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Down The Rathole

Richard Daughty
...the angriest guy in economics
The Mogambo Guru
Sep 21, 2005

- Through the peephole of the Mogambo Bunker Of Impenetrable Steel (MBOIS), I see that the Federal Reserve only increased total credit by $1.3 billion last week. While $1.3 billion is probably chump change to a big shot like you and the spendthrifts at the Fed and Congress, it is still a big chunk of change to me. More interesting, of course, is that the Fed is now steadily monetizing federal debt, and last week they created enough money to buy up $2 billion in government debt! Not much, but like my parents said when I got a lousy stick of chewing gum for Christmas, it is the thought that counts, not the amount.

Spinning the periscope around, we can see what the stupid banks were up to, and if you want to know why I call them "stupid banks", then spend a few minutes reading economic history and you will see that all economic crises were caused by the banks acting stupidly for one reason or another, by which I usually mean "because the government acted stupid", by which I mean "they spent so damned much money and incurred so damned much debt that the economy was destroyed." So, now that you are scared of the banks and are hiding under your bed, that is why you are peeking out and whimpering, "What in the hell are they up to now?"

Well, their little sandboxes got filled with some new sand and new toys, as the Required Reserves in the banks abruptly fell to $42.4 billion, even though their Loans/Leases book increased by $25 billion to $5,312 billion. According to these figures, the Reserve Ratio is, and hold onto your hats, now a measly 0.08%! The standard, textbook example ratio is 10%! And here they are at less than 1%! They have no cushion against losses of any kind! Wow! What guts! What nerve! What stupidity!

Since I am too aghast for words, I will make a very rude gesture to indicate that this means that the Fed is getting more and more desperate to cram money into this ridiculous economy, and is giving the banks unprecedented degrees of freedom to loan out every nickel they can get their grubby little banker hands on, all in a desperate attempt to keep this bankrupt economy going for a few more hours, or days, or weeks. Maybe months. Maybe it will even work. But I seriously, seriously, and you can see from my face how serious I am, doubt it.

But they are pulling out all the stops. Mark Lundeen, an independent economist of sorts, reports that last Thursday "The Fed added to the Repo pool 3 times! Unheard of!!!! Crazy!!! Lotsa worried men in suits buzzing round Uncle Alan."

This may have something to do with Foreign Holdings at the Fed dropping by $6.8 billion last week. It looks like foreigners are getting really, really, really tired of propping up the wildly dysfunctional and profoundly idiotic American economy, since it is becoming obvious that it is all money down a rat hole.

But who knows? From the September 17 issue of the Economist magazine we read that China now has more foreign reserves than Japan! China and Hong Kong have combined reserves of $870 billion, most of it in dollars. For the record, Japan has about $830 billion in foreign reserves, most of it in dollars. The four countries of South Korea, India, Singapore and Taiwan combined have another $700 billion in foreign reserves, most of it in dollars. Pop quiz: did you notice the phrase, "most of it in dollars?"

So you are thinking of writing to The Mogambo and asking "What is the deal with foreign reserves, and how I can get my grubby, grasping little hands on some of that lovely, lovely foreign reserves money, most of it in dollars?" I will save you the trouble. Foreign reserves is money that winds up in the hands of the central bank. How does that money end up there, instead of in some secret, Swiss account of The Mogambo? The $730 billion per year trade deficit that we have sends money overseas to pay for the stuff we buy from them. The Asian firms take the dollars to the bank and want to exchange them for their own money. So the bank then prints up some of their local money and exchanges it for the dollars. Now the bank has some new foreign reserves, all of it in dollars.

And it is this increase in the money supply (monetary inflation) that causes price inflation. Bummer! And that is not the end of the sad story. Remember all those local currency banknotes that they printed up to exchange for those dollars? Well, some of THEM end up in the central banks of other countries, thus expanding THEIR foreign reserves.

And when you take a look at the figures for the increases in the money supplies of countries in the world, they are almost ALL rising much, much, much faster than inflation and population increases combined! Which means more price inflation! Now you know why I am gobbling tranquilizers like candy.

- It was very interesting to me to read the Letters to the Editor in Barron's this week. Five of the eight letters were in reference to the September 5, 2005 Barron's article by Alex J. Pollock entitled "Can You Afford To Retire?" I said to myself, "Huh? I don't remember that!" So I jumped in my time machine, zipped through the time-space continuum, got a copy of the article, and then I remember I HAD read it. I just dismissed it and forgot about it.

