the whole country. In one month!
- An op-ed article written by Mary Anastasia O'Grady in the 9/10
edition of the Wall Street Journal entitled "Why Brazil's
Underground Economy Grows and Grows" was very instructive.
The thing starts out with (and I am twisting everything to suit
myself and my own nasty personal agenda) a denunciation of the
loathsome IMF and World Bank, and how those two pieces of Leftist
garbage actually ruin everything and everybody they touch with
their foul tentacles, which she justifiably calls "a disgrace."
But the big problem with Brazil is that, as if you had to be
told, the government is just so freaking huge, and she reports
that "Brazilian economists have for years been complaining
about what they call the 'Brazil cost,' that is the heavy burden
that the monstrous Brazilian government imposes on the economy."
She then quotes William Lewis, former partner of McKinsey &
Company, author of the book "The Power of Productivity,"
and founder of The McKinsey Global Institute, who says that his
twelve years of research on the subject have driven him to conclude
that "Most people don't recognize the destructive power
of big government on economic development." So how big is
the Brazilian government? I knew you were going to ask that question,
because I know what a bright and inquisitive person you are!
It spends, according to Mr. Lewis, 39% of GDP. Okay, now we are
done yelling at Brazil for acting like stupid commie Big Government
morons. Now, and this is the instructive part, we turn around
in our chairs and look at the USA. How much does our own jackass
government spend? It spends 37% of GDP! Hahaha! Theirs spends
39% and it is killing them, but ours spends 37% and everything
is supposed to be just fine! Hahahaha!
And it promises to get worse and worse for us, as both of our
main Presidential candidates are falling all over themselves
spending, more programs, more government!
Now you know why I say, with that irritatingly smug and snotty
know-it-all way that I have, that in America today the government
IS the damned economy. And that is why the lowest interest rates
in 45 years, and the biggest stimulus programs ever, have had
so little effect; the demand for goods and services is dictated
by the growth of government, which grows slowly, although continuously.
And as such, the old-school economic-theory calculus of interest
rates vis-à-vis economic growth has little, if any, effect
on investment, as there is very little real private demand, financed
by real, private funding, left in America. It's now all government,
all the time. But government cannot grow as fast as an economy
needs to grow. This is why our economy is limping along despite
massive tax cuts, cash-on-the-barrel-head tax rebates that pumped
raw consuming power into people's pockets, the government itself
borrowing and spending itself into a frenzy of consumption, people
going nuts with their credit cards, and negative real interest
rates producing roaring inflation in housing, which produced
paper-equity that was immediately borrowed (at miniscule interest
rates) and spent.
- George Ure on his UrbanSurvival.com site took a look at the
rising problem of inflation, which is the One Big Thing (OBT)
that I am constantly screaming about, and screaming about, and
screaming about, until I am hoarse from screaming in fear about
it, and my throat is so sore that I am now reduced to writing
apocalyptic warnings on large placards and standing by the side
of the road, maniacally waving them at people who are stopped
at the traffic light. Even my dog has started whimpering and
frantically scratching at the door to be let out every time he
hears the word "inflation."
Mr. Ure notes that crude goods prices are up 22.4% year over
year, and that intermediate goods are up 8.1% y/y. This is inflation
writ large. But somehow finished goods are showing no inflation!
How can that possibly be? Well, with so much competition engendered
by a Federal Reserve banking system that gave loans to anybody
who wanted to start or expand a business, firms that raise prices
makes fewer sales, so the firms have to eat the higher costs.
He says "What it means is that prices paid for crude and
intermediate goods that are used to make finished goods have
continued to increase while the pricing power for finished goods
has only kept pace with inflation - if that. It squeezed profits
generally and that leads to layoffs."
And, if I may add my usual snide remark, companies that are laying
people off are not famously known for simultaneously raising
wages, except to the weird computer models and the hundreds of
weird little low-IQ "economists" at the Federal Reserve.
