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Situations That Cannot Last

Richard Daughty
The Daily Reckoning

...the angriest guy in economics
The Mogambo Guru
December 16, 2004

- The end-of-year monetary and fiscal madness is taking me by surprise again, as every year I think that it would be too embarrassing for the Federal Reserve to have to admit their failure, and thus be "forced" to act so irresponsibly. Now they have to, once again, resort to such shameless and irresponsible behavior, as they have been bigger failures this year than last.

Remember, we are, and have been for a long, long time, in a bizarre era of government people thinking they can "manage" the economy and everything IN the damned economy. The Congress, the Federal Reserve, and the local governments have all been busy, busy little beavers, either authorizing the legality of the latest scheme, or providing the financing for those schemes, and everybody eating the profits of those schemes, to the cost of impoverishing the citizens, either by taxing them directly, or by devaluing the currency (which shows up as price inflation), which leads to wage increases by government employees, who are now allowed to collectively bargain, and so the guys on the other side of the bargaining table is another group of government employees, so you know how those negotiations work out!

Sure enough, around here, the latest "bare-knuckles" labor contract negotiations with the police unions resulted in three-year police officer's salary increases of 4% this year, 5.5% next year, and 5.5% the third year! Unfortunately, wage increases for the ordinary taxpayers have been much, much lower than that. So the net result is an impoverishment in the taxpaying citizenry, and a higher-paid police force.

It's not that they probably don't deserve the money, because I have seen the TV show "Cops" enough to know that dealing with the low-IQ, horse's-ass, gutter-dwelling idiot segment of the American population is NOT something I want to do, and if you wanted the cowardly Mogambo to do the police's job you would have to pay me a HELL of a lot more than some stinking $45,000 or so (the newspaper article only mentioned the starting salaries of about $36,000, and of course did not mention the rest of the wage scale, which is obviously significantly higher). But as for economics, it is bad, bad policy, and will have an effect on the economy, and it will almost certainly not be good, as I have never, ever read where it is a good thing to be increasing the salaries of government employees when the general population is not seeing their wages and salaries going up, although the latest statistic is that aggregate wages and salaries are going up by 2.6%. But when you strip out the wage and salary increases being granted to government employees (one out of every seven workers), this means that the rest of us are not seeing squat, as far as fatter paychecks is concerned. Government employees making more money than the rest of the taxpayers is one of those Situations That Cannot Last (STCL).

In a related vein, nonfarm payrolls are still down from where they were in 2002, but government payrolls have gone up 2.4% in that time. So government grew in size, and everybody else shrank. This is another of those famous Situations That Cannot Last (STCL).

Even Kurt
Richebächer is taking a look at this crap, and says "We come to the worst part of the poor U.S. employment performance: the dismal growth of aggregate wage and salary income. Wage rates have continued to rise, but taking job losses, shorter working hours, a considerable shift from high-paying manufacturing jobs into low-paying temp work in services and rising inflation rates into account, overall wage and salary income in real terms remains below its December 2000 level."

But the whole point is that the stinking Federal Reserve is still pulling out all the stops, and is creating money at a suicidal clip. Doug Noland, who has a particular fetish about this, as do I, and I therefore thank Mr. Noland for having it, because that means that there are now at least TWO of us out here who are mesmerized by it, "Bank Credit has expanded $517.1 billion during the first 48 weeks of the year, or 8.9% annualized."

- The results of the recent G-7 or G-8 or G-20, or whatever they are calling it these days, is becoming clear. They ate well, they had a few parties, told a few jokes, and decided to continue their present moronic course, the same one that got us into all this trouble, and those kindly foreigners will continue subsidizing us through the Christmas season at least. But it subsidizes them and their filthy inflationist agenda, too, as they create money via their own central banks to buy the dollars to buy the US debt. And true to their word, foreign custody holdings at the Fed expanded by $6.6 billion, which is not a new record in terms of one week, but it IS a new record, in terms of total, globulistic, gigantic globs of US debt that they are saddling their citizens with.