It uses these long-term averages to calculate how much money you will need if you want to retire for 20 years after working 40 years. In short, you somehow amass enough money that two days of working will be able to finance one day of retirement.

The basis of his astonishing investment return calculation is that you will get, on average, a real (inflation adjusted), yield in Treasury bonds of 3%. Hahahaha! Now you are starting to see why I dismissed the article! Inflation is now running, according to the just-released CPI report, at 3.6%! 10-year T-bonds are yielding 4.27%! This is a real, (inflation adjusted) yield of 0.67%! And this has been going on for YEARS already! So the idea of bonds yielding, after inflation, on average, 3% makes The Mogambo laugh with scorn and contempt (MTMLWSAC).

But suppose that the long-term average yield on bonds really IS a lofty 3%. Then that means that T-bonds, right now, should be yielding 6.6%. But, but, but, they are not yielding that! They are yielding a lot LESS than that. That means, to get back to the 3% real, (inflation adjusted) yield, bonds have to start not only yielding 6.6%, but more than that! They have to yield more to make up for the last few years where you were making a LOT less than 3%, currently about 0.67%, and often a lot less than that. If they don't, then the long-term, real, yield would be less than 3%, which violates the constants we all stipulated to at the beginning. So now we are talking about a nominal yield of 8-9%! Hahahaha!

And not only that, but the guy makes no adjustment for the taxes you are going to pay on those capital gains when you sell the bond, or the taxes on the interest, or (as is the case in the real world) both.

I know that you are happy that you are suddenly making 8-9%, and you are doubly happy that we are ignoring taxes, and already I can see your mind working on how you are going to defraud the taxman. As an aside, let me advise you to not ever, ever, ever cheat on your taxes, as the penalties they can levy on you will break your back, break your heart, and consume your whole life, as you think about it, and fret about it, and have nightmares about it, and worry about it every waking moment, and the few lousy dollars that you are ahead cannot possibly be worth it, especially after paying the lawyer to try to keep you out of the slammer. The way to pay less taxes is at the ballot box, when you get rid of the big-spending, socialist morons you accidentally elected last time because you showed up at the polls either stupid or drunk, or, as in the case of The Mogambo, both. And if you are from Massachusetts, yes, I am especially talking about you.

But this is not about taxes, or why the halfwits we elected to Congress have made inflation so high with their socialist spending programs and entitlement programs that are now supporting a full third of all Americans. And this is not even bringing up the horrid Federal Reserve, a secretive cartel of private banks who cleverly put the name "federal" in the name they chose to make people think that it is a government agency, but it ain't, even though their incredible stupidity makes them SEEM like a real government agency.

No, this is about what we professionals in the economics business call The Mogambo Big Freaking Point (MBFP): It all depends on where you are in the business cycle. Write this down in your notes. You will find it very instructive in the years to come.

Here is my iron-clad, unassailable reasoning; Today you are getting a real yield of about a half percent, right? So, to get back to a real yield, interest rates have to go to, and let's be conservative, 8%.

But what happens if you buy a bond today, one that yields that real 0.67% that we were laughing about earlier? When interest rates rise to that long-term average of 8% (which is, as we know, about double- double! -what today's ridiculously over-priced bonds are nominally yielding today), the market price of the bond that you are now so proudly holding will plummet to less than half what you paid for it! Sucker! You will realize a loss, a big loss, a huge freaking capital loss if you sell! Huge!

And if you DON'T sell the bond before maturity, you will be stuck with that damned silly, embarrassingly puny 4.27% yield, when everybody else is making 8%, until the damn thing matures! I will leave it up to you to imagine how your career will fare, when every day at work people will laugh at you and say "Hahahaha! Mogambo is a big fat idiot who locked us into getting a half a percent interest on our money for the next twenty years!"

The mighty extra-sensory mental powers of The Mogambo (MESMPOTM) are abuzz, meaning that I know what you are thinking. You are wondering "Does any of this impress pretty girls or boards of directors?" Unless you are a woman, then you are thinking "Does any of this impress hot hunks with tight buns or boards of directors?" Let me tell you, from a guy that knows first-hand, that boards of directors are NOT happy when you report that, through your own ignorance, stupidity and poor judgment, the firm's money is locked in for twenty long years, generating almost nothing in return. In fact, boards of directors are usually far beyond merely "unhappy." More towards the end of the spectrum where they summon security guards to clean out my desk, and they steal my stuff while they do it! Important stuff. Personal stuff, like that autographed photo of President Bush I had on my desk, where he has written, "I hate your guts, too! Now stop insulting me, you stupid little jerk."