But wages are not rising as fast as prices, which means that
people buy less with their static paychecks, which means that
factories sell less, which means that factories produce less,
which means they don't need as many workers, which means that
there is a glut of labor, which means that wages are not increasing
due to a lack of demand for labor, which gets us back to the
beginning where we learned that The Mogambo is screaming, screaming,
screaming that wages are not rising as fast as prices. Mr. Ure
goes on to say "As anyone can see, the mass layoffs in July
were up significantly and we have to wonder what the August report
will look like. The mass layoff picture clouding up again is
not a uniquely American problem, either. We note for example
that in Germany, Volkswagen is saying that up to 30-thousand
jobs are at risk if workers don't accept wage freezes and benefit
"Wage freezes and benefit reductions" is another way
of saying "Your stinking little paycheck ain't a-gonna buy
as much stuff from now on, my darling little Herrenworkers and
Frauworkerettes, and you might as well get used to having a lower
standard of living, and I'm not even going to mention the fact
that every year from now on your standard of living will get
lower and lower and lower until you finally can't take it anymore
and you scream 'The Mogambo was right! They are out to get us!'
and you reflexively grab flaming torches and pitchforks and
rise up in an angry rebellious mob bent on blood revenge."
who is everybody's favorite Austrian economist-type dude probably
because he is a real nice guy and is not, like me, a foul-mouthed
gun-wielding gold bug raving lunatic bastard who is always on
the verge of going berserk in a blazing rage of homicidal fury,
is also up to speed on this inflation and wage thing, and says
"Looking for clues in history, we have pored over the data
of past economic recoveries from recession in the United States.
Altogether, America experienced six upturns during the postwar
period." So, let's see here; that's about 60 years, and
there have been six upturns. Quickly reading ahead so it looks
like I have a thoughtful, cogent comment, I innocently ask "Mr.
Richebächer, what did those six upturns have in common?"
Playing right into my hands, he says, "They had many features
in common, both in speed and pattern. Most striking among them
was their extraordinary vigor in employment and income growth.
Manifestly, all the recoveries were job and income driven."
Makes sense to me! If you make more money, you get to spend more.
If you spend more, factories will produce more. If factories
produce more, they must hire more labor, which bids up the price
of labor, which means you make more money, which means you get
to spend more. Man, I love this economics stuff!
I suddenly find myself dancing gleefully around chanting "Make
more! Spend more! Whee! Produce more! Make more! Spend more!
Whee!" I am up on his coffee table dancing my little Mogambo
heart out in happy celebration, when out of the corner of my
eye I notice that Mr. Richebächer
is calmly cautioning me to take notice of the fact that income
growth is flat at best, and maybe even declining when viewed
another way, and perhaps even plummeting like a stone when viewed
through The Prism Of The Way The Mogambo Views The Whole World
And Everybody In It (TPOTWTMVTWWAEII), which is to see treachery, betrayal
and impending catastrophic doom in everything.
This is where the Natural Instincts Of The Mogambo (NIOTM) are
made manifest, as I hear that (and follow my logic closely here)
all previous recoveries had "extraordinary vigor in employment
and income growth," but our current "recovery"
has neither of them. I fixate on the part that says all recoveries
have extraordinary vigor in employment and income growth. I stop
dancing. I sit down. I stand up. I look around. I notice that
we do NOT have extraordinary vigor in employment and income growth.
I ask with a plaintive cry in my voice, "Hey, Mr. Richebächer! Do you see any extraordinary vigor
in employment and income growth?" He says nothing, but shakes
his head sadly, which I assume means "no."
This means that, ummm, it means that, ummm, well, I admit that
I have lost my train of thought. But it seems to me that there
was something significant about the fact that all previous recoveries
had extraordinary vigor in employment and income growth, and
the fact that we currently have neither extraordinary vigor in
employment or income growth seems like it should mean something
significant. I can't exactly put my finger on what it means,
but maybe you, with your giant, computer-like brain and your
fancy-schmancy education can make something out of it and then
explain it to me.
But since the significance of those two things escapes the Perpetually
Confused Mind Of The Mogambo (PCMOTM), it seems obvious that
I could not possibly come up with a remedy. But it would be foolish
to discount the government not coming up with a plan! If wages
are not rising as fast as prices, then (and I hope you love this
as much as I do) let's do something about prices! And since we
cannot actually lower prices, then the next best thing is to
do what government does best: lie and keep lying!
UrbanSurvival notes that the government has already employed
"creative lowering of the measured inflation rates through
hedonic pricing and other devices." And not content to show
how much smarter they are than that idiot Mogambo, they even
give the reason why the government is doing that. "Always
keep in mind: One less percentage point in inflation equals one
percentage point higher in productivity growth. In other words,
GDP growth is grossly overstated."
Those irrepressible clever dudes over at the Daily Reckoning
site who delight in effortlessly coining memorable phrases that
roll trippingly off the tongue, besides chronicling the way America
is spiraling down into economic ruination, comically crack wise
that going to war with Iraq is beneath us, in that "Kicking
the scrawny butts of nearly unarmed Third World nations is not
the sort of thing that epic poems and granite monuments typically
celebrate." I bring up this witty and profound comment not
because it has something to do with economics, but just because
it tickles me so much, and makes me wish I had said it, but I
did not, although just between us I would appreciate it very
much if you would tell people that I did, so that maybe somebody
would reply "The Mogambo said that? Wow! He's not as insipid
as I thought he was!"
