 Gather up your
Gold, your Guns & Get Gas
Richard Daughty
...the angriest guy in economics
The Mogambo
Guru
Archives
February 22, 2006
-- I don't remember the sound
of wolves howling in the distance, but it was a darkly inauspicious
start to the beginning of the Bernanke reign of monetary terror
and pain, as Total Fed Credit at the Federal Reserve shot up
by $6.7 billion last week, which is a handy measure of the amount
of excess money and credit that are being created - poof!
-out of thin air by the monstrous Federal Reserve.
But that pales in comparison
to the biggest and most unbelievable fraud, which is NOT that
I pretend that I am a decent, caring human being, but that the
total debt of the United States is now at $8.248 trillion, which
is $8,248 billion, which is $8,248,000 million, which is enough
to make instant millionaires out of 2.8% of the population of
the country! We owe, as a taxpaying nation, enough money to create
instant millionaires out of almost 1 in 30 people in the country!
My God! My eyes bug out of my head and my stomach churns, going
gorp gorp ga-lorp, at the very thought of such monetary, financial,
economic and social malfeasance, and I think to myself "Do
I have enough frozen pizzas and ammunition to sustain me during
the economic upheaval that is coming?"
Now you want to know, "What
upheaval?" Well, on the WorldNewsTrust.org site we read
"The Laboratoire européen d'Anticipation Politique
Europe 2020 (LEAP/E2020) now estimates to over 80% the probability
that the week of March 20-26, 2006 will be the beginning of the
most significant political crisis the world has known since the
Fall of the Iron Curtain in 1989, together with an economic and
financial crisis of a scope comparable with that of 1929."
I re-read and re-read and re-read that part about it being "comparable"
to 1929, which is the year that the stock market crashed and
ushered in the Great Depression. But there is, so these guys
say, only an 80% chance of that, which is the exact odds my wife
figured of our marriage lasting less than a week. They are obviously
not interested in my matrimonial problems, and blithely continue
"This last week of March 2006 will be the turning-point
of a number of critical developments, resulting in an acceleration
of all the factors leading to a major crisis, disregarding any
American or Israeli military intervention against Iran. In case
such an intervention is conducted, the probability of a major
crisis to start rises up to 100%."
Of course, I could not let
it pass without a snide and sneering comment that the Treasury
Department of the United States has now, illegally, put us $64
billion dollars farther in debt, in just a couple of weeks, than
is authorized by law! As aghast as that makes me, I can only
imagine with horror what foreign creditors make of this terrifying
development, now that the damned Treasury Department has proved
to the world that laws mean nothing to it, nor to the executive
branch, nor to the legislative branch, who all sit there watching
and doing nothing.
Addison Wiggin at the DailyReckoning.com
site thinks about that for a minute, and innocently asks "But
you have to ask yourself, how much faith would you put in an
I.O.U. from a friend who has sinking job prospects, soaring credit
card bills, a double mortgage, a chronic gambling problem and
- it turns out - a bad habit of lying about how much money he
has in the first place?" I thought he was talking about
The Mogambo there for a minute, especially about that "sinking
job prospects" thing.
So I asked, "What do you
mean about 'sinking job prospects', Addison?" He answered,
"If you use the real statistics to calculate unemployment,
the way we used to calculate it back in 1980, the real unemployment
rate is a much more devastating 12.5%." Yow!
The good news, they say (but
they are wrong) is that consumer spending went up, even if nobody
is working, by 2.3% in January. How to explain it? Well, it could
be that consumers are still spending those gift cards they received
for Christmas, I suppose. Or they may be out spending money because
they are getting raises and bonuses I haven't heard about, and
never hear about, because every time I go in and ask for a raise,
they say "What? Are you still working here?" and then
I scram, hoping to leave well-enough alone. And it's worked out
very well all these years, except for, you know, the raise thing.
Or it could be that that consumers
are spending by cutting back on other things. For instance, Tom
Dyson, writing for DailyWealth.com, reports that taxi drivers,
by dint of their conversing with so many passengers in their
cabs, have a good idea of what is really happening. One driver
told Mr. Dyson that he thinks "The economy is bad at the
moment." Mr. Dyson sums up the cabby's assessment as "Business
is hard. No one goes out anymore."
