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Gong! Gong! Gong!

Richard Daughty
...the angriest guy in economics
The Mogambo Guru
Provided as a courtesy of DailyReckoning

Dec 12, 2007

"We have finally overruled the Jeffersonian Republic that made America into the world power that it became, in favor of that Hamiltonian nightmare of a huge, powerful, dictatorial, fascist federal government"

Richard Schwartz of the Principles of the Stock Market newsletter is quoted in Barron's as saying, "It's not going to be the American consumer that rolls over first this time. This time, it's the financial system which is breaking down first. And then, after that, the very stressed, overburdened U.S. consumer will be forced to cut back because of rising unemployment."

So then I turn to the Financial Times to read essentially the same thing, as "US bank earnings plunged nearly 25% in the third quarter, falling below $30bn for the first time since 2003 as the sagging US housing market hit profits." Yow!

Then, alarmed that the first half of Mr. Schwartz's prediction about the banks failing is coming true, I look to see if the U.S. consumer is losing his job, and sure enough, I note with alarm ("Gong! Gong! Gong!") that Initial Jobless Claims jumped to a very worrisome 352,000 last week, continuing a rising streak.

Naturally, I then think about the future of my own job, but my boss refuses to answer me or even look me in the eye, and instead says that since I was goofing off and wasting company time reading Barron's and the Financial Times instead of working, perhaps I noticed that FT reports that loan loss provisions for American banks "rose $9.2bn, or 122 per cent, to $16.6bn" in the third quarter. They note that this "loss figure is the highest since the second quarter of 1987 and the second highest ever."

There are, apparently, a lot of people who have bosses like mine and whose jobs are hanging by a slender thread because they are incompetent losers, too, and who have cut back on their spending, as Reuters reports that "Consumer spending inched up by an unexpectedly small 0.2 percent last month and construction spending tumbled, according to reports on Friday that heightened concerns on the health of the economy."

And since we are talking about this Reuters report, even worse news is that "While personal spending rose slightly, the Commerce Department said consumer prices climbed an even greater 0.3 percent, leaving inflation-adjusted spending flat in October after a slim 0.1 percent rise in September." Yikes! Prices rising faster than wages! We're freaking doomed!

Maybe this explains why News.bbc.co.uk reports that "Over 1.3 million people, one in six New Yorkers, cannot afford enough food, with queues at soup kitchens getting longer, anti-poverty groups say", one of which is the New York City Coalition Against Hunger, and which "says the number of people who use food pantries and soup kitchens in the city increased by 20% in 2007." A 20% increase in destitute people in one year!

It reminds me of that Thomas Jefferson quote about how allowing the economy to fall into the hands of bankers is to (quoting from memory), "one day wake up landless, in debt, and as miserable, bankrupt slaves in the very country that our fathers fought to give us, proving that having a central bank is the biggest stupid mistake that a stupid country could make, and to allow a central bank to have the power to create excess money and credit out of fiat currency and thin 'fractional reserve' air will REALLY make things into a Big Stinking Economic Mess (BSEM), leading to the ascendance of The Mogambo, who shall lead us to the promised land of Austrian economics, where all people will live in the blissful heaven of a gold-standard static money supply so that inflation in prices is always zero - or less! - and so any increase in wages means an instant increase in the standard of living since prices have not increased, meaning that you can buy more stuff with your paycheck, whereas when you have inflation in prices caused by a despicable central bank creating excessive money and credit, the money goes into bidding for goods and services, driving up their prices, meaning that wages will LAG prices, so you have an a constant FALL in the standard of living, and this means that people will be stealing stuff from you to make up for their shortfalls, which reminds me to make sure I put that Second Amendment thing in the Constitution before we ratify it."

Well, I admit that my recollection of Jefferson's quote is a little fuzzy, but you get the drift. And while I am not sure that he ever actually referred to me directly, probably because I wasn't even born yet, you could tell what he was thinking.

But I saved myself a lot of Precious Mogambo Time (PMT) by not looking up the exact quote of Jefferson, and instead just using some remarks from Thomas J. DiLorenzo, a professor of economics at Loyola College. He writes that Alexander Hamilton was a moron Founding Father who liked a powerful federal government, a wishy-washy Constitution and central banks. He was, thankfully, outvoted by Jefferson and the other clear-thinking people in the room, maybe out of horror at the prospect of that Mogambo thing.

Now, pick up that remote control and hit the "fast-forward" button from 1776 to the last half of the 20th century, where we see that we have finally overruled the Jeffersonian Republic that made America into the world power that it became, in favor of that Hamiltonian nightmare of a huge, powerful, dictatorial, fascist federal government, an eviscerated Constitution and a corrupt Federal Reserve destroying the dollar.

Mr. DiLorenzo sneers at me that I am being much too narrow, and says that we now have "a republic of excessive public debt; inflationary finance fueled by a central bank that is the cause of perpetual boom-and-bust cycles; a dictatorial executive branch aided and abetted by 'black-robed deities' who have 'reinterpreted' the Constitution so much that the founders would not even recognize what is called 'constitutional law'; a tax burden that is even more excessive than that borne by medieval serfs; a standing army that is misused at the expense of genuine defense of America; an arrogant, imperialistic, and monopolistic government in Washington that rarely pays any attention at all to the citizens of the once-sovereign states; government policy that routinely benefits big, politically-connected businesses and wealthy individuals at the expense of the rest of society (neo-mercantilism); and protectionism."

The totality of it is that "Every one of these policies has been a curse on America. That is why every one of them, from central banking to public debt to judicial activism, was vigorously opposed by Hamilton's nemesis, Thomas Jefferson, and his political heirs, until they were finally snuffed out for good by the Lincoln regime."

I will take up the story from here and say that the republic was then taken towards the ultimate, hideous extremes ever since the deplorable Woodrow Wilson authorized the despicable Federal Reserve in 1913, which provided the money to pay for the Whole Stinking Thing (WST).

Now, taking that remote control once again in your hands, "fast forward" again to today, and take a good look at my Stupid Mogambo Face (SMF). Note the horror and sheer terror in it as I contemplate the inflation in prices that will destroy us, thanks to Wilson's Federal Reserve. Note the disgusting, greasy film on my lips and chin from my gobbling my lunch like an uncouth, ravenous savage. Note the rancid smell of something old and rotting that must have slopped out of my mouth and down the inside of my shirt. It doesn't get much worse than this.


Mogambo sez: There are many reasons why gold, silver and oil had a little downdraft in prices recently. I particularly like the one about how Someone Up There Likes You, and this mysterious someone is arranging things so that you can buy on a dip.

If you bought some, then you know it was you that is so adored, as is proved when their prices resume their inexorable climb to where you can say "I'm freaking rich! Let me pack a bag and I'm outta this dump for good!"

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Richard Daughty

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

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

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