 Daddy!
Wake up! Where is all my money?
Richard Daughty
...the angriest guy in economics
The Mogambo
Guru
Archives
April 14, 2005
- The only thing that made me gasp this week was that the banks
suddenly dumped $22 billion in bonds last week. Kinda
weird, but things have been more weird, I think.
Of course, the Treasury is still issuing debt with both hands,
bringing us to almost $7.9 trillion. The interest on the national
debt totaled $321.6 billion in 2004, which works out to an average
of 4.1%, and it, and the total debt, will obviously be higher
this year.
- Nursing a killer hangover and flipping through the TV dial
in my boredom, I ended up watching C-SPAN 2, which is this strange
television station that shows what is supposed to be the floor
of the U.S. Senate, and they have these actors portraying elected
officials in this weird format where everybody is a nitwit. In
this episode, I vaguely remember watching what is, I assume,
a formal debate between two Republicans and two Democrats about
the Social Security "crisis." It was painfully obvious
that the Democrats, as is their brain-dead wont, are idiots,
and they do not have the slightest comprehension of the issue,
or, if they DO have the slightest comprehension of the issue,
are not the least bit embarrassed to conceal the fact. The Republicans,
although they were much more well-informed as to the problem,
are equally moronic about how the stock market works, as is a
crucial tenet of the Social Security Privatization, for which
they are so hot to get passed into law.
Like I said; nitwits. For one thing, for all their preoccupation
with Social Security, they don't even mention Medicare, which
is, according to Comptroller General David Walker, "is a
seven to eight times greater problem than Social Security."
To clear this up, the Mighty Mogambo (MM) will take some of his
precious Mogambo Time (PMT) to explain that the "crisis"
in Social Security is that the Congress is aghast that they will
have less and less money to spend on their collective idiocies
for the next 45 years. This is because the Social Security tax
(and it is a tax, regardless of what anybody tells you) to fund
the Social Security welfare program (and it is a welfare program,
no matter what anybody tells you) produces more than enough money
to fund this welfare program for the next forty or fifty freaking
years! They all agree on this one point. This is a "crisis?"
Now, for normal people like me, a "crisis" is something
bad that is either happening right now (such as my wife banging
on my head with a skillet, screaming "Maybe this will knock
a little sense into your damn thick head!"), or a crisis
is something bad that will happen very soon (such as my wife
planning to hit me on the head with a skillet as soon as she
gets back from the kitchen with it). So Social Security, for
the next forty or fifty years is in fine shape, which is more
than you can say for me. Or the skillet.
But this is not about me and my comic misadventures with kitchen
cookware. So, and follow closely here, I swerve to get us back
to the topic, and reiterate that more money is coming in from
SS taxes than is needed, and money will continue to come in for,
as we recall from a previous paragraph, the next forty or fifty
years. But, and this is the crux of the matter so I will change
that to "BUT" as an indication of emphasis so that
you know that this of some significant import, the Congress takes
the rest of the money, calls it a "surplus,"
and spends it on their collectivist/socialist stupidities!
Thus, a surplus is reduced to, in round numbers, zero! It's all
used up! But they act as if there is actually some money
to "protect!" Hahahaha! I told you this was funny stuff!
Like waking up in the morning and looking in the mirror, this
is the ugly fact of the matter: The Social Security debate is
NOT about saving the Social Security welfare program in the future
by boosting some mythical "credit balances" in the
"trust fund," because there is no freaking money in
the trust fund and there never will be. Some is spent by giving
it to the current Social Security beneficiaries, and the rest
is spent by Congress, which thinks that (and this is proof of
their incompetence) because they put a "special IOU"
in the "trust fund," that it is as good as money!
Hahahaha! Even President George Bush, who has every incentive
to lie, admitted "The trust fund is just an empty IOU, just
a piece of paper. You pay your payroll tax; we pay for the people
who have retired, and if there's any money left over, we spend
it on government. That's how it works."
So where is the crisis? The "crisis" is, therefore,
that this glorious "surplus" will be gradually reduced,
year after year, as more and more seniors start collecting their
Social Security welfare checks, and fewer and fewer worker contribute
a larger and larger portion of their wages. At this point, if
you think that this is still not a crisis, then you are right!
Allow you gaze to follow the Mogambo Pointing Finger (MPF) to
the real "crisis," which is that the Congress will
then have less and less to spend on themselves, their friends,
and their socialist idiocies, as year after year they will have
even less and less to spend. Then, finally, after the forty
or fifty years have passed, they will have nothing, zero, zip,
zilch to spend, because that is when the "surplus"
disappears.