But getting back to economics, they also noted that Ernest Hemingway,
who was a whiz-bang author and heavy-drinking gun nut, but who
was NOT an economist, could clearly see, even through a heavy
haze of alcohol and gunpowder, that "The first panacea of
a mismanaged nation is inflation. The second is war."
Bill Bonner himself provides some historical instances of this
when he writes, "Germany was so unsettled by the financial
calamities of the '20s it welcomed a whole new team of scoundrels.
Italy welcomed Mussolini largely because the nation was bankrupt.
The Argentine generals launched the Falklands war in order to
divert the public from its financial catastrophes." And
of course our own Revolutionary War and the Civil War were essentially
about a nasty money-grubbing, fascist government trying to forcibly
extract more money from hapless citizens, who were so distraught
that they rose up in armed rebellion. In fact, one of the many
grievances included in the Declaration of Independence was that
the British government "erected a multitude of new offices,
and sent hither swarms of officers to harass our people, and
eat out their substance." Some things never change, except
now it is our own American government doing it to us.
And it is a sad, sad commentary about the United States that
Hemingway, a writer whose knowledge of economics was apparently
limited, as far as I know, to running up a tab at various saloons
and what he could read before he passed out in a drunken stupor,
knew that mismanaged countries resort to inflation and war to
solve the problems they brought on themselves. And yet today
we have a Federal Reserve (grrr!) and a federal government (double
grrr!) and a whole constellation of cold-sober halfwit idiot-savants
with PhD's in economics (triple grrr!) who can come up with impossibly-convoluted
mathematical models but can't comprehend what a novelist instinctively
recognized. And furthermore they can't see, even when pointed
out to them, that the entire history of the world for the last
8,000 years in a row is essentially that one sad lesson, over
and over, and they refuse to acknowledge it, even though I never
seem to tire of pointing it out to them in long, rambling letters
that all start out by addressing them as "Dear Ignorant
Butthead" which I purposely do so that they will know from
the get-go that they are a bunch of idiots and if they continue
reading they may learn something. But they never do.
This whole inflation and static wage thing is also the subject
of an essay entitled "Inflation's Impact on Americans -
'You're Fired!!' " by Barry Down and Bill Matlack, on the
Kitco.com site. "The US is suddenly finding itself being
sucked into the center of the perfect storm: a globalized and
fiercely competitive economy; an American economy where living
costs demand wage levels far exceeding foreign competition, resulting
in outsourcing of good paying mainstay American jobs; and a society
leveraged to the hilt and unable to cope with a future decelerating
As a guy who lives in Florida and who is writing this with one
eye on the weather channel on TV, watching as Hurricane Ivan
is being controlled by the CIA to slam into me personally, I
am therefore closely attuned to anything referred to as "the
perfect storm," and I am torn as to which of these two storms
I fear the most. On the one hand, the Ivan storm will be gone
in a few days, and on the other hand the economic storm that
is unfolding will bedevil us for the rest of my pitiful life,
and probably destroy the United States, which pretty much deserves
to be destroyed for acting like childish jackasses and pointedly
ignoring its own Constitution concerning the requirement that
money is to be only of silver and gold.
But they don't care about me and my stupid hurricane phobia,
and they continue on as if I was not even here. "What is
the likely economic scenario facing Americans for many years
to come? It is one of being caught up in a degenerating economy
contending with both deflationary and inflationary forces (the
worst of all worlds) and dealing with a long, protracted decline
in living standards." I note, to bring a little "up
close and personal" to the discussion, that it is funny
that they use the phrase "worst of all worlds," as
that is how my wife describes both knowing me and being married
to me! But, again, my pathetic attempt at levity does not impress
them, and since they seem to be getting irritated that I keep
interrupting them, I sit down in a huff with a scowl on my face
and stick out my lower lip to show my petulance.
They look at each other as if to say "What in the hell was
THAT all about?" But they quickly regain their composure
and continue along, saying "Perhaps the worst problem will
be the highly-leveraged state of the economy and the dislocations
the US debt burden will have on a whole cross section of the
economy, as the decades of cumulative distortions and imbalances
are corrected by market forces." Not to mention, of course,
the troubles that foreign lenders are heaping on themselves by
loaning us monstrous, almost unimaginable sums of money so that
we can buy more and more stuff, more than we have places to put
And Sean Corrigan, whose gigantic intellect is currently in service
at Sage Capital Zuerich AG, has a fabulous new essay entitled
"The Twin Deficits- Myths and Truths," also has something
to say about inflation. He says that "A falling dollar would
be welcome by some producers and politicians, but the country's
consumers would be left with no more goods than before, and just
higher prices. This is the legacy of an insidious transfer of
wealth out the hands of the private sector and into those of
the state and of its creatures."
