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"How bad is it, Mogambo?"
There are
few happy-ending stories that begin with 'Once upon a time, the
money supply was falling...'
 Richard Daughty
The Mogambo Guru
The
Daily Reckoning
Oct 29, 2003
I'm getting so jaded here lately
that I am not shocked at anything anymore. The dollar collapsing?
Ho-hum. Monetary policy excesses? Boring. Fiscal insanity? I
am filled to the brim with ennui.
Lord William Rees-Mogg, an
esteemed insider with Strategic Investment, shows that he truly
knows how to think long-term strategy when he writes, "The
next 50 years will see the great Asian advance, unless it is
interrupted by political divisions, war, or other disasters."
Hey, dude! I got a big news flash for you! I am pretty sure that
there won't be any period of time in that whole next fifty years
that will NOT have any "political divisions, wars or other
disasters." Hell, I can hardly think of any time in history,
as far as I can tell from the one book of history that I glanced
through one time, when there was not any - what were those categories
again? - political divisions, wars or other disasters! Hell,
it's so bad (audience yells out: "How bad is it, Mogambo?")
that I usually get up in the morning and have all three of those
before the coffee finishes perking!
He goes on to say, "The
Chinese economy will be generally comparable to the United States
by 2050." Well, getting out the calculator, and repeatedly
subtracting 2003, which represents today, from 2050, which represents
tomorrow, I of course get several different answers in the course
of an afternoon spent feverishly pounding those numbers into
that poor calculator, but the data shows that the most frequent
answer is 47 years. And to tell you the truth, at my age, and
I admit to 39 because it worked so well for Jack Benny, the day
when I am interested in 47 years from now has long past. My distant
horizon, these days, pretty much extends out to "What's
for dinner?"
Larry Edelson, the gold editor for Martin Weiss' "The Safe Money
Report," writes copy like I would write copy if I was writing
copy. Dig this: "The Japanese have $10 trillion in savings.
If just one-TENTH of 1% of that money - or $10 billion - goes
into gold, that would be enough to buy up 26
million ounces of the yellow metal, wiping out nearly 4 years
worth of mine production." Note that he did not use an explanation
point at the end, although in my puny little mind it seems to
really call for one. Succumbing to a fit of curiosity, I immediately
want to calculate demand for gold if
these guys put the standard 10% of their assets into gold, and using Larry's analysis as the starting
place, they would consume all of the gold produced
for the next 400 years! Yow!
He also reports that in Japan
demand for gold is surging: "18,000 ounces of
gold were sold to customers in the first
two weeks of October, 80% more than this year's monthly average."
Man, demand for something is up 80% year on year? Wow! And note
again, perversely, the guy does not use an exclamation point,
but I am using the damn things all over the place in just describing
what he says! Look, there's another one!
He then goes on to say that
demand is "soaring," his word not mine, in South Korea,
Thailand, India, and in "nearly every Muslim country on
the face of the planet."
He sums it up with, "To
me, with demand surging like this in virtually every corner of
the globe, it's a no-brainer that gold
is going to my next target of $550." Well, if there is anything
that a no-brain dude like myself really likes, it is some advisor
telling me that an investment is a no-brainer, because that is
the only kind of thing I can understand, and then only after
somebody patiently explains it to me over and over and over again,
preferably with lots of visual aids. And it just so happens that
I have recently been through that exercise, and I agree with
him.
And all of this is before you
actually get to the Chinese, and there are a hell of a lot more
Chinese dudes than there are anything else. If THEY start accumulating
gold, and I strongly recommend that they
do, and in case one of them actually ever asks for my opinion
that is what I shall suggest, then what will happen to the price
of gold in response to all that huge new demand?
A jillion dollars an ounce? Will the dollar actually be worth
so little in the future that it takes a jillion of them to buy
a lousy ounce of gold?
