Ceri, I vow to start taking
those yellow pills again
...the angriest guy in economics
October 21, 2004
- The Fed decided those damn
foreign bastards are getting wise to us, and they have apparently
stopped buying our debt, as evidenced by the lack of increases
in Foreign Holdings at the Fed, which is down about $4 billion
last week. So not only are they not buying MORE of our debt,
they are selling some that they already bought! Bummer!
So why are these foreign dirtbags, who speak with funny accents
and are not even civilized enough to celebrate Halloween by dressing
their kids in weird rags and begging the neighbors for candy,
NOT buying more and more of our debt so that we can continue
to buy things on the cheap? For this part of our lecture, I turn
the lectern over to Dr. Richard Appel, who recently posted his
America II: The First Shoe Drops," on 321gold.com site.
"Further damage accrues to China as the result of the ongoing
decline of the dollar. The dollar's fall is generating currency
exchange losses for all of the United States' trading partners,
including the Chinese. This threatens China's dollar holdings
with further depreciation, and gives them an additional reason
to find avenues to rid themselves of their dollars, before they
lose even more of their value."
And how much value has the dollar holdings of these foreigners
lost? "From the dollar's peak at the end of 2001, it's international
value as measured by the U.S. Dollar Index has eroded by 33%.
This places all external dollar holders in a very difficult position.
They have already lost one-third of the value of their holdings,
and are likely becoming frightened that they will lose more.
The recent action by the Chinese in their effort to acquire Noranda
and the Alberta oil sands, may be the first obvious sign that
one of the world's two largest dollar holders, may have reached
And before you start crying about these poor foreigners and how
their stockbrokers lied to them about how all American stocks
are a good buy, start thinking about your OWN situation, when
the dollar's purchasing value falls and the price of imports,
like oil, shoots up.
And speaking of China and how
they will soon be getting smart and spending those piles of American
dollars on something that has some real value, we read that Todd
Stein and Steven McIntyre, of the Texas Hedge Report, write "China Dumps Dollars
for Oil and Gold." They say "China National Petroleum
Corporation has a 40% stake in the international consortium extracting
oil in Sudan, and it is constructing refineries and pipelines,
enabling Sudan to benefit from oil export revenue over the last
five years. "
Beyond that, they note that
"Recently, China deployed thousands of troops to Southern
Sudan to protect its pipeline interests while Western oil companies
have been withdrawing from the war-torn African nation. The presence
of Chinese PLA troops in Sudan, in our opinion, marks the middle
kingdom's entrance into the great game." So there may soon
be TWO large and powerful countries running around the globe,
taking over the place, and randomly killing thousands of people
who get in their way.
"A major problem will
result when foreigners begin to dis-hoard their dollar stockpiles."
Well, I turn off the tape player and look at the statistics.
Last week these foreign scoundrels dis-hoarded $4 billion. And
what will happen to us if those guys continue to dis-hoard dollar
denominated assets? "It has the potential to generate a
U.S. inflationary episode that will make the one that occurred
during the latter part of the1970's pale by comparison. To my
mind, it is not a question of if, but of when!"
Andy Xie, of Morgan Stanley,
says "China's boom is itself partly the product of the Fed's
super-lax monetary policy." Well, you are a real rookie
if you think I am going to stay in my chair at that! Veteran
Mogambo watchers were not surprised to see me leap to my feet,
and say "Hold on there, Andy Xie, if that IS your real name!
I say that China's boom is COMPLETELY the result of the Fed's
super-lax monetary policy!" Security guards are suddenly
appearing from everywhere, and so I knew I had to talk fast!
So I said, the words tumbling out in a torrent, "Did you
think that the money would only stay in the country that created
it? I laugh at the very thought!"
So that may be part of the
reason why the Fed produced $3.8 billion in Magic Money last
week, giving their little slimy friends in the banks some money
to play with. The Fed used some of that money to Bought Outright
another $911 million in US debt, continuing to demonstrate that
particular moral, ethical and intellectual bankruptcy.
And since we are speaking of "M,E, and I bankruptcies,"
and I say "thanks" for not noting how The Mogambo is
likewise bankrupt in the old "M, E, and I categories."
The Treasury issued another $5 billion in new debt, even as the
Fed was buying up old debt, and taking us another notch above
the Congressionally-mandated ceiling of $7.384 trillion. The
Treasury also literally printed up another $4 billion in actual
cash last week, too, and not out of Fairy Dust, like the Federal
Reserve, but out of real ink and paper.
- Bill Gross has taken on the
government's statisticians and Fed Chairman Alan Greenspan, and
how they are a bunch of blatant liars on how they calculate inflation.
Naturally, he has taken a lot of heat for saying that the Emperor
Has No Clothes. He accuses them of purposefully underestimating
inflation to make the economy look stronger than it is, and keep
Uncle Sam's costs artificially low.
But he is not entirely alone. For example, there is The Mogambo,
who is bellowing and thrashing around against the leather retraining
straps and the handcuffs and swearing blood revenge, and whose
entire mental illness is an apparent fixation on inflation and
how it is such a killer-diller. And then, on the other hand,
there is Peter Cohan, a management consultant and author in Marlborough,
Mass., who says "There is just no way the CPI is reflecting
the actual increase in costs that the typical American family
faces. It doesn't pass the smell test."