- Consumer installment debt jumped again, and is now on track to break the $2.1 trillion mark next month. In December 2001, it was about $1.6 trillion. A decade ago it was a mere $900 billion. The Fed's Flow of Funds report showed, according to the Wall Street Journal, that "U.S. household debt grew at an annual rate of 9.1% in the third quarter, up from 8.5% in the second quarter." Going into deeper debt at a rate that equals 9.1% of total debt, accumulated over decades! It just doesn't get weirder than that!

- I saw Abby Joseph Cohen on TV, and I am sure that I got a few more demerits on Santa's "Naughty or Nice" list from the terrible things I said about her, although she was on TV, but you could tell by the look on her face that she knew The Mogambo was out here bad-mouthing her. She says that the 30% drop in the dollar makes our stocks and bonds more attractive, since foreigners with nice, strong currencies can buy them for a lower price, in terms of their own currencies! What a selling point! "Crud for sale! Crud for sale! Hey! Buddy! Come over here! Buy this bucket of crud for a dollar! It was two dollars last week, so it is a real bargain today!"

On the one hand, she is exactly right. Our stocks and bonds ARE cheaper at this exact moment, if they buy dollars with their own money with which to buy the stocks and bonds. But you let the dollar drop some more, and suddenly you have people calling Ms. Cohen on the phone and calling her lots of very rude names, sort of like the caustic comments that The Mogambo sends winging her way every time I happen to see her running her fat mouth. But she is right, in that at this exact, instantaneous moment, they are indeed cheaper to new buyers.

But on the other hand, guys who were ALREADY sitting on US assets have watched in horror as the value of their holdings has dropped by 30% just on currency translations alone! So how anxious are they to pick up MORE assets denominated in dollars? And do these two groups of people know each other?

Now you know as well as any American who has been privileged to get an American education in an American school, all foreigners are a dumb bunch of dirty, smelly people who aren't very smart and don't speak English, and who do everything comically wrong, and then we brave Americans have to go and save them. So maybe Ms. Cohen is right: maybe they WILL ignore their losses, and ignore the certainty of a declining dollar, and they will continue to act like idiots, and buy more US assets! Hey! It could happen!

- Reader Robert M. liked my new national holiday, Mogambo Day. He writes, "I think I could catch the spirit of a Mogambo Day! We could drink & drive, shoot guns, buy precious metals at a discount, etc." Now you're talking! Originally, I was thinking along the lines of a combination of my birthday, Father's Day, a little Christmas good cheer thrown in, maybe a dash of Thanksgiving for the gluttony, etc. But Robert may be on to something here! Especially that part about buying precious metals at a discount. "The gift that keeps on giving!

Speaking of buying precious metals at a discount, I got a press release from the American Liberty Dollar people, and they are announcing that the "slot" is set to double. In short, up to now they have been issuing the one-ounce, .999 silver $10 Liberty Dollars, and storekeepers and retailers have been, so they say, happily accepting them when people use them to buy things. But now that silver is getting to be so expensive, thanks to the debasement of our legal tender by the jerks mismanaging our government, they obviously cannot continue issuing a full ounce silver, umm "medallion" (they really hate it when you use the word "coin," as I found out when 1) they told me so when I used the word in casual conversation and 2) that same night somebody knocked over my garbage cans. Coincidence? Perhaps. But I wonder) and denominating the it as "Ten Dollars." So, they have to raise the face value to some higher number. Thus, the press release: They are on the cusp of issuing the same one-ounce of silver as the $20 Liberty Dollar.

Holders of old $10-base money can now turn in one dollar for, and hold onto your hats because mine flew up in the air when I read this, two dollars. But imagine that! Money in your pocket that actually goes UP in value, instead of having paper dollars in your pocket that continually go DOWN in value! Last night you went to bed with $10 of buying power, and this morning you wake up with $20! Ahhh! The glories of real, hard money!