On the other hand, Leonard
Kaplan of Prospector Asset Management reports, contrary to Larry,
that Japanese and Indian demand for physical gold
is very low, and has been low for quite awhile. And that there
is a low demand for physical gold all
over the place. This shows, I suppose, that his Japanese and
Indians are not good about identifying trends, or identifying
an asset that is rising in price, and has been rising in price
for seven years in a row, and if they HAD been buying gold they would have made a nice piece of change.
Nonetheless, Mr. Kaplan thinks
that maybe the there is something weird in the world of gold and gold futures, as evidenced in his choice
of title, "It is not a matter of manipulation; it is just
how the game is played." In short, manipulators running
the market down through a batch of sell stops, forcing them into
action, and pocketing the profits.
Or maybe it has something to
do with the world's central banks renewing the Washington Accord,
where central banks carry out their "sales of gold and uses of leasing and derivatives," probably
around 500 tonnes a year. Of that he says, "Please note
that the Central Banks of Britain, and Switzerland, among others,
were big sellers these past few years and that they look like
total morons now that gold is
at 7-year highs."
But whatever is really happening,
and I admit I am a clueless as the next guy, and probably more
so, the latest Lipper Mutual Fund Performance Average report
says that in the last 12-month period, gold-oriented
funds are up. They are up, let me check that figure again, 75%,
making them the best performing mutual fund of them all! Number
one! And by a long shot, too.
But my opinion, in case you
asked for it, which you didn't, is that fiat currencies are all
doomed, and gold has to go up because it is priced
in doomed-to-be-worthless currencies. It is just that simple.
And if you don't start accumulating gold
for yourself, then you had better start carrying a little notebook
around with you to write down your reasons why you did not, so
to be prepared to field future inquiries from your children and
grandchildren, such as, "Hey, old timer! Tell us again why
you did NOT accumulate gold, even
though it was the biggest no-brainer investment of the last century
or so! What a chump!" And if you are relying on an investment
advisor, then you can ask that question of him or her in the
near future, so that will be fun, too. And when you do, be sure
and write down what they say, because surely somebody is going
to collect all those lame excuses into a book entitled "The
Funny Things That Investment Advisors Say When Asked How They
Missed The Rise In Gold, And Thus Everybody Who Listened To
Their Stupid Advice Missed Out On The Biggest Money-Making Opportunity
Of The Last Few Centuries, One So Big And Important That It Is
Now The Actual Freaking Definition Of The Phrase 'No-Brainer,'
And Who Kept Their Clients In Stocks And Bonds, Even Though They
Were Ridiculously Overpriced And Only A Colossal Chump Would
Have Bought Them At Those Prices."
Well, you can see that I have
no real talent with coming up with book titles, which is just
the tip of the iceberg of all the vast constellation of things
I have no talent at, and even I think it looks a little unwieldy,
but you get the idea. And speaking of book titles, be sure and
get your copy of Financial Reckoning Day, hopefully a first edition.
And by reading it and taking the necessary precautions, then
you can easily afford the updated one they are going to print
in a few years. Hopefully, that next book will contain more flattering
references to the Mogambo Guru (total references in current edition:
zero), and maybe they'll even put my picture on the cover or
something, because having a picture of me, the Mogambo, on the
cover would really enhance my probability of buying a copy of
the book. And then to show you what an econometric genius I am,
I extrapolate that fact to show, with precise mathematical precision
out to nine decimal places, that everybody else would also be
more likely to buy a copy of the book if a picture of the Mogambo
was on the cover of it. As a function of income, it is an exponential
multiplier that I call it the Propensity to Mogambo, PM.
But right now the plan I have
carefully laid out for you is to get a copy of Financial Reckoning
Day, read it, underline whole passages, study it, comprehend
it, color whole paragraphs in yellow highlighter, and pore over
the graphs. The Mogambo looks down at the eager students, gently
reaches out his open hand, and says "Listen and listen well,
my little grasshoppers! I, the Mogambo, say to you that if your
souls are indeed pure, if your purpose be righteous, and with
the proper frame of mind, your course of study will be diligently
done. And it is thus that your consciousness will expand until
you will achieve Full Comprehension and Enlightenment (FC&E).