But a guy at Action Economics named Englund has a snappy rejoinder,
and says, in effect, and here I am putting words into his mouth
to make him look ridiculous because that is The Way Of The Mogambo
(WOTM), that the inflation figures are not adjusted for the Smell
Test, but that it is an interesting line of thought, and it certainly
deserves some government research grant money to look into, and
then maybe we can have some research that inflation statistics
OUGHT to be adjusted for smell according to the Smell Test. But
in the meantime we have to go with what we have, and that is
for us all to be calm and to stick with the adjustments that
they have already researched into existence, and actually says
"Academics have been studying this question for over a decade
and have sophisticated research to back up the need for adjustments."
It's not obvious to a bozo
like me, but then few things are obvious to me, except that there
are Mole People living under my house and eating all the cookies.
But I am delighted to learn that sophisticated research has revealed
a "need," and if there is one thing that Leftists love,
it is uncovering a "need" than can be addressed by
some government program or new law, especially one that allows
them to lie about the pernicious effects of their previous attentions
to other "needs."
Mr. Englund goes on to say
"It is irrefutable that some adjustments have to be made
for quality." Instantly, I leap to my feet with the agility
and grace of a lithe panther, hacking and coughing because I
ain't a young agile and lithe panther anymore, and standing astride
my chair, I throw my snazzy cape over my shoulder, resplendent
in my telegenic and elegant bravado. I shout out "Says who,
varlet? You? Ha! I laugh! Hahahaha!" Grabbing a rope that
was hanging down from the ceiling for some reason, I heroically
swing onto the stage to confront the poor Mr. Englund.
He stands there speechless. I stride confidently right up to
him until my nose is almost touching his, and you can see that
he is getting really nervous that this lunatic is swinging onto
the stage at the end of some rope and wearing some stupid cape
and is saying "Verily I say unto thee, puny earthling, show
me, how the German Weimar hyperinflation would have been prevented
if only they had adjusted inflation for quality! Show me how
the inflationary problems besetting Latin America for decades
could have been prevented if they had only adjusted their crippling
inflation for quality! For that matter, show me how the inflation
that fomented the French Revolution could have been prevented
if they had only adjusted their inflation for quality!"
Seeing that a demonstration
is in order, I gently jam my knee into his groin. "Ooof!"
he says. Then, when he looks up at me with that look on his face
that says "What in the hell did you do THAT for, you imbecile?"
I kick him as hard as I can with my foot, also in the groin.
"So, now, Mister Smarty-Pants, which one was worse? The
first one was a lame effort, and it barely hurt! The second kick
in the groin was with all the strength I could muster! The answer
is, you must like the hard second kick much better, once you
adjust for quality, you little bastard!"
Out of the corner of my eye I see security guards rushing the
stage, and so I grab the rope, swing to the top of the balcony,
and leaping down onto my trusty steed, I gallop off into the
night. The audience, stunned by what they had just seen, asks
"Who was that masked economist stranger?" to which
others reply "I dunno, but he smelled like the Mogambo!"
Little do they know!
For a Cup Of Coffee?" is an essay by Ceri Shepherd.
Now if you are confused as to the gender of Ceri Shepherd, so
was I, so I had to ask. He is a man, so he says, but
with today's Internet weirdness, who knows? [Editor's note: Crikey, MoGu, you're
a rude bugger -- maybe it's just jealousy of someone much younger
and much more handsome -- click] And I am sure that he is thinking the same thing
of me, since I described myself as a precocious 13-year old girl
who is confused with the sudden "blossoming" of my
perky breasts and how I was having strange, new, wicked thoughts,
and how if he could send me his credit card number so that I
could buy a plane ticket, then I could come and see him and talk
to him about teaching me "the language of love." Alas,
he was not interested, and so I did not get any money out of
him with my clever ruse. But like all loyal Americans, I intend
to keep pursuing Bernanke's suggestion that we pursue "unconventional
methods" to get through our economic travails, and this
weird impersonation of a pubescent girl trolling for a tryst
is certainly "unconventional." But since this Bernanke
guy actually has a job as a Governor at the Federal Reserve that
involves perpetuating monetary trickery and deceit, I figure
I know where he is coming from. With him as my mentor in this
thing, so I am sure that I will hit on something good here in
a little while, and while it is not as glamorous as his job at
the Fed, it is in the same line of work, and I just hope it will
be enough to pay the bills.
But three million Lira for a cup of coffee? That sounds a little
farfetched to me, and he anticipates my incredulity, and says,
"Does this sound a bit far fetched? A bit unrealistic?"
And I say "Yes! Yes it does!" He goes on, "3,000,000
Turkish Lira is the going rate for a cup of coffee. Ten years
ago it cost 500 Turkish Lira for a cup of coffee. Now it costs
3,000,000. The coffee has not changed-only the unit of measure."
I have a question that can be answered with the trusty HP 12-C
calculator, and probably not even then, being incompetent at
most everything , and when you look up "everything"
in the dictionary, then you will find that it also includes "calculators."