The driver also has friends
in the restaurant business, and "They are struggling to
make ends meet. It used to be easy, but nobody's spending anymore."
Then again, it may be (and
I think it is) that consumer spending went up not because consumers
are actually buying MORE stuff, but that the stuff they ARE buying
merely costs more, which it is. Remember, the report says only
that consumers spent more, not that they bought more stuff!
Of course, being officially
diagnosed with Mogambo Fear And Paranoia Syndrome (MFAPS) means
I see inflation and treachery everywhere. For you non-medical
professionals, MFAPS is the heartbreaking condition where you
fear inflation as the greatest threat to mankind, because it
is. Furthermore, you see enemies everywhere, mostly on the political
Left, as that group of grinning morons actually believe that
spending more money, and having a bigger government, and having
more of the population dependent upon government spending and
government support will (insert drum-roll) solve problems, which
is so absurdly stupid that it is all I can do to restrain myself
from actually tracking Democrat politicians down, one by one,
grabbing them by the neck, and slapping their silly damned faces
until they get some smarts. And in case anyone asks you, you
can tell them yes, I am MORE than willing to keep slapping, slapping,
slapping their stupid little smarmy faces for as long as it takes,
too!
And since we are talking about
inflation, for some bad news on the inflation front, the Producer
Price Index rose 0.3 percent in January, and I am reminded that
the PPI rose 0.6 percent in December, too. PPI is supposed to
measure the prices paid to those who actually produce something,
like factories, refiners and farmers, who then sell the value-added
product to other intermediaries, one after another, until it
gets to the final consumer, which is me, who has to pay a price
high enough so that a lot of middlemen can make a profit, even
as they, too, battle the dark forces of higher prices and higher
taxes.
The Core Producer Price Index,
which happily excludes food and energy prices, rose 0.4 percent
in January. I gulp and open my eyes real wide in this cute and
comical little way that I have, which I call the Mogambo Cute
And Comical Little Way That I Have (MCACLWTIH), when I am getting
ready to plotz from fear right here on the spot and probably
soil my pants.
Bloomberg News, apparently
thinking that I am real funny, replies with their own attempt
at dry, weird humor, and they write "The report may raise
concern that businesses will pass rising raw materials costs
on to consumers." Hahahaha! What did they say? Hahahaha!
Can you name ANY cost that is NOT passed along to the freaking
consumer? Hahaha! This is too rich!
How in the hell can a business
stay in business UNLESS they can pass along all the costs? Before
I can get a good rant going, here comes Zapata George Blake,
which is a hell of a terrific name, writing at FinancialSense.com,
saying "If there are no profits, our corporations will cease
to exist. Not all will cease to exist, but those that are engaged
in high employee cost, or in manufacturing of items that are
in direct competition with China, such as automobiles, steel,
aluminum, light bulbs, television sets, etc. If you make it in
a factory, you'll probably be out of business."
Standing up and striding back
the microphone, I was intending to launch into how this is a
good thing for gold, and a bad thing for stocks, bonds and houses,
but before I could say anything, Mr. Blake endears himself to
the crowd by telling them how to make money on it! He says "The
only surefire investment opportunity," he says " is
to have the things that the Chinese must purchase, things that
they don't have: oil, natural gas, copper, certain grades of
coal, all of the base metals such as zinc, lead, and in particular
uranium. Uranium will be in great demand. The other main class
of items they will need is agricultural." Why agricultural?
Well, he says the Chinese have "7% or the world's agricultural
land, 24% of the world's population."
And although we are completely
unrelated, notice how he, too, focuses on the exact same macroeconomic
things on which I focus, the chief one being prices, including
(and especially) the price of energy.
"The rising cost of energy
and the falling value of our dollar in world markets," he
goes on to say, will make our energy costs "soar beyond
belief."
"Beyond belief"?
This is the most second-most horrible news that could befall
you. The worse news is learning that I bought the house next
door to you, which would explain the "For Sale" signs
in all the yards on the block.
Byron King, who does NOT live
next door to The Mogambo and is disinterested in even thinking
about it because he says it makes him "queasy", tells
us that the oil problem of falling supply is not going away.