Beyond that, he says, perhaps we should also consider a couple
of other deficits. "The mental deficit which has lead otherwise
reasonable men and women into this hazardous entanglement and
the moral deficit which allows them to continue along this path,
regardless of the longer-term consequences." Yeah! Go get
- Gillespie Research looked a the ISM (Institute for Supply Management)
July numbers and noted that "July was the 29th consecutive
month of increasing prices." Those facts are as plain as
the big ugly Mogambo nose on my face, and we have Gillespie to
thank for making the effort of looking them up, because you know
that I am not going to get off my big, fat lazy butt to do the
work. But yet not a day goes by when there is not some knucklehead
from the Fed, or some other government agency, or some whack-job
"think tank" yahoo that gets his money from a government
grant, that is not telling me with a straight face that there
is no inflation, or that inflation is "tame" or that
inflation is "benign" or some other lie that makes
me scream ("aarrrggghhh!") in indignation at being
asked to swallow such a huge bald-faced lie.
In a similar vein of looking at inflation, Peter Schiff at Euro
Pacific Capital notes that "Import prices registered their
largest monthly gain in 20 months, increasing by 7.2% over the
past year, with the non-petroleum component increasing by 3.2%,
the fastest rate in nine years. Meanwhile, July export prices
actually declined by .5%."
- An article in last Thursday's WSJ was entitled "IMF Memo
Faults Argentine Debt Restructuring." Apparently the dolts
in charge of leading Argentina down the path of stupidity and
ruination don't like a new IMF report that intimates as much.
For one thing, the Argentines assume that any debt that they
have, or ever will have, will never be repaid, but that debt,
and any more debts they happily accrue, will be rolled over indefinitely
because they are such a nice bunch of sweethearts or something,
in essence going continually farther and farther into debt because
everybody out here in the real world has no problem with lending
them more, and more, and more money forever, and that accumulating
gigantic unpayable external debts is not something bad. Hahaha!
- An editorial in Thursday's WSJ by Albert R. Hunt entitled "The
Illusionary Domestic Agenda" has the memorable phrase "To
tackle any of the bigger issues will require a much sharper and
more politically sophisticated domestic policy team; the Bush
economic team is simply mediocre."
Well, personally would be thrilled -- thrilled! --to have an
economic team in the White House that is merely mediocre! I'd
love mediocre! Mediocre implies merely lackluster and average.
But the current crop of blowhard jackasses, namely the Council
of Economic Advisors run by that academic nitwit Gregory Mankiw,
are worse than lackluster. They are, in a word, horrid! These
are the economic advisors to George Bush, a guy who has not vetoed
one damn spending bill in his entire time in office! Not one!
And beyond that, he has spent more money, and run up more debt,
than any other President in history! And where has Mankiw and
the rest of the jackasses on the Council of Economic Advisor
been all this time while this was going on?
Perhaps Robert B. Gordon, Sc.D., said it best in an essay he
wrote on the Kitco.com site, in which the title says it all.
He writes "Do Not Believe American Economists. They Haven't
Got a Clue About the Economy." And then he goes on to prove
it. In spades.
Well, you can see by the drool on my chin and the rising decibel
level of my voice I am working myself into one of my spells,
so let's change the subject. Since we are speaking of the WSJ
and idiot economists, in the same issue was a letter to the editor
from a guy named Roger Brinner, PhD. This guy is, according to
his bio, "chief economist at the Parthenon Group and was
an economics professor at Harvard and MIT." Okay, with those
credentials he should know that if he opens his mouth with something
stupid then I am going to be gunning for him with both barrels.
PhD economists all make it a point NOT to write letters to the
WSJ if they have something stupid to say, especially when they
are making the case for perpetually higher taxes and/or more
government spending, because they know that I subscribe to that
newspaper. And since I subscribe, I am probably going to read
it, because I have nothing else to do all day except stay locked
in the safety of my cozy little closet under the stairs and read
the paper while scanning it for secretly implanted government
micro dots that they use to spy on me. So I figure that this
guy is new to the "letter to the editor game."