And if you check the schedule, you will notice that there is
a light buffet, and the next scheduled stop after that is Full
Panic Mode (FPM)."
For this reason I recommend
that you only read the book in the bright daylight hours, because
if you read it at night, when everything is scary and gloomy
and quiet, when all you can hear is your heart pounding in growing
panic, the clock ticking hollowly in the hall, and the sound
of CIA agents rustling around in the bushes outside the window,
well, that's what I did, and, I mean: Look at me! Do I seem normal
to you?
Wesley Clark, the Democrat
who is running for president, wrote a little piece in last Thursday's
WSJ to give us all a heads-up about what kind of a guy he is.
I have no idea why he wants to be president, as he is the perfect
stock tout. First, he starts off by saying that things are awful,
and he has personally met many people who have lost their jobs.
Then he says "My recommendation remains: Go long on the
US economy." People are losing their jobs, but they should
bet their lives on a bright future, preferably by buying a new
SUV, or overpriced stocks, or overpriced houses, or overpriced
bonds or something. He never actually says.
We all lost our boring jobs
and there are no jobs to be had, and the economy is this misshapen,
malignant, bloated, government-controlled and government-financed
mountain of debt towering over our heads, and here this Clark
fella is telling us, a la the optimistic message of the now-famous
Ronald Reagan theme, to make a bet with our remaining pathetic
few pennies, betting the farm on a glorious new American Century.
"After all," he cheerfully opines. "We have recently
seen how well we can do." And to this I say, trying as hard
as I can to keep the incredulous stupefaction out of my voice,
what "recently" is he talking about? I don't remember
that anything recently happened that would indicate a new American
Century, and in fact all I hear about is how awful things are.
And I didn't think HE has really heard anything else either,
as he started off his damn article saying how bad things are,
and how he has talked to all these sad-sack unemployed people,
and now he is all depressed and grumpy, and that is why he decided
to get up off his dead butt and run for president and how things
will be peachy if you elect him. And if he is talking about the
bubble of the 90's, then he is not qualified to be president
by a long shot, if he thinks that shows "how well we can
do."
Well, I have kept you on the
edge of your seat for long enough, so I will present the general's
plan. To add a little extra entertainment value, I will open
with bugles blaring, footage of ticker tape falling from office
windows, people rejoicing and jumping up and down in the street,
and then segue right into Clark's plan, which I am sure he thinks
is a big wonderful fabulous plan, to propel us into (ta-daaahhh!)
"A New American Century."
His first idea he calls "Job
Creation Is Job One." Kinda cute, huh? A job of making jobs!
Anyway, he figures that $20 billion in tax credits to businesses
would be about right, and this next one is a quote, because if
I did not actually use his exact words you would accuse me of
making it up, "Investing $40 billion in our nation's safety."
Ooooh! I'm all a-tingle! "Our nation's safety."
Anyway, he achieves this by
giving money to police (government employees), emergency workers
(more government employees) and "safeguards at our nation's
borders and bridges," whatever in the hell that is, but
I envision some government guy sitting at every bridge with a
uniform, a gun and a clipboard, waiting for some other government
employee to drop off his big pay envelope so he can duck out
early and maybe scarf down a few brews.
So, obviously, creating a bigger
and more expensive government is how this Democrat candidate
wants to create prosperity, which is how all Democrats think
you can create prosperity, and therefore he is just as big an
ignoramus as the rest of the Democrats, because all the evidence
of 6,000 continuous years of human history shows that bigger
and more expensive governments do NOT create prosperity. In fact,
if you want to know the ugly truth, they always create just the
opposite. Plus, this Clark guy has the added handicap of being
a retired military guy, whose whole life was completely divorced
from real life, and whose days consisted of taking orders from
superiors, filling out requisition forms, and waiting for somebody
to drop off a delivery of people and parts, regardless of cost.
And if that wasn't bad enough,
then he wants to increase the taxes on people making more than
$200,000. For starters, I assume. Because, and this floored me
when I read it, and while I was down there on the floor waiting
for the ambulance to arrive I noticed that there was this huge
dust bunny under my desk, he is going to raise $1 trillion, yes
one trillion dollars, by "adjusting the tax cuts which affect
the wealthiest families, those earning more than $200,000."