Their aim is laudable, even noble, and I am sure that the Founding Fathers would be proud of them, as they want nothing more than to get the USA back on real silver money, and thus save our country from the guarantee of economic ruination that comes from having something as preposterous as fiat currency, especially when coupled with a fractional reserve banking system. And they are doing it, as they say, "one dollar at a time."

I will not take you down the long, long list of reasons why this would be a very, very good thing, as all you have to do is get up and walk over to your window and see the result of NOT having money that is, as the Constitution requires, made "only of silver and gold" and when you get back from looking out of the window at the huge, suffocating, bankrupting economic problems that we have, you will have page after page after page of very good reasons why this would be a good thing. And then perhaps you will also get an inkling of why America became the world's economic powerhouse, up from nothing, when our money WAS made of silver and gold.

And if this was not enough, you can buy the new $20 Liberty Dollars at a discount! At a big premium to the silver content, to be sure, but you spend them as twenty dollars of buying power, and are not investment in silver. Ergo, you get a discount on everything you buy with them, every time you spend one! It costs twelve or so bucks for one of these $20 Liberty dollars, and then you get to use them like a $20-dollar bill? I know what you are thinking, because my little brain was spinning, too, and since my brain is so much smaller than YOUR big powerhouse brain, you can imagine how adversely I was affected. So, in my incredulity, I actually talked with Bernard NotHaus, who is one of the founding big shots at LibertyDollar.org, and he was real nice to my face and all, but I can only imagine the nasty things he is saying about me behind my back. But we seem to have confirmed that however screwed up my medications are, and although my words are slurred, I seem to mumble incessantly, and I am simultaneously listening to strange voices in my head, I haven't screwed up the basics of the deal too much.

But this demonstrates the power of silver (commodity) money; it has a tendency to get stronger, whereas paper money always gets weaker and weaker, just like now.

Along the same lines, Bob Hoye of Institutional Advisors, in an essay entitled "Princely Finance and Taxation", writes, "Fortunately, history indicates that the public will eventually figure out that no matter how beguiling the claims about currency management and taxation are, the gambit has been mainly to confiscate private savings. They will then demand the return of sound money and accountable government."

And he is exactly right, although they usually "demand the return of sound money and accountable government" only AFTER the whole shebang goes ker-flooey and there has been a lot of hollering and screaming and whining and threatening, and the government has done shameless, crazy and confiscatory things, and everybody is angry and bankrupted and scared and there are enemies knocking down the gates.

- Speaking of precious metals, Richard Russell, of Dow Theory Letter fame, writes, "I get e-mails every day asking 'How much gold should I own?' The government's propaganda has been going on so long that they've got innocent people content to sit with fiat dollars, but afraid to own 'too much' gold. Nobody sends me e-mails asking 'How many dollars should I own?'" Hahahaha!

But we listen to Richard Russell for more than witty anecdotes that make us laugh. Knowing this, he goes on to give us a little of that Dow Theory, and writes "I've been saying that there won't be any trouble until the bonds tell us there is. So saying, let's look at an updated chart of the bellwether 10-year T-note. Here we see a chart of the perfect two-headed 'head-and-shoulders top.' And if you are at all hip to elementary technical analysis, then you are acutely aware that there are usually significant ramifications to a "head-and-shoulders" top, which is why the call it a "top."

- "The Porsche Syndrome" is an essay by Randy Buss of Der Invest Informant. "I call it the Porsche Syndrome. Where one who is intent on killing himself (The Fed) decides to at least 'go out in style' and takes the 911 turbo up to 10,000 rpm into a brick wall - that certainly seems to be the US' fiscal model."

The clever wags at Daily Reckoning have such a literary way of saying things, and in commenting on Alan Greenspan and the Fed, they write, "And who can blame Mr. Greenspan? Did not he do the smart thing, too? He got a chance to play a role that the world wanted him to play - a central banker so shrewd he could make sure everyone got something for nothing... an economist so savvy he could come up with a short term lending rate better than the one that buyers and sellers of credit would choose on their own. The world wanted to be deceived; Mr. Greenspan gave it a great performance. Hocus-pocus, mumbo-jumbo, folderol and voodoo - the Fed chief used every technique known to modern economics and ancient legerdemain!"