Anyway, he was writing because he wanted to comment on a story
that the Journal ran about how local and state governments are
desperately trying to get more spending money because the economic
slowdown has adversely impacted their take. Their usual reliance
on income taxes (and sales taxes, I assume) means that when we
bozo citizens spend less money because we are suffering the woes
of the business cycle, then the government also suffers because
their tax revenue falls. He hates that, and he apparently wants
government to always get as much money as they want. From that
I assume that he is a clueless Leftist Democrat dweeb, if I may
lapse into my usual gratuitous personal-insult mode. He helpfully
suggests to remedy this by also taxing people's property, and
making that a part of the whole "diversified portfolio"
of taxes! Gaahhhh! This Brinner person (and notice that my voice
is suddenly tinged with a raw, undisguised disgust and loathing)
says that this is "a prudent strategy for states and cities
to follow in both resolving temporary fiscal needs and providing
more revenues for the long run."
(Long, long pause. Measured in hours).
Okay, now I am back from the Emergency Room. I heroically drove
myself there, horn blaring, tires squealing, running red lights
and stop signs, picking up a quick couple of tacos on the way,
to get checked out by Trained Medical Professionals to see if
I had a stroke or something. As I explained to the doctor, I
thought I knew what the word "prudent" meant. But when
I read that this guy thinks that it is "prudent" for
some damn state, or some damn county, or some damn city, or some
damn town, or some damn federal government, to maintain constant
(or increasing) tax extraction, when the citizens are making
less money in this phase of the business cycle, then I naturally
figured that the Mighty Brain Of The Mogambo (MBOTM) had exploded.
As such, it was incumbent upon me to get this checked out right
away, and if true, to immediately apply for that precious Handicapped
Parking sticker for my car! I mean, my freaking brain has exploded!
How much more handicapped can you be, for crying out loud?
But there was nothing wrong with me, which I surmised from the
doctors taking all the money out of my wallet and then throwing
me bodily out of the emergency room, screaming "Quit wasting
our time and stinking up the place, you filthy little bastard!"
So I stood in the parking lot and yelled "But he said it
was prudent! I used to know what prudent means!" When they
started coming at me with syringes and straightjackets I got
in my car and came home and looked up "prudent" in
the dictionary. I was right! I actually DO know what it means!
So increasing taxes is prudent? I snort, and as I snort with
contempt (SWC), something came flying out of the Nose Of The
Mogambo (NOTM), which makes the whole thing a little MORE disgusting,
as if the idea of it being "prudent" to constantly
extract more and more taxes out of beleaguered citizens during
an economic slowdown is not disgusting enough.
He apparently likes this property taxation wheeze better than
just raising other taxes, as it is more "progressive,"
in that poor people, who live in hovels and tenements and in
their cars and under bridges and who carry their worldly belongings
in old grocery carts which are too flimsy to mount a .50-caliber
machinegun on the handle and so you mount it on the tripod and
then there is not any room left in the cart for any ammunition
and so I end up crying out "There is no God!" and sobbing
in frustration, pay very little in property taxes. So, as the
theory apparently goes, only the rich will pay the taxes. Hahahaha!
I will let this idiocy pass, as anybody who thinks that the rich,
who are rentiers and owners of business and political hucksters
and religious charlatans and assorted getters-and-lenders-of-money
are so stupid that they cannot figure a way to get their money
back from us unwashed proletariat masses, and it never occurs
to them to hire hotshot accountants and tax lawyers to do it
for them! Hahahaha!
But he goes on to say that the state and local weenies can tax
everybody as much as they want, because the taxpayers can deduct
the property tax on their federal income tax returns! So it is
an offset! I erupt in derisive laughter, hahahaha! Apparently
this guy, for all his PhD education, does not comprehend how
the Schedule A deduction works. If you see him, tell him that
it only means that you don't pay income taxes on the money you
used to pay the state and local taxes. You still pay all the
money! You just don't have the additional injury of paying income
taxes on it! And if you think that is an "offset,"
then there is something seriously, seriously wrong with you!
I pause to wipe the tears of laughter from my darling Mogambo
eyes that twinkle and sparkle like the stars in the firmament,
at the spectacle of a PhD who taught at Harvard and MIT that
is so clueless that he believes such a thing, because it is just
too, too funny for words! Hahahaha! I can't stop laughing!
(Another long pause. Also measured in hours.)