It is getting worse: "Princeton Geology Professor Ken Deffeyes
has come out with a new statement about the timing of Hubbert's
Peak. According to his calculations, the world passed the geological
peak of its oil production in December of 2005."
But this is not about energy
and how higher energy costs are going to make prices rise, but
about inflation, which is the measure of prices that have ALREADY
risen. And in that regard, the Labor Department said that U.S.
import prices climbed 1.3 percent in January!! Note the rare
use of the double exclamation point, which, if you use your Official
Mogambo Decoder Ring (OMDR), means for you to gather up your gold
and your guns and get the car gassed and ready to go.
They say that the cost of imported
petroleum shot up 6.4 percent, which is plenty bad enough, but
(and you had better sit down for this) EXPORT prices also rose
0.7 percent! This export stuff is the stuff we are, and correct
me if I am wrong here, exporting! This is the stuff that is supposed
to be going down in price, thanks to a weaker dollar! Yet 0.7
inflation in one month, times 12 months a year, comes out to
8.4% inflation a year!
Well, about this time Bloomberg
sees all the attention I am getting by reporting the horrifying
inflation statistics, and they grab the microphone out of my
hand and say that we ain't seen nuthin' yet, as "Costs of
intermediate goods, those used in earlier stages of production,
rose 1.2 percent last month and are up 9.3 percent in the 12
months ended in January." Gaaahhh! I'm screaming in fear!
My heart is pounding through my chest and I feel woozy.
Then Bloomberg turns and sees
me lying there, prostrate on the floor, ostensibly killed by
the shock of the terrible inflation news. Poor, poor Mogambo!
Then they decide to test me and see if I am really dead so they
get the celebration started for real. So they soothingly say
"Prices of raw materials, or so-called crude goods, fell
0.5 percent." At that, the lifeless body of the Mogambo
stirred, the flicker of life kept alive by the desperate hope
that maybe, just maybe, I've got this thing all wrong! Maybe
everybody is right; I really DON'T have any idea what in the
hell I am talking about! After all, "Prices of raw materials,
or so-called crude goods, fell 0.5 percent." Maybe we are
NOT doomed!
Encouraged, I struggle back
from the brink of death and despair. As I slowly regain consciousness,
I can hear my wife screaming and fighting with the paramedics
"Pull the plug! He wants to die with dignity!" which
only increased my desire to live, since dead men can't exact
revenge. But then I forgot all about her, and gave up hope when
Bloomberg admitted that the prices of raw materials "were
up 23.6 percent in the last 12 months."
Even Eric Fry at the DailyReckoning.com
admits that the stupid Mogambo was actually right about something
for once. Well, he did not actually say those exact words, but
you can get the drift of it when he says that Jim Rogers "correctly
notes that 'costs are going through the roof' for many commodity
producers, thereby reducing the profits they would be earning
from the soaring prices of their products."
See? See? See what I mean about
profits going down if you don't pass along your costs to the
final consumer? Less profits! But I'll bet that his CEO and a
couple of muscle-bound goons from security aren't going to go
tramping down to Jim Rogers' office and chase him down the hall,
zapping HIM in the butt with Tazer stun guns and yelling at him
"And don't come back, you stupid Mogambo idiot!"
Mr. Fry ignores them zapping
me and my crying like a little baby, and casually goes on to
report that "As anticipated, steel makers, copper miners,
gold miners, fertilizer producers, chemical companies and many
other types of commodity-based companies are all suffering from
a toxic combination of high energy prices and mounting labor
costs. Therefore, profit growth at many resource companies is,
in fact, grinding to a halt."
And it is not just domestic
producers that are going to make less profit. And if there is
one thing that I am sure of, it is that foreign producers may
be known for a lot of things, but being forgiving about making
less profit is not one of them, as I gather from once working
for a company that was bought out by a Asian firm, and they were
always in my office, poking me with their chopsticks and saying
"More profit! More profit, Mogambo-pig!" But, to be
fair, I get the same treatment from any America producer so stupid
as to hire me, too. In short, profit is ALL that producers think
about.
And if you what to see the
kind of thing that you can expect from soaring inflation, Todd
L. forwarded a news clip from Indianapolis that reports "High
prices being offered for scrap metals have driven thieves to
steal manhole covers from city streets and aluminum siding from
homes. Now, the thieves have turned to stripping copper tubing
from outdoor condensers on home air conditioners."