So if the coffee was 500 Lira (PV= -500), and the coffee is now
3,000,00 Lira (FV= 3,000,000), then what is the Interest rate
(i) that would, compounded, produce that inflationary effect
over ten years (N=10)? Normally I would shrug my shoulders and
ask "Why do you want to know? You trying to make trouble
or something? Is that what you want? You looking for some trouble,
punk?" and then you would say "Forget it, jerk!"
and then you would go away all mad and cursing under your breath
and go get into your car and slam the door and then squeal the
tires as you roar out of the parking lot and make a very rude
hand gesture to me as you went by and probably call me some dirty
name, and then I would not have to answer the question, which
suits me just fine.
But nevertheless, like one of today's "investors" who
is mindlessly plowing money into stocks and bonds and hoping
everything will work out for the best, I plunge ahead fearlessly.
After a few hours of looking things up the instruction book and
punching numbers into the calculator over and over and getting
different answers every time, I finally got a neighbor kid to
do it for me in five seconds, and told me that it was 138.68%
Perhaps this is why Mr. Shepherd says "Inflation is currently
running at about 20%, which is historically a very low rate of
inflation for Turkey." No kidding! Only twenty percent,
versus the long-run average of 138.68%? "Yeah," I say
with a suave, devilish Mogambo grin (S,DMG). "I can certainly
see that!" And indeed I can! Which will, I hope, finally
put to rest that whole terrible story about how I am so clueless
that I can't even see the obvious even when it is right in front
of my face, which I assume he means that my computer is looking
into my soul, hypnotizing me, and that explains who, or what,
is implanting the thought in my bursting brain that I must eat
nothing but donuts and high-fat, high-calorie foods, especially
those of the chocolate persuasion. And burn things! Everything
must be cleansed by the purity of fire! Fire! Burn! Everything
With a struggle I regain control over my raging thoughts, and
as I allow the SWAT team to slowly pry my fingers off the triggers,
I secretly vow to start taking those yellow pills again instead
of spitting them out when my attendants are not looking.
He asks, "Why couldn't the same thing happen in the USA,
or the Euro area, Or Britain? The simple answer is that there
is no reason why this could not happen." But to show you
how the Manly Mogambo (MM) treads fearlessly into places where
truly rational people will not go, even on a bet, I stand up
and promise, cross my heart and hope to die, even though I don't
hope to die, which shows you what a liar I am and how that is
only one of my many, many faults, that one day the U.S. dollar
will meet a similar fate, because there is not one instance of
a fiat currency, in the whole history of fiat currencies, that
DIDN'T turn to squat.
But he is not done with me yet. "The reality is that the
British Pound, like any other fiat currency, can simply be printed
very much at will and therefore has no real true lasting value.
Mr. Bernanke, a Federal Reserve Governor no less, has already
publicly explained in graphic detail the workings of the printing
press." Mr. Shepherd refers to that famous speech of Bernanke,
where he reminded us dumb yokels out here in the sticks where
literacy has not yet penetrated, that he has figured out that
we can print as many dollars as we want, which we already know.
This proves that I, for one, am light-years ahead of this Bernanke
jerk in the economics-smarts department, and indeed the Founding
Fathers, who were so backward that you couldn't even buy a Double
Café Mocha Latte Grande in the whole New World, but even
THEY also knew that you could use a printing press to print dollars.
And because they knew that, they were horrified that somebody
here in the USA might try that suicidal crap one day, and so
that was why they wrote into the Constitution that you could
NOT just print money on a printing press, and that money shall
ONLY be gold and silver, which you can't print,
and that was over 250 freaking years ago! And this Bernanke guy
is just now getting up to speed with that concept? Jeez Louise!
This just shows how slow on
the uptake this Bernanke character is, and that ought to fill
you with horror because this lamebrain is a Governor of the Federal
Reserve, and he is literally making monetary policy of the USA,
and, by extension, the world! If you are NOT scared by that,
then you are not competent to vote, unless you are voting for
the Mogambo for President (MFP), and then, in that case, you
ARE competent to vote, and that you should, as they say, vote
often and early for me, The Mogambo.
He goes on to show how a devaluation
of currency is actually, in this weird paradoxical way, good
for the stock market. If McDonald's, for instance, sells yummy
hamburgers in a foreign country whose currency appreciates 20%
against the dollar, then "McDonald's has now made a magical
extra 20% profit. In reality they have made no extra profit as
the Dollar has also lost 20% of its purchasing power, but in
simple numerical accounting terms they have."
This is a part of the "money illusion" of story and
song that so Bewilders The Common Man Until It Is Too Late To
Listen To The Mogambo, and how Mister and Missus America now
belatedly understand the True Meaning of Christmas. No! Wait!
Forget the Christmas thing! What I meant to write is that they
discover the True Meaning Of Having Your Currency Devalued By
A Dirtbag Central Bank Bankrolling The Cancerous Growth Of A
Government That By Necessity Grows More Tyrannical With Every
He asks "So if we can devalue a currency when necessary,
how will that impact the level of the Stock market? Please note
that I used the word level and not value. I would
suggest beneficially, because it allows companies to export more
product and gain a currency advantage over foreign competitors."