There is that $200,000 thing again! It keeps springing up! Now
these guys who are in the category of "Making The Big Bucks"
are going to pony up a trillion bucks between them! A trillion!
So, the question is, how many
guys in the USA make more than $200,000 a year? A couple of million,
tops? So Clark is going to take $500,000 from each of these guys?
He is promising to tax away 2.5 year's worth of their gross income?
I'll bet he just lost two million votes, right there, so I would
not bet on Clark winning the election.
His next item is "Restoring
Fiscal Discipline." And he gets into a bunch of stuff about
cutting spending and how bad it is and how it saddles our descendents
with the bills for our profligacy, and I agree with him 100%.
Secretly, I stand up in my own little way and cheer him, although
I am afraid that somebody will mistake that small, infinitesimal
point of agreement with my actually endorsing this man. So my
applause is more the mental, internal type, and on the outside
I am still grumpy and dyspeptic.
He also wants to "end
corporate welfare," waste and corruption, to which I reply
"Hey, doofus, it is corporate welfare that has kept prices
low and kept a lot of friends-of-Congress millionaires in cigars
and Rolls Royces! And better men than you have tried to root
out waste, fraud and corruption, and all of them have failed!"
And, of course, he has some
idea to provide "economic opportunity for all Americans"
which he defines as more education (the government again providing
something), a family's security (which is another example of
a government providing something, as I assume he means more police
and prisons, but NOT, as I had hoped, a Constitutional Amendment
guaranteeing the right of the people to carry a concealed bazooka,
because I think having one of those babies tucked up under my
trench coat would really bolster MY feeling of family security),
and of course, everybody working, so that they can pay higher
taxes and support the bigger government.
He also wants more access to
health care and child care, which means, of course, and by this
time I am sure that you saw this coming from a mile away, more
government paying for something. I say this since there is no
lack of "access" to health care OR child care that
I ever heard of, since all that is really lacking is the ability
to PAY for health services and child care. But they are, to use
his words, immediately accessible to everyone, even though he
bizarrely thinks that they are not. And I will let pass without
comment, well, okay, maybe a little sneer of contempt and disgust,
that I think that the whole idea of the government paying for
people's baby-sitting services is so, so weird.
Now, I am sure that this is
all as scary to you as it is to me, and you are starting to hope
that we are near the end of the Clark-the-candidate thing, because
you are not sure how much more of this you can take, and you
are clenching your teeth so hard by this time that you taste
blood. But I have a Hallowe'en treat for you! Well, I have one
if you think getting scared out of your skull is a treat. Ready?
He wants to, and let me provide the exact quote, because I am
afraid that it will lose some of its horror if I mess it up,
"We need a president who will lead the way in developing
an effective governance structure for global economics, one which
affords all people and all nations a chance to prosper."
If you reacted the way that
I did when I read that, I know that you have to go and wash up
and put on clean underwear after reading that, so I will be brief
in my summation: Wrong. Not only wrong, but wrong wrong wrong,
which is a stupid literary device I use here to indicate that
Mr. Clark is not only exactly180 degrees wrong, and could not
be more wrong, but that in the whole universe of wrong-ness,
there is not a small, tiny, little sub-atomic sliver of a part
of a tiny piece of what he said that is not wrong. The misty-eyed
and dim-witted One-Worlders of the country, and their idea of
a single benevolent global government, have a new champion. And
I will leave Mr. Clark and his presidential plan with a gratuitous
snotty and disrespectful aspersion on him and his horrifying
ideas, especially the one where he wants to create a one-world
government: "You ignorant commie weenie bastard."