-- Foreign holdings of U.S
debt deposited at the Federal Reserve zoomed up by another $12.644
billion last week. This is strangely at odds with the news that
Net Foreign Purchase of Securities fell to $56.6 billion in December,
from $91.6 billion in November of last year. This is a drop of
$35 billion, or, in percentage terms, 38%.
But foreigners soaking up almost
thirteen freaking billions of dollars in one week helps explain
why money supplies around the world are exploding. And that unholy
thing means that when there is massive inflation in the money
supply like this, then you will soon see inflation in the prices
of some things, then inflation in the prices of a lot of things,
and eventually in all things.
But, for some perverse reason
that future historians will make whole careers arguing about,
the moronic people of America think all of these price inflations
are good! Hahaha! A nation of morons! I sort of remember a quote
by Benjamin Franklin, who was asked, when they finished work
on the Constitution, "And what kind of government do we
have?" and he replied "A democracy, if you can keep
it."
What he surely meant by that
enigmatic phrase was if you let people decide tax policy, the
numerous have-not people will always vote to give themselves
somebody else's money. A democratic, majority-rule government
always elects to provide a "free lunch" for everybody!
Whee! Thus, democracy will ultimately destroy the economy. That
is why the Founding Fathers wrote into the Constitution that
money shall only be of silver and gold, which is the only thing
that would possibly prevent it.
But this tirade is NOT about
how a nation of Leftist ignoramuses and big-heart-yet-small-intellect
morons destroyed America via democracy, or how that same dank,
dismal democracy guided the nation's fiscal policy (governmental
taxing and spending), which, in turn, picked the people who ran
the nation's monetary policy (the banking system). And then the
government spent, and spent, and spent, and then the banks created
the money, created the money, created the money to finance these
perpetual budget deficits!* Notice the exclamation point AND
the asterisk. This is a new Mogambo punctuation innovation (MPI),
which I use to indicate that this is the most stupid economic
idea that I, The Mogambo, have ever heard.
I can hear you thinking to
yourself, "Big deal! That doesn't mean much, because The
Mogambo is really ignorant about most things! Especially, for
example, his appalling lack of social skills. And he eats like
a pig!" To this I can only reply, "Touché!"
But now you have fallen into
my trap! Suddenly springing the snare, I call into evidence Defense
Exhibit 327, the Bonner and Wiggin book "Empire
of Debt", which is has not only been adjudged to be
one of the top (I turn to the jury, stare at them, and repeat
the word "top") economics books of 2005 by both the
Economist and Barron's magazines and many other fine publications,
but it also demonstrates, beyond a doubt (again I turn to the
jury, stare them down, and repeat "beyond a doubt!")
the ugly fact - FACT! - that there is no example of the success
of this fruitcake idea of "free money for everybody"
anywhere in history! In fact, history is full of, and I am talking
freaking fuuuuuuullllllll of, countries that HAVE had governments
that printed more and more money for the government to spend.
And it ended tragically for ALL of them! The inflation in the
money supply that produced inflation in prices destroyed them
all!
I turn to the jury, fall to
my knees, and raise my arms to them, as if pleading for them
to please, please, please understand the enormous gravity of
the situation, and I finish my brilliant testimony by saying
"I weep for us!" and then fall, slowly, to the floor,
sobbing.
With a flourish, I spring to
my feet, spin around, face the judge and announce "I have
no further questions of this witness!" And the judge says
"YOU'RE the witness, you blockhead!" Then I say "Then
the witness is dismissed, and the case is dismissed!"
And if inflation shows up in
the price of food, then that is the time when you suddenly realize,
to your horror, that The Mogambo was right about this monetary
insanity thing, and how it always leads to inflation, and that
leads to misery and degradation of the economy. And that leads
to societal anger and desperation. And that leads to panic when
you realize that you did NOT build a massive defensive fortress
of steel-reinforced concrete and lead shielding in your backyard,
and you suddenly get the idea that maybe you can come over to
MY Mogambo Impregnable Bunker of Fear (MIBOF). And then you chuckle
to yourself when you realize that, by now, there is nothing but
scorched earth for a quarter-mile radius around my house and
you couldn't even get close.