Fortunately, these are the same "foreigners" who are
so stupid that they keep buying our debt, even as interest rates
are rising and the dollar is falling, so I figure that they will
never smarten up to what we are doing to them, competition-wise.
Then he hammers home the point
by correctly noting that this brings up an interesting point.
"If you devalue your currency, you can artificially produce
more earnings and therefore influence the future direction of
the stock market." To which I append, "Well put, Mr.
Shepherd! Only with the caveat of ceteris paribus, which means
'all things being equal' which, of course, is stupid, because
there is never a time when all things remain equal, especially
when something so important as a 20% currency devaluation occurs,
and how there will be literally nothing that will remain, as
they say, equal, or even near to it, probably."
So, handing the microphone
back over to Mr. Shepherd, I sum up with, "So I append that
with the phrase 'In the short run.' " He takes the microphone
from me, but just stands there looking at me with this strange
expression on his face, like I took a bite out of one of his
tacos again when he wasn't looking. So I take the microphone
back, and I continue "See, in the longer run, if wages are
not rising as fast, or faster than, prices, then the consumer
is forced to A) either go farther into debt, or B) stop consuming
as much, or C) stop loaning money to the Mogambo and never getting
your money back no matter how many 'hints' you drop, and THEN
what in the hell are my wife and kids gonna do? Eventually, of
course, I run out of people who do not already owe me money and
have learned a valuable lesson the hard way, and so the consumer,
which is all of you, is eventually forced to choose B, and that
should makes stock prices go down, because companies that are
making less sales and less money usually have a falling stock
price. So which will it be?
This brings up a guy I recently saw on CNBC, who was apparently
a CEO of some company or another, and he said that, in effect,
the shares of his company are a screaming buy because, and you
are going to love this, "Prices for commodities and inputs
is up, but production volume is down." Reflexively, I leap
at the TV set, forgetting in my rage that I can't grab this guy
by the throat and shake some sense into his stupid head. Fortunately
I trip, and I land in a heap on the floor, and I say some bad
words. As I lay there, I am thinking to myself "Costs are
up, and volume is down? And I should buy the stock of this company?
Gahhhh!" Again I leap at the TV set. But it too late.
Since we are talking about things I remember, I saw part of a
science-fiction movie last night, and there was this scene where
the handsome biologist hero is explaining to the pretty newcomer
heroine (and all of us in the audience) that all the animals
have mysteriously disappeared in this whole region of the country.
And all the insects, too. Now, if you told ME that, I'd be screaming
like a banshee "Gaahhh! Get me the hell out of here! This
place is haunted!" which is, of course, the wrong conclusion
to jump to, but I eventually get it right, and how this is actually
a job for the EPA to come to the rescue and blame everything
on white men, especially white businessmen, and how we keep the
noble Native American down and the noble Black Man down and the
noble Women down and noble Children down and keep all the noble
Minorities down, wherever they may be around the globe, and all
the animals and insects all committed suicide to protest the
injustice, or maybe we just killed them, too. I dunno. And we
won't know the answer until the EPA report comes out, probably
in the sequel.
But our heroine, who personifies all that is stupid in America,
is not interested in hearing such things. She is not alarmed
at all that all the animals and insects are gone, like she never
heard of Rachel Carson or her monumental book Silent Spring.
Getting back to Mr. Shepherd, he thinks like me when talking
about the coming economic cataclysm of Baby Boomers moving into
retirement and start sucking up benefits. (Which reminds me of
a witticism of Eric Fry, who said "After winning the Second
World War, the greatest generation married in record numbers
and gave birth to the greatest generation of freeloaders ever
conceived - you know us as the 'Baby Boomers.' " Hahaha!
Well said!) But getting back to Mr. Shepherd again, he says,
"I believe the boomers will receive what they were promised
by Government. Unfortunately, they will be paid in vastly depreciated
Dollars." Like he says, paying off retirees is easy! You
need a thousand bucks? No problem! Print up some dollars to give
this man! How about ten thousand? No problem! And if you don't
know how to create money out of thin air, Ben Bernanke at the
Fed is the perfect man to ask.
He also correctly notes that
"Gold is not appreciating against the Dollar. It is simply
maintaining value as the Dollar depreciates." So it LOOKS
like gold is going up in value, even though
it is only going up in price! He then gives you a little trip
down the highways and byways of history when he says "This
is the job it does best, a job it has done for over 5000 years,
which is why Gold had true value in ancient Egypt, Greece, and
Rome and still has today. It is why gold
has been identified throughout the ages as real, lasting and
definable wealth-the currency of the kings. So do you own any?
If not, why not?"
- Tamara Draut, director of
economic opportunity programs at Demos, a public policy organization,
reports that "People are living paycheck to paycheck, and,
after they've paid the bills, everything else -- like groceries
or back-to-school clothes -- goes on the credit card. Credit
cards are picking up the slack in the household budget."