Not to be outdone, on Monday
there was another article by yet another perennial Democrat presidential-wannabe,
Lieberman, in the WSJ again, and in the same place on the same
page in the Op-Ed section, which leads me to think that this
particular place in that newspaper is some kind of Zone of Democrat
Weirdness. In his introductory paragraph, he lets us know right
off the bat where he is coming from: He wants to reform the tax
code. He says he wants to restore "fairness" to the
tax code, which is Democrat-speak for "raising taxes on
those we figure aren't paying enough." And he wants to use
the tax code to "rejuvenate" the economy, which is
typical government-speak for utilizing the fiscal-policy club
to beat a little short-term performance out of the economy, which
is, as we all know, the government actually succeeding in beating
blood out of a turnip, leaving the government with a few more
gallons of turnip blood and leaving you with a bloodless and
lifeless turnip.
He also reveals his, and get
a load of this hubris, "Lieberman Tax Fairness Plan,"
which he is going to use to "reduce taxes for 98% of all
taxpayers." He wants to raise taxes for those making more
than $200,000, the identical group of lambs being culled for
shearing as in the Clark plan! Weird, huh? But Clark did NOT
christen his as "The Clark Tax Fairness Plan," so it
is easy to see why you are confused, and my bizarre style of
writing certainly doesn't help, I'm sure. But he, meaning Lieberman,
wants to raise the Social Security Tax, that luscious 15.3% bite
of every single dollar of income, on everyone. And there is a
certain fairness to it, and I say that top income earners ought
to pay the full 15.3% of income like everybody else, instead
of having their fully-taxable earnings capped at some piddly
$85,000 of income. These high-rollers are not getting away free,
however; they pay a scant 2.9% on income over that amount. And
Lieberman is right; that huge disparity is not fair.
Lieberman goes on demonstrate
that he is not just another pretty face, and justifies tax cuts
on the ugly fact that health care and tuition price inflations
are eating us alive, meaning that if health care and tuition
were not increasing then he would have no problem taking your
money away, and maybe even raising your taxes some more, because
he is a Democrat, but he feels your pain, so he wants the government
to Do Something, because he is a Democrat. So the one saving
grace is that there is a least one guy running for president
who understands what price inflation actually IS!
He also has some doofus plan
to balance the budget within eight years, based mostly on holding
the growth of government to the rate of inflation, like I am
going to believe that since I was born yesterday and I am so
stupid that I'll believe anything. So, he is admitting that there
will be at least seven years of deficits even under his plan,
and in that time he will increase taxes by an amount necessary
to achieve that goal, since he is already on record as saying
that he has no plan to reduce government spending to less than
growing at the rate of inflation. Promising to raise taxes by
such an enormous amount in such a short time ought to win him
lots of votes, eh?
He is also suggesting, and
I take full credit for this, as it was one of my sarcastic and
idiotic ideas that I used to demonstrate the folly of government
fiscal policy, which is to use tax credits for businesses. He
suggests a 20% tax credit for IT purchases. So, the way it works
is that you buy a thousand-dollar computer, see, you deduct the
whole thing as a business expense, and, and this is the best
part, you get $200 dollars in cash back from the government!
Of course, my sneering, sarcastic suggestion was to use a 100%
tax credit, which is even more ridiculous than his plan, so I
take a certain pride in that. But under my plan, which I will
call the "Mogambo Tax Fairness Plan" since doing so
is so popular these days, you buy a thousand-dollar computer,
you claim the whole thing as a tax deduction against income,
and then you get the whole thousand dollars back as an Investment
Tax Credit! So, under the Mogambo Plan you end up with a free
computer and some tax-free money, making you better off than
when you started!
The trial of Frank Quattrone
ended in a mistrial, and apparently it comes down to the fact
that his famous memo was to "clean up the files," and
did not actually say to delete or destroy them. Now if it was
me or you, see, this is where we would have made our big mistake:
we would have stupidly written a memo that read, "They're
coming to get us! We're all going to prison for long stretches!
Delete files and destroy evidence! And remember: In case anyone
asks, I was here all day last Thursday!" And when I say
"we" I mean, of course, me and everyone else, because
we all know what a big genius you, personally, are, and you would
never make such a rookie mistake.