It is now much later. According to my medical file, I was overcome
with laughter and so my "attendants" hooked some electrodes
to my head that ran to a machine, and the last thing I remember
was the machine going "bzzzzz!" But he never bothers
to question whether or not constantly extracting more and more
money from the economy is good or bad. He naturally assumes it
is good, and so I naturally assume, in turn, that he is worthless
commie jackass or a Democrat, which I realize is highly redundant
and insulting and I will probably be hearing from his lawyer,
but I am not worried because he will be too gutless to prosecute
the lawsuit because I can PROVE that he is, as I stated, a worthless
commie jackass by using his own words against him, although he
may not be, in fact, a card-carrying Democrat, but he probably
is because that is exactly how they think. But every normal man,
woman or child who is even marginally conversant in elementary
economics, or who has ever paid a damn tax, knows that constantly
extracting more and more taxes from an economy is not good. It
is never good. It is bad. It is always bad. Very bad.
But here comes this Brinner character who says that extracting
more and more taxes is, as he says, "a prudent strategy."
And not only that, but it will alleviate both temporary budget
imbalances, and will also, (my guts are making a noise that sounds
like "urrrk orrgg" as they churn in outrage) provide
"core revenues for the long run," although I suspect
that the word "core" is a typo, and what he meant to
say was "MORE revenues for the long run." Although
if he DOES mean "core," then that implies that there
will be OTHER taxes and fees and charges laid on top of it with
which to cruelly torture the citizens, which brings us back to
"more," which means "the government gets more
and you get to keep less." And only in Democrat-land are
the laws of economics so bizarre that economies prosper when
the government gets more money and the citizens get less.
And this horrid, twisted little man, and you can tell from my
use of that incendiary phrase that I am really starting to lose
my cool here, has 1) a PhD in economics, and 2) actually taught
economics at Harvard and MIT, from which I trust he no longer
does because he was fired for mental insufficiency and utter,
utter incompetence, as this is just the sort of socialist/communist/
big government nonsense that is all the rage in the Leftist economics
departments of the major universities, as I gather from reading
the Leftist drivel that comes out of those awful people, and
that is why I helpfully suggest that you should never hire anybody
who graduated with a degree in anything from Princeton, Harvard,
MIT or Yale. But especially anyone with a degree in economics
from one of them, which is obviously now more worthless than
a degree in Education, which was heretofore the perennial winner
of the Most Worthless College Degree Sweepstakes.
- Peter George, in an article entitled "Greenspan's Ducks
Take Flight" we get a little lesson in technical market
savvy. "When a market breaks below its 200 day moving average,
it generally signals a long term change of trend. If a market
stays down long enough for its 100 day moving average to turn
down, and in turn break below the 200 day, it draws a line in
the sand. Very rarely will a market then rally above the crossover
point before beginning a major new slide which takes out previous
This makes intuitive sense, since the averages declined because
lots and lots people were selling for some reason, and "reasons"
of that magnitude do not reverse on a dime. I can see that you
are raising you hand, and I don't even need to call on you to
know that you are wondering why he brought this up in the first
place, and why I brought it up in the second place. Instead of
me running my big fat mouth let me just quote Mr. George. "In
the past two months, starting with the NASDAQ, but followed by
the Dow, Europe and Japan, all major equity indices have largely
met the above criteria, as a prelude to re-entering the next
phase of continuing long term bear markets. All these markets
will in due course go lower - much lower than the investing public
presently anticipates." And what he did not say is that
temporary bounces back over those 100-day and 200-lines do not
usually stay there very long. So look out below!
Marc Faber is also handy with a technical tidbit or two, as he
proves in his essay, "The US Economy Is The Next 9/11"
He writes that "As a result of the decline in the rate of
growth of money supply, 'excess money', as defined by the growth
in money supply in excess of nominal GDP, has over the last 18
months also plunged. Usually, when money supply growth slows
down so rapidly and when 'excess money' plunges, the economy
follows with a brief time lag." How brief? Well, looking
at my watch, any minute now, I figure.
- Chad Hudson, on the Prudent Bear website, wrote an essay entitled
"Consumers Slowing Down." It is such a litany of bad
news that I am under orders from Mental Health Professionals
Who Charge The Big Bucks Although I Never Seem To Get Any Better
to not spend any time trying to put in my own words, most of
which would probably end up being loud obscenities. So I will
merely quote him verbatim. "On Tuesday, the Chicago Purchasing
Manager index dropped 7.4 points in August, reversing most of
the 8.3 point gain in July. Most of the weakness was in production,
new orders and order backlog. Prices paid jumped nine points
to 86.6, the highest level since July 1988. "On Wednesday,
the Institute for Supply Management released its survey of manufacturing
purchasing managers. The headline number fell three points to
59, which is the lowest level this year. The more heavily weighted
components dropped the most. Production fell 6.6 to 59.5,the
lowest since September 2003, and new orders dropped 3.5, but
remained well north of 50 at 61.2. The only components that rose
were the two inventory measures and prices paid.
