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Ceri, I vow to start taking those yellow pills again

Richard Daughty

The Daily Reckoning
...the angriest guy in economics
The Mogambo Guru
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 essay "Buy 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 their limit."

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!

- "3,000,000 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% per year.

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 must burn!!

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 Day.

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 indebtedness.

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 Act."

- 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 been?

- 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 "morons."

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" all night.

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:

"You 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
Richard Daughty

The Daily Reckoning

Richard Daughty is general partner and C.O.O. for Smith Consultant Group, serving the financial and medical communities, and the writer/publisher of the Mogambo Guru economic newsletter, an avocational exercise the better to heap disrespect on those who desperately deserve it. The Mogambo Guru is quoted frequently in Barron's, The Daily Reckoning and other fine publications.

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