But this is how we learn, and
there is usually a learning experience in everything. For instance,
I have finally learned that buying authentic pirate maps to buried
treasure from a guy I just met, in a convenience store parking
lot, out of the trunk of his car, are probably not going to be
worth the money. And this is where I always get all disappointed,
because the guys selling me the maps always seem so trustworthy,
and they even look me right in the eye when they ask me to trust
them, and they always seem so friendly, and they act like they
are just so happy to have met you, and how their little daughter
needs an operation or she will never walk again, and that is
the only reason he is selling this valuable map, cash, no checks
or credit cards, just cash, and that is why he would like us
to vote for him, so that he could enact legislation creating
a whole new program of wonderful benefits and helpful and courteous
government services for all of America's needy, the maybe-needy,
and the could-be-needy, whoever they may be, both now and in
the future, and establish a Tax Fairness Plan!
And for all you bank robbers
out there, the note that you give to the teller ought to be likewise
something innocent sounding, like "Please make a donation
to me, consisting of all the money you have handy, and then go
into the vault and see if there is any more money there, and
borrow that money, and give it to me as a donation. Thank you.
Have a nice day."
The litany of woes experienced
by the lower-income classes is heating up, judging by the seemingly
increasing number of references that I run across in the media.
Whatever low-income group you talk about, somebody is speaking
up about them and their escalating desperation. The homeless.
The poor. The disabled. The immigrants. The minorities. The seniors.
I am sorry to report that the misery will continue to grow in
breadth and severity, and it will continue to be more so in the
future. Week after week you will be able to see it in graphs
and charts and visual aides. Month after month there will continue
to be strident calls for the government to "do something"
to help these pathetic, desperate people. Year after year the
big situation gets worse and worse, and everybody's little situation
gets worse and worse, and pretty soon the whole freaking enchilada
is getting worse and worse. And tempers will flare, and scapegoats
will be found, and the excess population killed off.
I know I shocked you with that
last part there, you know that part about excess populations
being killed off. But, you know me: I am always trawling for
the Nobel Prize in Economics, grubbing around in the gutter and
sewers of the world of economics, and especially that million-dollar
prize money. Or even just the money, if you want an example of
how flexible I can get on this thing. And now, to my amazement,
econometric guys are still winning the damn things, even though
I get up and look out of the window and I see the result of them
and their damned stupid cockamamie theories, and their damned
stupid econometric models, and their damned stupid monstrously
over-inflated egos, thinking they could make an healthy economy
out of fraud and printing money, when not one other country in
the history of the world has ever done it, and all of them tried
to print their way of their stinking mess and none of them could
do it! But Alan Greenspan, and Ben Bernanke, and all those Fed
governors, and Fed big shots, and advisors, and researchers,
and concerned bank presidents, and Congressperson meddlers, and
computers, and computer models, and miscellaneous hangers-on
and loudmouth bores, all smugly thinking that now - now! - after
all these wasted centuries, now will our geniuses in charge make
a vibrant, healthy economy based on fraud and printing money,
and then forever preventing the collapse they so justifiably
earned, when, as I said, everybody in all of history has else
has already tried it, and NOT ONE OF THEM EVER CAME CLOSE!
Jeez, now I'm all worked up
in a sweat and in a really foul mood! What were we talking about?
Oh, yeah, my Nobel Prize-winning economics idea! Well, first
we note that that poor brain-dead Terri Schiavo woman was ordered
by a court to be left alone to starve to death. Why? For the
money, stupid! It's always about the money! Everything is always
about the money! This brain-dead woman is costing somebody around
a hundred thousand dollars a year, every year since 1991. And
I don't know where you come from, but around these parts $100,000
a year is a lot of money to keep a human vegetable alive.
And so killing off the old
people and the disabled people and all the rest of those people
gobbling up expensive government-provided money and services
would instantly alleviate the stress on those systems. And then
Social Security would always be solvent, since retirees would
all be dead, and Medicare would always have enough money, since
the sick would all be dead, too. And those smelly homeless people
would all be dead, and not creating an unsightly mess by sleeping
on the sidewalk!