Okay, then we get to the crux of the whole thing. They conclude "But what will we really get from Mr. Greenspan's sparkling performance? Something for nothing? Or nothing for something? We are on the edge of our chairs."

Fabulous! I love that underlying sarcasm! "Will we get something for nothing?" they ask, all wide-eyed innocence. Hahahaha! What humor! "Will we get something for nothing?" Hahaha! Stop! Stop! I am laughing so hard my sides hurt! Hahaha! Please stop!

And that crack about being on the edge of their chairs is so deliciously rude, so disrespectful, so perfect, that I wish I had thought of it myself and as soon as nobody is looking, I am going to say that I DID think of it!

- John Snow must need money badly, and to tell you truth I was not aware that the position of U.S. Secretary of the Treasury paid that much. He wanted a job that literally nobody else wanted, and because of the insurmountable problems, people who were approached about taking the position actually ran away in fear. Then, suddenly, when it becomes clear that nobody would take the job, he gets an offer from the White House to stay on the job. If not for the money, why did he accept a job that has such a guarantee of failure?

- "A Specter Is Haunting Liberalism" is an interesting essay by Joe Sobran. "How did the government manage to grow out of control this way?" he asks. "Simple, really. It has successfully claimed the final authority to interpret the Constitution. Everyone seems to have forgotten Jefferson's warning that if the Federal Government is allowed to decide the extent of its own powers, there is no reason to have a written constitution at all. That government will just take what it pleases, insisting that all its power grabs are licit."

And the culprits are, of course, the boneheads of the Supreme Court, who ruled, time after time in case after case, that the federal government could do all these things, and Mr. Sobran actually points out a few of the infamous Leftist weird-o's who stunk up the Supreme Court, such as buttheads like Earl Warren, William Brennan, and Thurgood Marshall.

Thus is the same Supreme Court system of corrupt, gutless cowards who let FDR put us on the path of the destruction of our economy, by making money of something OTHER than the required silver and gold, as freaking required by the Constitution. This is the same corruption of the Supreme Court that admitted that Affirmative Action was un-Constitutional and therefore illegal, but that they were going to allow it anyway. These are the same imbeciles who found that since a lot of states passed laws prohibiting the execution of retarded murderers, they now see a new Constitutional right of the retarded to murder without danger of being executed. But these are the same butthead hypocrites who are now deciding that even though a terminally ill woman can only find relief of her suffering through marijuana, the stupid federal Rockefeller-era laws, in all their silly, hyperventilating "Reefer Madness" hysteria, override any and all state laws that allow her to have it, and therefore the Supreme Court will rule that she must not just die, but die suffering. This is but to scratch the surface of the continual corruption of the Supreme Court, a pox on all their houses.

- David Morgan, of the Stone Investment Group, reports that the "Chinese use about 1/70th the amount of silver per household that is used by advanced economies." But you can bet the Chinese will use more and more as we go merrily through the future, as electrical devices requires its use. And, as if I had to tell you, increased demand usually means higher prices.

He goes on to say, "Uranium's price has just begun its upward trajectory to the $60 to $100 range and silver is going to see much higher levels. Both metals have been under-explored and under-produced for the past 20 years."

Bob Moriarty at 321gold.com is also looking at the future of molybdenum. "The increase in moly prices is going to last far longer than anyone now imagines," he says. "No one has opened a primary moly mine in the last 28 years."

- Reader Jacques L. writes, "Since you are always harping about inflation I thought the following fact would interest you: In 1908 the Model T was priced at $850. In 1927 a much improved model [electric headlights, electric starter, better tires etc.] was priced at $325. That's how America is supposed to work."