And I can only imagine with horror how it impresses pretty girls, and I don't want to know, as I get enough insults, abuse, and lawsuits from them as it is.

But I am sure that you assume that I did not read the whole article, since I laugh in derision when it declared the assumptions, plus the fact it did not have any photographs of Victoria's Secret models posing in their underwear to keep my interest. But you may be too hasty in judging the Mogambo! Perhaps I had read more of the article instead of, like you figure, crumpling it up and throwing it into the fireplace with a snort of contempt, and then my wife says "Get that damned paper out of the fireplace, you moron, and put it in the trash where it belongs!"

Well, you would be wrong! I DID read more. I'm sorry I did. Mr. Pollock also goes on to say that a portfolio of stocks AND bonds "might be expect to return 4% over inflation." So the bond half of your portfolio making three percent means that the stock half will make a (inflation adjusted) yield of 5%? Hahahaha! I can't stop laughing! Hahahaha! This is getting more and more bizarre! Stocks are not making any money at all, if a price/earnings ratio of 19.54 on the SP500, or the dividend yield of 1.81% on that same index are any indications, and haven't made you anything for five years running in the market price, either! 5% a year? Hahahaha!

I will not even comment on the stupidity of thinking that everybody can make money in the stock market. They can't. If everyone puts ten dollars into a bucket, then it is impossible for everybody to take twenty dollars out of the bucket. Jeez! You would think it would be obvious!

But remember that part where I said that it all depends on where you are in the business cycle? Well, we are only talking about TODAY. Stocks and bonds are a bad, bad idea today. There was a time when buying bonds was a really, really, good idea, and they were paying ABOVE their long-term, real (inflation adjusted) average! Then, when interest rates fell, as they inevitably do, the bonds went UP in value! This ain't, in the vernacular, nowhere near that time no how.

And there was a time when buying stocks was a very, very good idea, too, back when the P/E ratio was below ITS long-term, real (inflation adjusted) average, too. As with bonds, this ain't that time, either. This ain't, again, nowhere near that time no how.

The sad truth is inflation will destroy whatever little bit of money that you set aside, as it is currently destroying the little bit of money that you have been setting aside, especially for the last five years. The sad, sad truth is that you will need to save, at least, one day's pay for one day's retirement. In other words, you must save 100% of your income if you want to have enough money to offset the roaring inflation that we are going to have over the next decades! Hahahaha!

So how bad is inflation? Alert reader Mike S. sent me the table of inflation calculated by Freebuck.com, using the same components of the official Consumer Price Index, but calculated by merely looking at the price of something in 1968, and then looking at what the item costs now. Both of the statistics have housing at 40% of the total market basket.

So what is the bad news? Well, first off, the official government number is that annual inflation has averaged, and I hope you have a safety helmet on when you hear this, 4.71% since 1968! This is, in historical context, so horrifically bad that is ranks as one of the longest and worst episodes of inflationary misery in our history. After the paramedics have restarted your heart, tell them to stand by, because next you are going to learn that the Freebuck people show, and quite easily, too, that inflation is REALLY running at 5.96%!

And that 6% inflation is, coincidentally, less than the real, wallet-busting, prices-you-pay type of inflation that is roaring right freaking now! Actually, true inflation is somewhere between 7% and 11%, as far as I can tell, and I get that from looking at the checks I have to write every damned month, and it is the worst in decades, judging by the number of tears that I shed while paying those bills.

Notice I said "decades", although you were probably distracted by watching the way little drops of spittle fly out of my mouth when I say it with such vehemence and how sparks of outrage are shooting out of my ears. So I will repeat; you must save 100% of your income to stay ahead of inflation if you think you are going to work for forty years and retire for twenty.

Stop that screaming! Stop it! There! Okay, now that everyone is calm, I will rise up on one Mogambo elbow, serene and smiling, to tell you that I, the mighty Mogambo who loves you like a father (MMWLYLAF), have a solution! All you must do, and listen closely, young grasshoppers, is do a little work and find that investment that is currently at the LOW end of its possible range of values. Stop screaming! Okay, I'll tell you what it is so that you don't have to do any damned work, you lazy little bastards! Okay, now that we are all quieted down again, I am talking about, of course, gold and silver and, for those of you who like the action of trading, commodities in general, especially oil.