"Consumer confidence fell in August for the first time in
six months according to the Conference Board. The 7.5 point drop
was more severe than the 2.2 point decline economists had forecasted.
Consumers were more cautious regarding the future as the expectations
component dropped 8.7 points to 96.6."
Your homework assignment is to find one single, lousy piece of
good news in any of that. Just one will be enough to earn an
A. And if you can't manage to find one, and don't feel bad because
I could not find one either, then you can still get extra credit
by coming up with some damn way that this string of bad news
will NOT be a portent of bad things happening in the future.
I recommend that you take lots of powerful psychoactive drugs,
measured in fistfuls, in completing this assignment, as there
is no way in hell that anyone operating within the constraints
of stark reality can complete it.
- The Labor Department reported that non-farm payrolls increased
by 144,000 jobs. Pete Spina over at Goldseek.com, who is just
the kind of party-pooper to do this kind of balloon-bursting
research, went to the BLS website and found that 120,000 of those
jobs were from the infamous "birth/death model." So
jobs, net of these assumed jobs, was 24,000. Of course, there
probably were some jobs to be realized that were not counted,
but it takes a real optimist to think that there were 120,000
of them, given the other conflicting evidence from other reports.
The 9/11-17 issue of the Economist magazine also reports that
"The unemployment rate edged down to 5.4% in July, though
this was mainly because the labour force shrank by 150,000 during
the month." Huh? The government says the labor force shrank?
The freaking labor force shrank? How in the hell could the labor
force shrink when we need 150,000 new jobs a month just to keep
up with the growth in the damn population?
- A biography written by James Chaco about the 1912 election,
entitled "1912: Wilson, Roosevelt, Taft and Debs,"
was reviewed in Barron's, and the reviewer quotes Taft as saying
"A national government cannot create good times. It cannot
make the rain to fall, the sun to shine, or the crops to grow,
but it can, by pursuing a meddlesome policy prevent prosperity."
And I will amend that (even though Taft is long since dead and
so he cannot heartily clap me on the back and say "Well
said, Mogambo! Here's a tall, frosty beer and a big ol' government
grant as my way of saying thanks!") to say that "Not
only can the national government prevent prosperity, but after
it prevents it long enough, it will produce bankrupting misery.
It always does."
- Stephen King, but probably not THAT Stephen King, in an article
posted at Independent News entitled "Bond Slump Shows Fragility
Of US Recovery" writes about "the peculiarity is the
performance of bond markets. When was the last time that US 10-year
Treasury yields fell against a background of rising oil prices?
When was the last time that 10-year Treasury yields fell at the
beginning of an apparently prolonged period of monetary tightening?
Why is it that investors are buying bonds - pushing up their
prices and, hence, lowering their yields - when most economic
fundamentals should be telling them to sell? Tighter monetary
policy, higher oil prices: in normal circumstances, these alone
would be enough to drive bond yields significantly higher. Yet
as short-term interest rates have risen, long-term rates have
Mr. King is such a class act that he does not come to the conclusion
that The Mogambo instantly comes to, which is that there is rampant
manipulation and outright fraud being perpetuated by governments
who are desperate to make sure that nothing untoward happens
to the markets before the election in November, and that there
are scumbags in charge of financial centers who are willing to
be complicit in those slimy frauds because it enables them to
make lotsa money by screwing the hell out of people who are making
sensible, realistic market bets based on education, smarts, history
and common sense.
As if to underscore my irresponsible raving, Rob Peebles of Pru
Bear posted a fascinating graph entitled "Weekly Program
Trading as a Percentage of NYSE Volume" that carried the
cryptic notation "Source: New York Stock Exchange, 'New
Laws of The Stock Market Jungle' by Michael Panzner."
The crux of the graph was that since January of 2000, the level
of program trading has increased, and it now accounts for over
50% of NYSE volume, and is spiking at around 70%!
In short, it seems I was right: The stock market is being gamed
as large financial centers that have access to other people's
money are speculating against each other, and every dime of that
is coming out of somebody's hide, and it ain't them or their
corrupt little buddies. It's you and me.
- The Economist magazine is not above printing execrable Leftist
garbage, as evidenced by a recent article entitled "The
Risks Ahead For The World Economy" by Fred Bergsten, who
is the director of the Institute for International Economics
in Washington, DC.