On the one hand, he is absolutely right; That IS how America is supposed to work, because that is the way entrepreneurship and free-market competition, financed by the hand of capitalism, increases the standards of living for everybody. It's Adam Smith's Invisible Hand in all its glory.

On the other hand, he is wrong, in that I do not "harp." I have never harped. Long, rambling harangues about inflation, yes. But harping, no. Bellowing in outrage and fear about inflation, yes. But harping, no. Screaming at WalMart clerks about inflation until they call security personnel, yes, and even as they are dragging me out of the place I continue to scream "Inflation is going to eat your guts out and destroy your children, you fools! Stop the Federal Reserve now, you stupid morons!" which is pretty much a verbatim quote transcribed from the store's video security tapes, as entered into evidence as "People's Exhibit A."

But that is not the worst of it. Marc Faber writes "I should remind our readers that rising commodity prices lead to geopolitical tensions, and that when wars break out, commodity prices soar vertically ­ such as occurred during the Napoleonic Wars, the American Civil War, and just following the First World War." So inflation causes "geopolitical tensions" and then those, in turn, cause wars, which causes more inflation? I jump to my feet and run into the Mogambo Bunker, locking the door behind me, because I do NOT like the direction that thing is headed, and you wouldn't either when you remember what governments do when in a war. It is not pretty, and they always say that they feel bad afterward, but by then the damage is done. And what is going to be done? They are going to take all your money with taxes and fees, and if not your actual money, then they will take purchasing power of your money. And that, paradoxically, makes inflation worse.

So how bad is inflation? For a clue, we can read where Doug Noland, of PrudentBear,com, reports that "during November, Producer Prices have increased at a 5.3% rate so far this year. The PPI has not posted a y-o-y increase above 5% since 1991. November Import Prices were also up more than expected, with y-o-y prices rising 9.5%."

This would normally launch me right into a long discussion about precious metals, but you know me so well that you can probably write the thing better than me. So while you finish up with a nice paragraph or two about how precious metals are a MUST, I will go down and use the little Mogambo room (LMR). Thanks!

So I come back, and everybody is yelling that I forgot to wash my hands and pull my zipper up and how, since I was already down there, would it hurt to throw on a little deodorant? But now I find that you did not write anything, but instead merely cut-and-pasted a nice quote from Kurt
Richebächer. "U.S. policymakers and economists are hailing the dollar's fall as a boom for exports, employment and profits. They fail to realize that the consumer borrowing and spending excesses of the past few years have grossly depleted the economy of available resources for sharply higher exports. A plummeting dollar does nothing at all to offset the profound structural shortfall of savings and capital formation. Rather, it fuels inflation."

Well, getting the job done while doing the least amount of work possible is True The Mogambo Way (TTMW). And to pick such an outstanding quote, too! I am so proud of you! Congratulations! We're all proud of you!

And for a little flourish at the end, I see you included his quote "The risks are frightening." Very nice touch (VNT)!

- Speaking of precious metals, check out Gary North's latest Reality Check. He writes, "The day of reckoning for America, her deficits and her dollar, is surely on its way. Investors who haven't yet bought gold as protection could be forgiven for thinking they've missed their chance. But we may see gold make the inevitable run up to $450 -- as early as next week ­ and then experience a serious correction and consolidation. For a specific prediction in a free e-mail newsletter, this is as good as it gets."

But for those of you who were upset by the recent swoon in precious metals prices, and I got my share of you writing to me and complaining, perhaps I could offer this timely bit by Todd Stein and Steven McIntyre of the Texas Hedge Report. "Whether or not you believe all or some of these conspiracy/rigging theories," they write, "we are here to tell you that this manipulation (if it exists) may not a bad thing. We are tired of all the gold & silver bugs complaining every time the metals suffer a large correction. If you are a true long-term believer, then be thankful that these forces are keeping the prices low for all of us to buy physical metals. If you are a greedy paper trader looking for a short term gain, then you will continue to be agitated by the choppy behavior of the metals prices. Maybe this alleged 'scam' will continue to go on for many years, but sooner or later, market forces will win out."