To sort of verify that Freebuck.com inflation figure, I note that Paul van Eeden says, "The value of gold in U.S. dollars has increased at an average rate of 6.07% since 1959." Howe does he figure this? He explains, "The percentage increase in the price of gold in U.S. dollars is equal to the difference between the inflation rate of gold and the inflation rate of the dollar."

- There are people in the world who will tell you the truth when you ask for it. For instance, if I ask my wife if I look stupid in this snazzy new propeller beanie ("Thanks, Ben S.!"), she says "No. Not any more stupid than usual." But if I ask my employees the same question, they are all a cringing bunch of cowards whining "No! You look great, boss! Don't hurt me or my kids!" Venezuelan Oil Minister Rafael Ramirez is of the former, by which I mean that he will tell you the truth, and not whether or not he likes my hat, but if I ever run into him, I'll ask him. But he said that oil at these prices "isn't a temporary thing. These prices are here to stay. These high oil prices are out of OPEC's hands."

So, here is the Mogambo Investment Tip O' The Day (MITOTD); whenever oil falls a little bit in price, buy.

Lance Lewis of Lewis Capital hears us talking about oil, and says "I am becoming increasingly worried that I am wrong and that the Fed is indeed going to try and monetize the supply shock that we have seen in energy and many other commodities, as well as the coming flood of spending by the Federal government by meeting it with easier monetary policy. And that means inflation is going to accelerate." It's going to accelerate from here? Gaaccckkk! No wonder gold is soaring in price!

And the practical result of inflation means that each dollar buys less, which means (if value remains constant) that oil will go up, and gold will go up, and silver will go up, and all things that you buy with dollars will go up in price. Welcome to the world of inflation caused by the Federal Reserve letting the banks act irresponsibly, causing a bubble, and then their irresponsible, stupid panic reaction to the bursting of that bubble, causing other bubbles, which grew until THEY were in danger of bursting, and then the Fed created more money to create more bubbles and blah blah blah.

- Peter Navarro, of the newsletter Macrowave Investor writes "Ironically, with the Bush Administration's colossal mishandling of the crisis, Katrina may turn out to be a net stimulus. The reason: The Bushies and Republican Congress facing an unhappy electorate are going to throw gobs of money at the beast." Well, to be fair, this is what Congress does all the damn time, and that is why we are in the parlous shape that we are in. But I can tell by the look on Mr. Navarro's face that he meant that this time they are going to throw gobs of money that are bigger, much, MUCH bigger than all the other gobs of money that Congresses and Presidents spew. I chose the word "spew" deliberately to convey a kind of vomiting up, because when you know that inflation in prices will result, and a huge increase in the debt will result, and when you know that they are only creating another cohort of people who are totally dependent on more and more and more government money for the rest of their, and our, natural lives, then you understand WHY I used the word "spew", although this does not explain why I used the word "parlous" instead of "perilous" or "dangerous" or "asininely suicidal." And if you still do not know, then try and stay alive for a few more years. THEN you will grok it, meaning to completely comprehend, as they say in the novel "Stranger in a Strange Land", which I read a long time ago, and from which I only remember the word "grok" and that it didn't have any steamy X-rated pictures in it, and that is probably why I didn't finish reading it, and that is why I don't remember much.

- George Ure, in his commentary at his UrbanSurvival.com site, has looked the just-released trade deficit figures, which were reportedly down, and how this is so peachy. He is not convinced. "What they don't mention up front is that the PR hype numbers are seasonally adjusted, while on a not-seasonally adjusted basis, the trade deficit increased again in the current reporting month from $65.095 billion last month to $66.872 billion this month. But to see the reality of the non-adjusted numbers, you have to wade all the way down to page 17." And that, buried in the report, is where you find the raw numbers, and they show that the deficit did NOT get better, but it actually got worse! Seasonally-adjusting! Hedonic adjusting! Hahahaha! And we Americans, like the little halfwits that we are, smile that vacant little smile, and not even a cloud dims the blank, vacuous non-comprehension in our eyes. Until we get to the gas pump, and we bleat "Hey! Why are gasoline prices so high?"

- Bill Bonner of the DailyReckoning.com is not only a real nice guy and one of the few people who has not actually threatened me with physical violence, but also has a lot of smarts about this economics stuff. To show you this is true, he gives away, for free, a nice piece of technical analysis. Talking about how the stock market works, he said, "There are upswings that last from 15-20 years followed by downswings that last 15-20 years. After WWI, stocks ran up to the 1929 high. Then, they crashed and dragged around until the depths of WWII. After WWII began, another big surge to the upside, peaking in 1966. Thereafter, stock prices shilly-shallied around, but generally sank until 1982. In August of 1982, stocks entered a bull market that lasted 18 years. America's stock market bubble exploded in January 2000."