Now, people racking up debt is nothing new. But what IS new is
using credit to merely survive. It is referred to as "survival
debt." Exactly what percentage of credit card debt qualifies
as survival debt nobody knows, but Cavazos, Draut and others
who work closely with debtors say that even those who intend
to pay off these charges often fail to do so, which I assume
is because they probably still don't have any money. But survival
debt seems to be growing as a percentage of total credit card
In the same light, Robert McKinley,
CEO of CardWeb.com, an information provider on credit cards,
says "In 2003, consumers charged $50.6 billion in household
expenses on Visa alone." That is a lot of money, and a lot
of years go by that I don't charge $50 billion on my credit card,
especially for household expenses. But that's not the end of
it. He goes on to say "That's for cable, home and cell phone
use, insurance, rents or mortgage."
Rent on a credit card? Mortgage on a credit cards? Phone bills
on credit cards? What the hell are we coming to here? McKinley
says that the hot new revenue center for credit card companies
is . . . (are you sitting down?) . . . fast food.
- Jack Crooks, who wrote an
interesting essay entitled "Ominous: The US deficit vs the
dollar" on the Asia Times at atimes.com. site, says "The
Economist magazine recently summed it up this way: 'China's boom
is itself partly the product of the Fed's super-lax monetary
policy. With its currency pegged to the dollar, China has been
forced to import America's easy monetary conditions.' "
"When the US financial markets cratered in early 2000 after
one of the biggest financial parties in the history of mankind,
the Fed quickly stepped in to fill the void with liquidity. This
is why the so-called 'emergency' Fed funds rate of 1.0% materialized.
The Fed made it clear to all it would err on the side of creating
global asset bubbles in stocks, bonds and real estate to stave
off the bogeyman of global deflation. Well, the Fed succeeded
beyond anyone's wildest expectations at the time." By this
cryptic statement I assume that he refers to the rising and bubbling
price inflation that seems to be everywhere, the result of bubbling
monetary inflation that is likewise bubbling everywhere. And
sure enough, he goes on to say, "There seems to be a lot
bubbling around here!" Hahahaha! No, he didn't actually
say that. I said that to make you smile, because you are so pretty
when you smile. No, what he said will NOT make you smile, because
he says "Soaring crude oil prices are dampening growth prospects.
Property prices in Australia and the United Kingdom are already
falling. And policymakers are continuing to apply the brakes
in China where they can."
"These are the dynamics that scream for an eventual bust
in China. I believe this will be the catalyst for a dollar crisis.
It could be a wake-up call to US policymakers. They may realize
that ignorance is no longer strength when it comes to the deficit.
But by the time they act, most of the damage will probably already
be done." This reference to the idiotic epigram "ignorance
is strength" is from George Orwell's 1984, which we all
thought was just a book, but is turning out to be the horrific
blueprint for our future, except that we call it "The Patriot
- Rebecca Iocca, a reader who does NOT believe, repeat NOT believe,
that I should be locked up somewhere out in the country where
nobody has to ever see me or hear from me again and maybe I can
finally get some if that "therapy" wink-wink, nudge-nudge
that I so desperately need and maybe that will teach me a lesson.
I am keeping her e-mail with me at all times, and so the next
time that somebody says "Everybody thinks you should be
locked up somewhere far, far away where" here's where I
will whip out Rebecca's e-mail and wave it in their nasty little
faces, and then we'll see who has the last laugh! Nevertheless,
she is offering advice to the Congressional Transportation Committee!
"Instead of fixing our roads you should remind them of the
Bastiat's economic theory. Why repair roads, where by simply
allowing our cars to be damaged we could stimulate the economy
and save money from needless spending? It would be an absolute
economic BOOM!!!!" And she included one, two, three, four,
I count four exclamation points, which indicates a huge sincerity,
which all of us, and I am speaking for both myself and the Transportation
Committee, too, are thankful.
But Rebecca is not the only one who has a good idea. Another
guy who uses his head to carry around a big brain, Michael Bixby
Dudley, suggests that we could solve budget problems easily.
His fabulous solution is "Send 4.2 billion pillows to everyone
in the third world, pull all the teeth of everyone on
the planet, place the same under the myriad pillows, and the
dimes (or it is quarters, now?) will pile up to the sky, thus
solving the problem forever." Brilliant! And now I am more
depressed than ever. I mean, I go my whole freaking life trying
to have one good idea, desperately trying to come up with one
halfway original thought of my own, but I get zip. Then these
two hotshots come waltzing up, out of the blue, looking down
their noses at me, as if to say "Well, up yours, Mogambo!"
Another reader, Jill, figures
that the word Mogambo is actually an acronym for "Monstrously
Obsessed Guy About Money Being Overspent." And while the
term Mogambo did not mean that originally, it will from now on!
- As this week's "A straw to clutch, instead of grabbing
our own throats to keep from gagging in outrage," I am happy
to report to that American Central Bank Stupidity is not pandemic
in the whole world. According to the October 9 issue of the Economist
magazine, "Hungary's central bank has pursued an ultra-tight
monetary policy to compensate for the government's fiscal laxity."