But getting back to the point
I was trying to make, which was about how the poor and the old
and the disabled and all those static-income people get the old
baseball-bat-upside-the-head treatment, or in this case let-them-starve-to-death
treatment, when it comes to inflation. And I know it is inflation
that is causing their problems because all the problems being
suffered by these pitiful people are the one same problem; prices
rose faster than income, and now they don't have enough money
to buy the things they need. But they USED to have almost enough
to buy the things they needed. But nowadays they do NOT have
enough money to buy, you know, the things they need.
And I know this for a fact
because history has shown that these are the people who ALWAYS
feel it first, and then the misery travels up and up into the
middle classes and chews their guts out awhile, and then pretty
soon everybody else is looking at reduced real income.
Welcome to the Wonderful World
of Inflation!
And speaking of inflation,
and hardly a minute goes by where I don't bring it up because
it scares me to death, USA Today has an article entitled, "Bernanke
Has No Fear of Diving In." The article announced that he
was appointed to a 14-year job at the Fed. But it also had a
little information about the guy, such as, "In a break with
Greenspan, Bernanke is prodding the central bank to adopt a target
or range of acceptable inflation. He says such a target, mentioning
1% to 2% annual core inflation based on a preferred Fed measure
as a reasonable bound, would give markets increased confidence
the Fed will not let inflation soar too high nor plummet too
low."
So, right off the bat we have
a new Fed big-shot promising price inflation! Could anything
BE farther from the goal of a central bank? And as a direct corollary,
is there anybody who is LESS deserving to be getting an appointment
to the Fed than this Bernanke creep? The goal is supposed to
be zero inflation, or, better yet, gently falling inflation,
which would give people an automatic rising standard of living!
But nooOOOoooo! We have a guy standing right there in front of
you, appointed to a sparkling new 14-year term at the central
bank, looking you right in the eye, who has the sheer gall to
promise to use all the powers at his disposal to give you a constantly
lower and lower standard of living, every year, for the rest
of your life!
The article goes on to say
how Greenspan disagrees. Oh, not about cramming a lower and lower
standard of living down your throat by fostering inflation. No,
Greenspan's objection is that setting a strict a inflation goal,
"used by other central banks, could limit flexibility."
Man, I love that word! "Flexibility!" So what else
is Greenspan "flexible" on? Well, the Greenspan Federal
Reserve has consistently broken every rule of responsible and
prudent economics and central banking, so you have to assume
that he is flexible on most everything, as long as it results
in you getting whacked on the head.
And perhaps the ultimate in
flexibility is permitting a jackass like Bernanke, who is promising
you the one thing that is to be feared over all else, namely
persistent, gnawing, cancerous price inflation, to be appointed
to the Federal Reserve. It reminds me of a speech by Groundskeeper
Willie of the Simpson's TV show, who was testing a podium microphone
and facetiously said, "And if elected, my first official
act in office will be to kill the lot of you, and burn your town
to ashes!"
Kurt Richebcher, one of the
toppest of the top dogs in the realm of Austrian-type economics,
is a glum as I. In his latest screed, he writes, "Focusing
strictly on the hard economic data, like employment, personal
income, production, business fixed investment and profits, we
completely fail to see any recovery at all in the United States.
Measured by the hard economic data of employment, income growth,
production and new orders, the U.S. economy is at best stagnating,
if not weakening. Its apparent acceleration has its main causes
in sharply higher government spending and the big deflator for
business investment in computers."
Steve Puetz, the superstar
behind the Steve Puetz Letter and that is why they named the
newsletter after him, writes, "The drop in home-mortgage
refinancing applications is probably the foremost indicator of
bad things ahead for the economy. Refinancing applications normally
lead changes in the economy by about three months."