And why did the market take off in 1982? Because that is when the morons in Congress authorized the explosion in retirement accounts, telling us the transparent lie that everyone can get rich by investing in the stock market. That this is obviously not true is evidence, as if you needed more evidence, that Congresspersons are idiots and liars.

Now we are in a housing bubble, and while I am impatiently waiting for a pizza to be delivered, I lied and told Mr. Bonner that I am working, working, working, and waiting for the bubble to pop. Perhaps this is why he said "We are waiting for the bubble to (finally) pop. When it does, we expect a resumption of the bear market/recession that began in 2000/2001."

Yow! Perhaps if I HAD really been working, I would have seen this myself. So what does this mean? He replies, in that calm, quiet way that he has that is made more pronounced when compared to the hysterical, screaming fits of The Mogambo, "Asset prices should deflate for at least another 10 years." Ten years of falling asset prices? Whoops!

Frank Barbera sees Mr. Bonner and me getting all the attention, and gives us a little technical analysis insight of his own. "The A/D Line will normally turn down well in advance of a serious stock market decline. The very fact that the S&P, NASDAQ and Russell Indices are within a few points of matching a nearly 4-year high with this indicator below zero tells me this is a market headed for big trouble-and sooner rather than later. Over the medium-term horizon, I continue to believe the S&P 500 is forming a major top in this area and could decline fairly rapidly toward the 1065 to 1100 zone in coming months."

Then Mr. Bonner got into reminding us about how falling birth rates are a death knell for economies that depend so heavily on workers giving up larger and larger chunks of their wages to support a monstrously large, totally-dependent population. He says "But now birthrates are falling throughout Europe. In Italy, young men stay with their mothers until they are in their mid-thirties. In Germany, women no longer marry, and no longer have children. In Spain, a catholic country that used to have the highest birthrates in Europe, the maternity wards are empty, and silent. And in today's Moscow Times comes a report that birthrates are falling in Russia, too."

Personally, I think it is weird that people who have ONE kid, and thus know exactly what is involved, turn around and have more! Maybe some sort of mental illness. I dunno. But I sure can understand why people are NOT having kids anymore; inflation. Who in the hell can afford the little brats? I mean, if you are barely keeping your head above water, even though you are borrowing money from anybody stupid enough to loan money to a deadbeat like me, what rational being would increase his costs when he or she can't even increase his, or her, income enough to keep from borrowing money? Maybe in the old days, when you could put them to work in the mines, or sell excess children to gypsies and maybe make a few bucks, having kids was a good idea. Or back when your welfare check increased every time you had another kid. But those days are long gone.

- My suggestion is to never get into a fistfight with Bill Buckler of the Privateer newsletter, because he is relentless. Notice the way he punches me right between the eyes without a let-up. "The US new orders index fell from 69.6 to 46.5. The US production index dropped from 70.5 to 56.2. The measure of prices paid by manufacturers for materials rose from 61.3 to 62.9. The employment index dropped from 56.1 to 51.7. The Chicago Purchasing Managers Business Barometer fell to 49.2 from 63.5. US median household income stood at $US 44,389, unchanged from 2003. These are the economic numbers of an economy stripping all its gears." By this time I am staggering and wish I had taken my manager's advice to throw the fight.

Pummeled as I am, I am in no mood to try and figure out what this means. But I do not have to get up off the canvas, or even lift a finger, as I can depend on Roger Wiegand of Trader Tracks to do that for me. "We have previously alerted our readers to the potential of a large stock market selling event. It is our opinion the time is very close. We have worked extensively to re-check several indicators and most all of them are aligning for major stock market selling session(s). Here are the reasons for our sending this alert: Oil has bottomed and is rising again. gold had mild selling and recovered. Today gold prices were rising in the after hours markets. The U.S. Dollar is weak and getting weaker. Next we see .8500 support for the dollar. The Transportation Index fell apart and is a major Dow selling indicator when it falls. Retailing reports came in very weak. Some retail forecasters are already forecasting a weak Christmas sales event. Housing has a huge head and shoulders top and three major housing indicators all went negative. Bonds are looking weak and the very large health care sector sold off today. The pros are buying OEX PUTS with both hands."