- Apparently I am not the only guy who is upset by the privatization of Social Security thing, and for proof of that, I proudly present Llewellyn Rockwell, Jr., president of Ludwig von Mises Institute, who, in his essay entitled "Save or Else," said "The movement to privatize Social Security (fully or partially) may be the most ideologically duplicitous and fiscally irresponsible I've seen in my lifetime.

"The money will continue to flow to older Americans but not come from present revenue. It will come from new funds. And where are these funds going to come from? Among those who favor privatization, there are two camps: the left-wing suggests more taxes and the right-wing suggests more debt.

"The proponents say it is worth running up this level of debt because it will save money later. But you know what? In the entire history of government finance and government programs, I doubt that there is a single one that didn't claim to save money in the long run. We have to 'invest' now in education in order to save money later on x, y, and z. We must nationalize the health care system now so that we can save money later that will otherwise be spent on ballooning costs. We must go to war now to prevent a worse war later.

"This is the staple rhetoric of all government programs from time immemorial. When a robber comes to your door and says he wants your television and stereo now so that he won't have to take your car and kid next week, you might comply, but you shouldn't believe he is doing you a favor." Hahaha! Bravo! Well said!

He adds, "It is a disastrous decision to create an additional forced savings program that is wholly unnecessary, and will bring about vast distortions in the stock market." To that I add; distortions, yes. But also higher stock prices for a while longer, and that will forestall the imminent collapse of the stock market. THAT is the whole freaking point of it. That this is just another transparent and slimy little scam perpetuated by government and their little playmates in the financial industry, necessitated by hitching the economy of the USA to inflation in assets, goes without saying.

Jay Taylor of MiningStocks.com newsletter has written on this very topic in an essay entitled "Catch-up With Gold in 2005." He writes, "Since the empire makes all the rules, it can do, and is obviously doing, everything within its power to keep the status quo alive and well. That's why, as Richard Russell argues, the Fed will fight deflation tooth and nail because if/when deflation gets the upper hand, the empire will suffer a serious if not fatal decline, given our enormous indebtedness."

I will go even farther than that. I will say that this coordinated action could possibly explain why it is that almost everybody involved in the oversight of the last Presidential election was so gung-ho on having balloting machines that had no paper trail, so that the results could not be verified. Only a real first-class bozo could possibly believe that the election could not be "fixed," and only a nation as full of morons as the United States would roll over for such a thing without even a whimper. And if the American people are so incredibly naïve and stupid as to allow such a transparent fraud in something as simple as an election, then pulling the wool over their eyes as far as economics is concerned is going to be a breeze!

But there is a lot of money floating around already, and it takes a lot of profits to pay all the interest on all that debt. CBS.MarketWatch.com reports "Total U.S. debt increased at a 7.4 percent annual rate to $23.6 trillion, as federal debt slowed to a 4.9 percent growth rate. Debt owed by U.S. businesses increased at a 5.1 percent rate, the fastest in five quarters.

"Household mortgage debt increased at an 11.8 percent annual rate to $7.3 trillion, which was offset by higher asset values." Well, I got Big Mogambo News (BMN) for CBSMarketWatch, because higher debt is not offset by anything, including higher asset values, because the only way you can offset them is to sell the damn house or the other assets, and then you got nothing all the way around. No debt, no house, no nothing.

They don't listen to me, since they figure that they are a bunch of big-time CBS hotshots and I am just the crazy guy on the curb offering to clean their windshield for a quarter. So they continue like I wasn't even here, "Household real estate was worth $16.6 trillion, up more than 20 percent at an annual rate." The only two things THAT mean are 1) people are paying higher prices to buy a house, which is not a good thing for them, and 2) that everybody is paying bigger property tax bills on the higher assessments, and paying higher taxes is never a good thing, either. And if you think either of those things is good for an economy, then you got rocks in your head (RIYH), as they say.