So it IS possible for a central bank to act in a responsible,
intelligent manner to offset government insanity! I am, as you
are, aghast that Hungary, which has, as far as I know from my
parochial and dimwitted way of viewing the world as learned from
watching old movies on TV and having graduated from an American
public school that teaches that everybody and everything that
is not American is worthless, has never produced anything except
a lot of gypsies, goulash and excellent swordsmen, but is now
one of the few remaining central banks with integrity and wisdom,
although I am not sure, as it has been so long since I have seen
either in the USA that I am not sure that I would recognize integrity
and wisdom when I saw it. But it seems like it, anyway.
- Kurt Richevacher [Editor's note: This
is probably a deliberate typo -- so I didn't correct it] says "The U.S. economy is plagued
by an extraordinary array of growth-impairing imbalances: a record-high
trade deficit, a record-high budget deficit, record-high household
indebtedness, record-low national saving and asset price bubbles
supporting record-high consumer spending."
Did he say "imbalances?"
"Growth impairing imbalances?" I know what you are
thinking, because I assume that you are like me, an armed lunatic
on the edge of going ballistic at the economic insanity of this
country. And because you are, as are we all, paranoid and suspicious
of others, (and right now you are suspicious, and thinking to
yourself, "How did this Mogambo guy know I was paranoid
and suspicious"?) you are likewise thinking to yourself
"What is this Richebacher guy? [ä]
Some kind of Pollyanna optimist?"
You and I say this because I, or we, do not think that they are
"imbalances" at all, but are relentless horrors that
are going to track us down like Arnold Schwartzenegger as the
Terminator, and he is not going to fall for the old "crawl-inside-an-industrial-press-and-get-crushed"
gag again, and when he catches up with us, there is going to
be some hard way hell to pay. But he thinks this is an "imbalance"
that is "growth inhibiting"? Did Sarah Connor, looking
in horror at the Terminator trying to reach her to tear her throat
out, think to herself "Gosh! This is certainly growth-inhibiting?"
- I spent most of the week
in a delightful lightheaded giddiness, as I kept thinking about,
and then giggling about, and then laughing about, and then having
my joy evolve into this oddly strangely weird, hysterical lunacy
(that even surprised and frightened me, but then again I am The
Mogambo, so it takes very little to scare the hell out of me),
how the Nobel Prize in economics was given to two guys who proved
that the damn Federal Reserve is making a huge mistake in abandoning
the quest for low inflation to stimulate the economy to get us
out of the mess that the same damn Federal Reserve got us into
with their constant monetary stimulus idiocy.
So, all week long, it was my wife asking me "What are you
laughing about?" and then I'd say "Well, it seems that
these two guys won" and she jumps up and starts screaming
"Nooo! Not another damn story about those two guys who won
a stupid Nobel Prize in economics. I am up to here with you and
your stupid economics and the stupid banks! Is that all you ever
freaking think about, for God's sake! My friends were right about
you!" And here is where she usually started getting melodramatic,
as she stretches her arms heavenward, and she cries out in a
voice positively reeking of heartbreaking pathos, "And,
oh, how I pray for the chance to go back to THAT fateful day
where I came to (and here she lowers her eyes downward in her
profound sorrow) what I call 'The Fork in the Road.' "
Well usually this is about the time that my mind started wandering,
as I have had many, many visits to this fabled Fork in the Road,
and by this time I know exactly where both road lead. One road
leads to hell, which is me and everything, and everyone, that
I touch. The other road leads to some mythical Utopia, where
she is happy, her family is happy, and all her many, many friends
are happy, mostly because I am not around, and as far as I can
tell something pretty ugly happened to me at some fork in the
road, years and years ago.
Then I start thinking about how Prescott and Kyland won the Nobel
Prize for proving that Alan Greenspan is wrong, that the Mogambo
is right, and therefore it is proved that you should vote for
me, The Mogambo, for President of the United States, and then
I start laughing all over again, and now she thinks I am laughing
at HER, and so you can probably imagine what happened THEN! And
that somehow makes it even MORE funny, since I am sure that she
is probably going to end up killing me in my sleep one of these
days, so how much worse can it get? Hahahaha! See what I mean?
Hahahaha! But when I get to be President in a few weeks, I'll
bet she changes her tune pretty quick!
But Greenspan could have easily avoided all of this by merely
listening to me when I am yelling at him. But does Alan Greenspan
listen to me? No! He does NOT listen to me! And instead of answering
my phone call even one lousy time, he instead spent his entire
17-year career as the chairman of the Fed injecting excessive
monetary stimulus into the economy! And I grit my teeth in my
frustration and anger, jamming a fresh clip of expensive hollow-point
ammo into an assault rifle, because all of this unpleasantness
could have been avoided if he had, just once, picked up the phone
and said "Hello, Mogambo. I am glad you called. I am ready
to listen to you tell me how I am wrong about this whole monetary
policy thing, and how I am a big butthead, and all the people
at the Federal Reserve are all buttheads, and all the people
who do NOT say we are all a bunch of buttheads are also buttheads,
and I now am ready to do exactly as you say, and I will put the
entire Federal Reserve System into your capable Mogambo hands
(CMH). All hail the Mogambo!" See how easy it could have
- Doug Noland, who writes the Credit Bubble Bulletin for the
Prudent Bear site and is as upset about all of this as I am,
writes "The August Trade Deficit was reported at a miserable
and worse-than-expected $54.0 billion. August's trade shortfall
was 35% greater than 12 months ago and trailed only June's $55.0
billion. Goods Exports were up 16.8% y-o-y to $67.4 billion,
while Imports were up 22% to a record $124.8 billion. It would
require an 85% increase in Goods Exports to match Imports."