This shows that people who are market professionals see the writing on the wall, although the writing is merely poor-quality Mogambo graffiti (PQMG) proclaiming, "We're freaking doomed!"

- As you know, I am a real noisy table-pounder about silver and how I think you ought to buy as much silver as you can afford, and then send it to me, addressed to "Occupant." David Morgan of the silver-Investor.com newsletter laughs in my face when I suggest this, but implies that I am on the right track about recommending it. "One of the most incredible truths about silver is that demand has outstripped supply for fifteen straight years. This trend is projected to continue for at least the next several years. As Ted Butler is fond on stating 'There is nothing more bullish for a commodity than such a deficit condition.' "

At this, my feeble Mogambo mind (FMM) laughs, as I have an obvious mental deficit, but there is nothing bullish about it, especially as compared to silver. Seeing that I am not falling for that "deficit" thing, mostly because I do not understand it, he cleverly switches tacks and says, "Another fact that is extremely bullish, but generally unknown, is that there is actually less silver bullion available for investment than gold! According to the CPM Group's silver Survey 2003, there are approximately 400 million ounces of silver bullion and 2 billion ounces of gold bullion. This one fact alone should alert any intelligent investor into thinking that some silver must be held as part of one's precious metals allocation."

This referring to "any intelligent investor" is an obvious slap in my face, and since I am really sensitive about being a brain-damaged moron from another planet, I decide to turn around and leave in a huff.

But I come immediately back when he promises to show how a boom in silver is inevitable. "There will not be a sustained or substantial increase in the price of silver until the physical supply is so small that the commercial users sense a coming shortage. At that point, silver users in the automobile, defense and electronics industries will all be competing for silver at the same time that investors will sense the profit potential." And I can tell you for a fact that when lots of people with money are all bidding on a finite pool of anything, the price goes up a lot. Look at oil for a perfect example. And when those people are all bidding on a SMALL and finite pool of anything, the price goes up a lot! Mr. Morgan says "It is with this understanding that I build my case that silver offers one of the single best long-term investments today." And since the logic is inescapable, that is what I also say, mostly because I am a low-life copycat that never has any ideas of his own, and that is why I am forced to steal them from other people. In this case, Mr. Morgan, to whom I am not going to apologize, since he knew what a scumbag I was before he even opened his mouth.

- All in all, my tiny Mogambo brain (TMB) is whirling, whirling, whirling, as there is just too much happening all of a sudden, all of it bad. Consumer confidence is low and dropping. Prices are rising. Oil is rising. Prices are rising all over the damn world. Any government dork with a government credit card is now allowed to buy anything priced less than $250,000. Congress is literally pouring money onto anybody who can spell "Katrina". Jobless claims are spiking. Two airlines are in bankruptcy. The banks (and your retirement accounts) that have loaned money to the state and local governments in Mississippi and Louisiana are going to take a huge hit when the money can't be repaid, probably necessitating bank bailouts. Terrorists are seizing the opportunity provided by our distractions and are getting more murderous. There is not one good piece of news anywhere. Not one.

This, this, THIS is just the beginning of the ugly end-game a fiat currency, excessive fractional-reserve banking, all financing a huge government by letting Alan Greenspan and the monstrous, evil Federal Reserve destroy our money by financing the ridiculous booms of the 90's.


***The Mogambo Sez: Gold is, if you have been reading the newspapers, on a tear, as more people than just you and I recognize that only precious metals can save us now.

And in response to all of you who want to know if the government will again confiscate gold, the answer is "yes". But not now, nor anytime soon. But one day, when consumer buying has completely dried up because nobody has any money, and the few people who DO have any money cannot afford to buy anything because inflation is off the charts, the government will get the bright idea to confiscate your gold, or your house, or your car, or your retirement accounts, or anything that you have that is worth something, and put dollars in your hand, hoping that you will run out and buy something.

That that day is coming is foreordained, as there is no way, no freaking way, no freaking way in hell to stop the collapse of the despicable economic system that has evolved in this country. If there was a way, any way at all, then one other country in the whole history of countries that have gotten themselves into this kind of mess would have thought of it by now. None have, although they have tried everything, even the stuff that they already knew would NOT work. Then they went to war. Which merely finished them off.

Welcome to fiat currency, fractional-reserve, deficit-spending hell. They call it "hell" for a reason.

Sep 20, 2005
Richard Daughty

email: RichardSmithGroup@verizon.net
Daughty Archives
Provided as a courtesy of Agora Publishing and 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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