I'm not sure how reliable this
new refinancing statistic is as an economic indicator, since
refinancing your house, aka "going deeper into debt,"
for the purpose of merely getting a wallet full of some more
spending money is a pretty recent innovation. So while the change
in refinancing may or may not be a leading indicator of economic
activity, and I suspect that it is, I am nevertheless absolutely
SURE that the rise in refinancing activity is a coincident indicator
of the fall in the collective IQ of Americans, which has been
falling for so long, as indicated by the increasingly stupid
ideas we are now believing as a nation, that I figure the average
IQ of Americans is pretty much down there in the gerbil range,
without, you know, insulting gerbils, because to tell the truth
very few gerbils go deeper into debt by refinancing their cages
to buy a new exercise wheel, or for whatever it is that gerbils
spend their discretionary cash on.
On the other hand, the fall
in refinancing probably IS now a leading indicator, and Mr. Puetz
is probably right on the money, no pun intended.
The rate of interest that Certificates
of Deposit are paying has been rising pretty steadily here lately,
and it appears that the bottom in those rates was in June. I
think it is significant that banks are now paying higher rates
to attract deposits. In 2000, 6-month CD rates were almost seven
percent, versus the 1.25% rate now. Still, even though the absolute
rate is still quite low, it is the direction that rates are going
that seems important.
Richard Russell, Dow Theory
Letters, "Last week M-3 broke below its 20-week moving average
for the first time since July 1994." I've been watching
those M numbers too, but given the upheavals going on, I am not
sure that they mean anything anymore. I mean, the Fed and the
banks and all the banks all over the world have told so many
lies, and changed so many things to suit themselves, and committed
so many blatant frauds and crimes against economic nature that
I am not sure of anything anymore.
But something big and ugly
is stirring, because there are very few happy-ending stories
that start off with "Once upon a time, the money supply
was falling..." Think of your own life, and imagine a happy
future when your money supply was falling.
But since the original high-powered
money was created out of thin air to start with, and then that
money was turned into loans, which turned into money supply,
then it seems obvious that when loans started going bad and banks
stopped loaning money, that the money supply would automatically
drop as that money disappeared back into where it came from,
which is thin air.
Harry Schultz, he of the famous
HSL Newsletter, opines that "OPEC is run by largely anti-West,
anti-US nations. Here's their chance to make money & get
back at the West/US. Look for higher oil for a long time."
Well, I am not sure how far
the anti-Americanism of OPEC runs as concerns making money to
feed their wives and kids, but I can see where their natural
instincts and business savvy would cause them to raise the price
of oil when calculating market price in terms of depreciating
American dollars. If one assumes that fiat currencies never lose
purchasing power, then the American Indians would still be able
to buy Manhattan back for $24 in beads and trinkets, which was
probably the first instance of the use of fiat money in the USA,
 As an additional anecdote and alliteration,
which is one two three four five six words long, Debbie Holly,
my beautiful and talented sister in law, makes her living selling
soft-sculptures, mostly whimsical flamingos in comical outfits,
at arts and crafts shows. And when you talk about whimsy, you
know that these are sales that depend on the most discretionary
of discretionary income. So how is the market for whimsy? She
reports that sales are soft, and have been getting softer for
quite a while now, and all the other vendors are reporting sales
that mostly range from poor to bad to horrid to "losing
money just by showing up."
So what kind of America is
it that won't spend fifty bucks on a flamingo
wearing pearls, sunglasses and high-top tennis shoes?
Ugh.
---Mogambo Sez: Don't worry about the Federal Reserve.
They aren't going to do much now or anytime soon, because changes
in Fed policy take about nine months to affect the economy. It
is twelve months until the November 2004 elections, and the last
thing those Fed weenies want is to be accused of partisan monetary
policy, which will invite the inevitable Congressional interest,
which will invite the inevitable Congressional investigations,
which will invite the inevitable Congressional horror, which
will invite the inevitable Congressional meddling.
Richard Daughty
October 29, 2003
Copyright ©
2000-2003 Agora Publishing, Inc. All rights reserved.
The
Mogambo Guru Lives!
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.
The Daily Reckoning
Bill Bonner
and Addison Wiggins's book: "Financial Reckoning Day:
Surviving the Soft Depression of the 21st Century" is
now available.
You can buy
it
online from Amazon.
Sales rank: #68 on Oct 29, 2003.
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