This is bad enough, but it
is inflation that gets my attention. Sensing that my mind is
wandering, he adds "Import Prices were up 7.8% y-o-y, the
strongest rise since June 2000. There have been only three stronger
monthly y-o-y price gain readings in the past 14 years."
Now I am paying attention again, and more scared than ever! 7.8%!
Did he "adjust inflation for quality?"
He notes that we are marking the milestone that this is the two-year
anniversary of Ben Bernanke's first major speech as a Federal
Reserve governor, which was entitled "Asset Price 'Bubbles'
and Monetary Policy." He continues "It is befitting
and worthwhile analytically - to concurrently note the
second anniversary of the 'great' Greenspan/Bernanke Reflation.
In hindsight, the title of Dr. Bernanke's speech told us all
we needed to know: Monetary policy inflated Asset Price Bubbles
to historic extremes. And as students of inflation would have
expected, the initial constructive aspects of Credit excess (liquid
and booming financial markets, rising real and financial asset
prices, stronger income growth and economic expansion) are now
in the process of giving way to the inevitable detrimental effects
of inflation. Surging energy and commodity prices, along with
rising import prices, have joined higher housing, insurance,
medical and insurance costs. Sporadic inflationary effects only
exacerbate economic distortions and imbalances, while general
economic performance (especially job creation) disappoints."
- An AP news item by Olgar
R. Rodriguez described the increasing popularity of cell phone
blockers/jammers. These are devices that prevent cell phones
from ringing and thus interrupting church services and weddings.
But buried in his newsy item was the revelation that "In
Mexico, the main clients have been banks looking to stop would-be
robbers from communicating with their accomplices and the Mexican
government" Hahahaha! I knew it the whole time! Just like
here in America! Hahahaha!
- If you promise to keep a secret, I accidentally got sent a
copy of James R. Cook's book "The Great Gold Comeback,"
and before you know it I was already reading it and marking up
nice little passages that I could use to add a little education
to my stupid newsletter, which is entitled The Mogambo Guru in
case you are wondering how it is that you are here, reading this,
and now you are saying to yourself "Hey! The guy's right!
How in the hell did I get here and why am I reading this Mogambo
crap? " And if you are, I suggest you cut back on the blue
pills and take a few more of the red ones with the white writing
on them. It worked for me.
As an introduction to my credentials,
I have spent a great part of my life reading and writing. Mostly
I write long angry letters to the United Nations ("Dear
U.N. Buttheads, I hate your guts!") and disjointed rebuttals
to the "findings" of mental health experts testifying
before some jerk judge or another, or how some mud accidentally
got on the speed-limit sign and so it looked like the sign said
"Speed Limit 80" and how even the cop who arrested
me testified that I was not going much faster than 80, and the
rest of the time I read economics stuff gathered from one end
of the galaxy to another, and that includes those less-developed
planets (LDP), or what my people call "LDPs," that
are so far down the socialist, Marxist, statist, collectivist
path ("Pew! I smell the stench of Democrats!" the Mogambo
says under his breath), that they are classified officially as
So it is a delight to me to reveal to you, here on the Mogambo
Network, that shining beacon of Truth, Integrity And Purveyor
of Overpriced Collectibles, Including Mogambo-Related Items,
which is now the generic term for "crazed and paranoid gold bug self-defense gun nut," something that
not even I, The Mogambo, knew.
Mr. Cook refers to a guy names Robert Ardrey, who wrote, way
back in 1966, a book called the "Territorial Imperative."
Now Mr. Cook summarizes it as "He linked behavior with defense
of territory." Wow! As a guy who has his undergraduate degree
in psychology (Mogambo Tip O' The Day (MTOTD): Psychology major
= loser), and who majored in it only because it was fun, and
it was easy, and I was hoping to save a lot of money through
the years by learning to diagnose my own various and crippling
psychological and psychiatric neuroses and psychoses and split
personalities and how I can read your mind and you are thinking
"The poor Mogambo! How he suffers! Maybe I ought to send
him a few bucks." But this Territorial Imperative thing
is interesting stuff.
This is because one of the Holy Grails of psychology is "motivation."