He starts off innocently enough, looking at the trade and budget
deficits. "Of course, it is virtually inconceivable that
the markets will permit such deficits to eventuate. The only
issue is how they are to be averted. An immediate resumption
of the gradual decline of the dollar, as in the period 2002-03,
cumulating in a fall of at least another 20%, is needed to reduce
the deficits to sustainable levels."
You gotta take that with a grain of salt however, as he went
on to say "The budget and current-account deficits are not
'twin'. The budget in fact moved from large deficit in the early
1990s into surplus in 1999-2001." What a load of crap! And
he should know it! The budget only went into putative surplus
because the damn Congress conspired together to commit a fraud,
and agreed to change what they counted and what they didn't count!
As proof, all I have to do is show that if you were truly in
a surplus, you would not be going farther into debt, as it is
mathematically impossible to be going farther into debt if you
are making more money than you are spending. But when you look
at our national debt, we haven't shown a "surplus"
in over 40 years! To the contrary, we have been constantly going
farther and farther into debt, including the aforementioned 1999-2001
timeframe he comically alludes to!
He then puts his towering intellect to work, and says that he
thinks that the high cost of oil should be brought down. Wow!
Why didn't I think of that? He then says, and you are going to
love this, "America should therefore seek agreement among
importing countries (including China, India and other large developing
importers as well as industrialised members of the International
Energy Agency) to offer the producers an agreement to stabilise
prices within a fairly wide range centred at about $20 per barrel."
Hahahaha! They ought to love that! Using this fabulous plan,
my neighbors and I are all going to run down to the local supermarkets
and get them to agree to stabilize the price of pork chops centered
at fifty cents a pound, stabilize the price of milk at ten cents
a gallon and stabilize Oreo cookies at a quarter a bag! I am
sure that they, like the oil exporters, will all leap to agree
to such a wonderful plan!
But it would be a mistake to think that everything he says is
laughable nonsense just because so much of what is spewing out
of his mouth is laughable nonsense. He does say some things that
are correct. To wit, he looks at China and notes "A sizeable
renminbi revaluation is also crucial for global adjustment because
much of the further fall of the dollar needs to take place against
the East Asian currencies." Well, duh! It is those selfsame
East Asians that are buying up all the dollars, thus keeping
its exchange rate value high, that we are spending!
And then just as I was paying attention to him again, and thinking
to myself that maybe I was too hard on him and that maybe I am
just too stupid to comprehend what he is saying, he goes really
bananas and says "Countries that undergo currency appreciation,
and thus face reductions in their trade surpluses, will need
to expand domestic demand to sustain global growth. China need
not do so now because it must cool its overheated economy. But
the other surplus countries, including Japan and the euro area,
will have to implement structural reforms and new macroeconomic
policies to pick up the slack."
Hell, it would seem that a guy who works for some hotshot organization
called the Institute for International Economics would know that
the American consumerist economy is so damn huge that it constitutes
a third of global GDP, and it consumes the overwhelming majority
of every scrap of goods and services that the world produces!
And so there is no way in hell that tiny little Japan and the
Euro area could possibly, ever, even in their wildest imaginations,
suck up enough global output to even consume a quarter of what
us Americans consume. Only China is big enough to perform such
a gigantic feat, and he wants China to stay out of it!
I shake my head in weary resignation. This is the sorrowfully
low level of sophistication of economics as taught, and practiced,
here in America.
*** The Mogambo Sez: There is a theory going around that
the dollar may soon, paradoxically, strengthen, because there
is such a universal consensus that the dollar must fall in value.
In short, the market does the opposite of what everybody thinks,
and since everybody thinks that dollar should fall, it will rise.
The reason that people think that is should fall is that there
is no fundamental reason for the dollar NOT to fall, as it is
being actively devalued by the Federal Reserve every day of the
If it does rise, the price of gold will
probably fall. If it does, then try and contain your joy at what
will probably be the last time that you will ever get to buy
gold that cheap. If this does come to pass,
I assume that, because you are a smart person, you will back
up the truck and load up with the gift of cheap gold, as the long-term course of the dollar is inexorably
down and the course of precious metals is, as a result, equally
And you don't have to listen to me, and only a real idiot would
listen to anything I had to say. But you would be well advised
to listen to Marc Faber, who also suggests the accumulation of
gold, "as it is the only sound money,"
and that "Gold should be accumulated continuously."
But he agrees with me, even though I am sure that the very thought
of agreeing with me about anything puts a bad taste in his mouth,
that there is also a lot to be said for the bull market in commodities,
and he especially likes the profit potential of "corn and
coffee, and especially sugar and orange juice."
Sep 13, 2004
The Daily Reckoning
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.