A hand goes up in the front
row. It's that pretty little reporter! I say "You have a
question, my little pretty?" She says, "Yes, mighty,
magnificent Mogambo (MMM)! From whence cometh the original money
that financed all of this expansion of debt and government spending?"
Seeing my opportunity, I tell her that I will have to discuss
that with her personally, later, in my office, where we can be
alone, and she says she'd rather slash her wrists, which I take
as a "No." So I say to the crowd "Okay, the question
was 'Where did all of the money come from that the government
borrowed and spent?' which is, I might add, a very good question."
The pretty reporter smiles
and blushes because she is pleased to be so complimented, and
I figure that maybe she has changed her mind about, you know,
the private office visit! So I look right at her, I raise one
Mogambo eyebrow and provocatively lick the slobber on my lips,
and she shakes her head to signify "no!" So I bid "farewell"
to the foul temptress and her full, pouting lips, and I continue
on as if she hadn't even been born by saying "The money
came from the only place it CAN come from, you morons! You let
the banks create credit out of thin freaking air, and then they
loaned it out! That's how money becomes money, you idiots!"
-- Of all the reasons to sell
stocks and bonds and houses now, before prices fall, Phil S.
sent the DrKW "Fear and Greed Index", and it shows
that we are heavily into the "greed" side of the chart,
and about far enough to equal the middle of the year1987, just
before the market, as they say, "crashed." Very interesting!
-- Thanks to Doug Noland for
a quote from Bernanke's first appearance before Congress since
he was appointed Fed chairman, where he is dismissing the importance
of the inverted yield curve, even though this has ALWAYS signaled
a downturn in the economy. "More importantly, in the past,
when the inverted yield curve presaged a slowdown in the economy,
it was usually in a situation where both long-term and short-term
interest rates were actually quite high in real terms, suggesting
a good bit of drag on the economy." Huh? Where in the hell
did THAT come from?
But he does not answer my question,
and instead he goes on to reveal the basic tenet of his whole,
idiotic theory of economics, namely that interest rates are the
ONLY thing that matter. Hahaha! What a buffoon! He virtually
admits it when he says "With the real interest rate not
creating a drag on economic activity, I don't anticipate that
the term structure signals an oncoming slowing of the economy."
Hahaha! And this laughable economic stupidity is the wellspring
core belief of the majority of mainstream universities in America
today! Debt doesn't matter! Budget deficits don't matter! Trade
deficits don't matter! Energy costs don't matter! Housing prices
don't matter! The value of the dollar doesn't matter! Only interest
rates matter! Hahaha!
So you can rest assured that
the Bernanke Fed is going to keep creating excess money and credit,
and he will keep flooding the banks with it, and the banks will
make more and more loans at cheaper and cheaper rates, creating
more and more money as they completely debase the buying power
of the dollar.
And speaking of debasing your
dollars so that they buy less and less, Gary Tanashian of BiiWii.com
enunciates my thinking perfectly when he
says "Therefore, the ongoing debasement of the dollar
remains my fundamental reason for being bullish gold. We are
in a secular bull market in resources, commodities and hard money.
We are in a secular bear market in paper currencies, being led
lower by the world's reserve currency, the Federal Reserve Note."
And let's not forget silver!
As Jon A. Nones at ResourceInvestor.com writes "According
to the analyst, of all metals, silver is nearest to Hubbert's
Peak."
- Aaron Russo, bless his Hollywood
heart, is releasing a new movie entitled "America: From
Freedom to Fascism". The reviewer says that "Aaron
Russo has created a compelling and troubling documentary that
indeed gives the impression that America has already moved from
Freedom to Fascism. Russo is a bulldog as he prowls halls of
government trying to get someone to just show him the Law that
says a working citizen in the United States owes an Income Tax,
or just to acknowledge prior Supreme Court rulings on the subject."
Later, there is "Another
interview with a former IRS Commissioner who, now a high-powered
D.C. attorney, can't seem to make the connection between Supreme
Court decisions on the Constitutionality of the Income Tax and
how the IRS regards 'voluntary compliance' with a law he's unable
to articulate."
Ugh.
***Mogambo sez: Keep buying silver, gold and oil.
One day you will be very, very glad you did, or very, very sorry
you didn't.
February 21, 2006
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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