What is it? Where does it comes from? Why isn't everybody like
the Mogambo, sitting around all day in some drunken haze and
burping and shirking responsibilities, including those ones concerning
personal hygiene and not screaming at the neighbors for acting
like morons because they don't know anything about monetary policy
and how the Federal Reserve has taken the same ruinous path that
every other stinking dirtbag government/bank cartel in history
took? And since I am screaming hysterically about it, when I
say "all of history" you are supposed to get the idea
that this was some longitudinal thing over a long, long freaking
time, and we will predictably end up where they all ended up,
because it is axiomatic that those who do not study and learn
from history are doomed to repeat it (or rhyme with it, says
Mark Twain), and it is this whole repeating and rhyming thing
that is the answer to your freaking capital-gains prayers , you
idiots! Because if I told you that a run of dice was going to
repeat at a craps table you would have your fat fanny on a plane
to Vegas within hours, and if I told you that two hands of poker
were going to repeat you would shove your entire bankroll into
the pot and declare "I'm all in!" and although I just
finished throwing a lawn chair at the neighbors to get their
undivided attention, it STILL went over their thick stupid American
heads that what happened to various asset classes in all the
other times when a stinking government/central bank cartel foisted
fiat currency and fractional banking on a unsuspecting society
will probably be their best freaking chance to make a little
money on the coming cataclysm! Of course I am talking about gold, although now that I think about it, we were
originally talking about motivation.
Well, the Bible says that envy is the cause of wars, and author
Helmut Schoek likewise says that envy is the drive that makes
us get moving. Anyway, Mr. Ardrey says that, quoting Mr. Cook,
"There are three principal needs of all higher animals,
including man; the need for identity, the need for stimulation
and the need for security." Mr Ardrey himself writes "Identity,
stimulation, security; if you think of them in terms of their
opposites, their images will be sharpened. Identity is the opposite
of anonymity. Stimulation is the opposite of boredom. Security
is the opposite of anxiety. We shun anonymity, dread boredom,
seek to dispel anxiety."
And this brings me, naturally,
to the Second Noble Truth of the Buddha, namely that we suffer
because we, and catch the eerie parallel here, desire pleasure
and power! That sound you hear is the pieces falling into place.
- So we are standing at the
bar, and by this time I am so wasted that I can hardly stand
up, and I spill half of my beer in my lap! It looks like I took
a big ol' pee in my pants, so you can tell I am going to be one
of my "moods" pretty soon. But I try to cover up my
embarrassment by raising my half-full glass, and telling the
old joke about "Is the glass half empty or half full?"
and how the optimist sees the glass as half full, while the pessimist
sees that the glass is also half full, but we are all going to
die, anyway. Ha ha ha. The same goes with the debate "Will
we be killed by inflation, or will we be killed by deflation?"
All eyes were upon me as I lifted my finger, no, not THAT finger,
but my index finger, and with a stoned smile of serenity and
satisfaction beaming from my Mogambo face, I say "I know
the answer to that ancient riddle!"
A hush comes over the patrons at the bar. Even the bartender,
who doesn't think I can see him out of the corner of my eye,
stops putting some mysterious drops in my beer and leans closer
to hear what I am going to say. Drawing myself up off the floor
and swaying unsteadily to my feet, I announce "The Mogambo's
answer: some of both! Things that you don't want to see go down,
WILL go down! And things that you don't want to see go up, WILL
(burp!) go up ! The worst of all worlds!"
And the beautiful girl who was hanging on my every word eventually
stopped begging "Let me go! Let me go!" over and over
like she's a broken record and it's the only thing that she knows
how to say or something, except for how she also wants me to
give her purse back, says "Will YOU be in this new world,
this 'worst of all worlds' as you describe it?" And so I
lean over closer to her and purse my lips into a big sloppy kiss,
and I say "Yes!" and then she and all the other people
at the bar start that damned hysterical screaming again and blah
blah blah, and then I go home. And I was right: I was in a "mood"
But at least I have solved the "inflation or deflation"
riddle for you. Quote me if you want.
- Rebecca Hougher sent me a poem that she saw posted someplace:
are old, Father Greenspan, the young man said
And your hair is exceedingly white
And yet you continue to trade all those futures
Do you think at your age it is right?"
If the author wonders if it
is appropriate that Greenspan is trading our nation's future
for a little inflationary breathing room in the present so that
his whole ridiculous economic philosophy won't be completely
discredited before he dies and therefore he will not have to
face the wrath of the Mogambo, then I can answer the question:
no, it is not right.
- Gurram Gopal, who is an Assistant Professor of Business Administration
at Elmhurst College, writes that John Kerry's plan, (and apparently
he has a plan for everything) is to let us ordinary citizens
enroll in the health care plan that he and his horrid Congressional
buddies use. Mr. Gopal thinks this is a fine idea, but he asks
"Why stop at just health care? Let us expand the Senate
and House so that every American is a member of one of the two
houses. This immediately solves the unemployment problem. Every
citizen can take home a cool $158,100 this year, with cost-of-living-adjustment
(COLA) increases every year (2.5%for the upcoming year)."
You don't have to be a real smart guy to see the profound error
in that, but I am sure that some idiot in the school system,
which is, of course, redundant, is thinking "Hey! Great
idea!" because they are typical of the idiot Leftist trash
that keeps on referring to America as a "democracy,"
even though it is not. We are Republic. But if everybody was
a member of Congress, and everybody got to propose stupid laws
that benefit their friends while it destroys America, then we
WOULD have a true democracy!
** The Mogambo Sez: Just when I thought things couldn't
get any weirder, I look around and I notice that they do. And
just when I think that I could not get more scared and paranoid,
I look around, and I am.
October 20, 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.