Like a dentist's drill, their words are starting to bore painfully into my head. "Fed officials have said consumer debt levels are not problematic because household net worth, especially in housing, has also increased." This is the kind of laughable idiocy that habitually spews from the Federal Reserve, banks, stock and bond touts, and government.

- George Ure of UrbanSurvival.com is also taking at look at inflation, and says, "Hard on the heels of the 1.7% gain in wholesale prices in October, the whole price index is up another 1/2 of one percent in November for a 2.2% two-month gain.

Another interesting thing that he has come across that may have profound economic ramifications concerns "deep tremors under the San Andreas. We keep wondering if the predicted double-quake of the web bots has been fulfilled - yes it was - if you think a couple of wimpy 6+ quakes were it, but somehow, the web bots always get things right in a 60-90 day window - and if the window is longer, it means the size of the event is that much bigger. Gulp." This is the kind of stuff you don't find in your family newspaper. And a major, major earthquake along the San Andreas would be bad, bad news for us all.

- If you want a good look at the cancerous growth of debt in this country, look no further than the latest Labor Department's "Flow of Funds", which reports that "Domestic nonfinancial debt rose at a seasonally adjusted annual rate of 7-1/2 percent in the third quarter of 2004, up a bit from the 7 percent pace posted in the previous quarter. The pickup in debt growth reflected faster growth of nonfederal debt, which was offset in large part by a substantial decline in the growth of federal debt." Pardon the Mogambo interruption (TMI), but I am here to tell you that the growth of federal debt is one of those things that I look at constantly, and I am somewhat of an expert on the level of federal debt, and as an expert witness I will look you right in the eye and tell you, with 100% assurance, that it has NOT declined at all, and so it has obviously NOT declined by anything "substantial", the stupid opinions of the stupid writer of this stupid Flow of Fund Report notwithstanding. But continuing on, the report goes on to say "On a seasonally adjusted basis, federal debt growth fell to an annual rate of 5 percent in the third quarter, less than half its pace earlier this year." And here is another TMI interruption, because it is only due to sheer arithmetic that the growth of federal debt has apparently "slowed." If you owe a dollar and borrow another dollar, your debt grows by 100%. But if you owe $7.5 trillion, then even $70 billion is only 1%! And every year the debt gets monstrously bigger and bigger, and even if the government kept spending constant, the percentage will still go down! As if by magic!

They finish up by saying "By contrast, nonfederal debt expanded at an 8 percent annual rate in the third quarter, up from a 6-1/4 percent pace in the previous quarter. The acceleration in nonfederal debt last quarter was broadly distributed across households, nonfinancial businesses, and state and local governments."

- Bloomberg reports that "China's oil imports between January and November rose 35 percent to 110.6 million metric tons from a year earlier." And you thought that oil was going to go down in price? Hahahaha!

- Having been once in the human services and my wife is still involved in it, we know a lot of people who are working in the field, and the story is getting grim as state revenues are getting squeezed. This is part of the Big Economic Unraveling, and the first victims are always at the bottom, and believe me when I tell you that being profoundly, tragically mentally retarded and physically handicapped means that you ARE the bottom.

As painful as the economic conditions of the retarded in Florida are, you may be alarmed to know that the pain will start going up the income ladder. I'm talking to you and about you. And me.


** The Mogambo Sez: As suspicious, distrustful and paranoid as I am, I find it entirely appropriate that gold and silver are being manipulated. It would be contrary to the way the financial system is routinely gamed. Gold and silver have to go up as everything else goes down and people start clamoring for the safety and capital gains of precious metals, just like they always have throughout all of history. So somebody is keeping the price low until they and their little friends can all climb on board and get themselves set to capitalize on it. All you gotta do is get on board, too, and then sit back, pop the top on a fresh beer, put your feet up, and watch the show while you get richer and richer as gold climbs higher and higher. Call it "The Good Life (TGL)"

Dec 15, 2004
Richard Daughty
email: scgcjs@gte.net

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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