I close my eyes and use the Mogambo Extra-Sensory Powers (MESP),
and as I peer into your brain I note that you are wondering if
now, finally, after having to read paragraph after paragraph
of pure tripe, I will be getting to the damn point, which affects
these Congressional buttheads so profoundly that they refer to
it as a "crisis." To that I smile enigmatically, and
reveal "Maybe yes, and maybe no, but mostly no." The
problem is that erstwhile "surplus" was not spent on
a pleasant day at the beach. No, it was spent on creating enormous,
permanent programs, all staffed by people who went out and bought
houses, and are raising families because they think that this
program is permanent, and there is also a whole cohort of the
"private" economy that is selling goods and services
to these programs, and all of THOSE people went out and bought
houses and are raising families because they, also, think that
the programs are permanent. But it is impossible to keep these
programs permanent when you know you will have less and less
money coming in. Especially when every halfwit Democrat actually
believes that creating more and more programs, to funnel more
and more money to selected recipients, is, and I quote some of
them, from Clinton on down, as saying it is "the business
of government!" They actually say it in so many words! So
what are these idiot Congresspersons going to do with their precious
Congressperson time all day when there is no more money for them
to start more programs? Oh, the horror!
It is, instead, all about letting the Congress have lots of money
to spend as they try to buy our love and our votes, such as more
malignant expansion of the size and scope of government, which
distorts the economy more and more, as if this is a good thing,
which it is not. In fact, it is a very bad thing, as we are about
to find out. And it gets worse than this; not only is all that
Social Security "surplus" spent on on-going programs,
but it is completely insufficient to pay for the wants and needs
of government, as they are already on track to borrow another
$700 billion's worth of "budget deficit" this year
alone! And the cost of all the programs and deficit-spending
to date has produced the National Debt of close to $7.9 trillion
dollars!
On the other hand, the idea to force Personal Savings Accounts
down the ravenous maw of the gluttonous American population is
a blatant attempt to force people to put money into the stock
and bond markets. And it will be done, one way or the
other. If we do not, then these two ridiculously overpriced markets
will "revert to the mean" and fall to their true values,
which would wipe out the entire American economy, as financial
services and government ARE the economy nowadays.
This point is not lost on Alan Abelson, as he notes, in his "Up
and Down Wall Street" column in Barron's, that "Earnings
of financial companies now account for some 40% of all corporate
earnings, up from a mere 4% two decades ago, and they represent
25% of total stock market capitalization, versus 5% in the 'Seventies."
They make a whopping 40% of all earnings, and their shares are
a quarter of the entire stock market? Wow! See how important
they are? Now you know why Bush is pushing this idea so hard!
The problem
is that it cannot work. For this stock market and bond market
stupidity to succeed would be exactly the same as sitting down
to a game of poker (and you can call me "Doc" Mogambo,
as in "Hey, Doc! Stop dealing from the bottom of the deck
or I'll punch your stupid nose again!"), and expecting that
everybody will win! Hahahaha! You sit down at the table,
and you are dealt a hand of stocks and bonds and houses, you
bet like crazy, (of which the house, namely the government, takes
a percentage), and then you bet some more, and gamble some more,
and drink beer, and smoke cigars, and get drunker and drunker,
and at the end of the night, after weaving down the road singing
"How dry I am," we wake up the next morning and our
heads are pounding, and our spouses want to know where in the
hell we have been all night, and we call our buddies on the phone
trying to get some answers, and then we find that everybody went
home with more money than they had at the beginning? Hahahaha!
People believe this can happen? Well, the Republicans do!
Hahahaha! Morons! But you never see these posturing, preening
weenies saying that people ought to take their Social Security
taxes and play poker with them! Hahahaha!
So, when you cut through the lies, stupidities and outright frauds,
the entire "Saving Social Security" exercise is to
1) get at least the same, and hopefully more, money for the Congress
to spend since the Social Security program will be throwing off
smaller and smaller "surpluses," and 2) funneling lots
of money into the financial services sector of the economy, since
it already produces 40% of the corporate earnings in the whole
freaking country. That is all there is to it. Simple, huh?
Even AFL-CIO President John Sweeney criticized the Bush privatization
plan, calling it "a risky scheme for America, but a sure
bet for the financial services industry."
And if anybody tells you different, like these four Congressional
blockheads, then you know who is trustworthy and who is not,
which ought to make your voting chores very easy next November,
when you have a chance to throw these lying, despicable jerks
out of office and elect someone who is, hopefully, competent
and trustworthy. Like you. Or somebody just like you. Preferably
you.
But it is also another blistering indictment of the stupidity
of the Baby ("We Love Everybody!") Boomer generation,
as once again try and pump up the economy via mandating that
people put more and more money into retirement plans, so that
we can get a little short-term pleasure from watching our assets
go up in price, and maybe that will make our houses go up in
price, too, so that we can take some of that additional equity
and borrow it, which we will because interest rates will be low,
low, low as a result of our buying so damned many bonds with
this forced investment, then we can take all that wonderful,
glorious money and go shopping! And we will buy more consumables
and gobble them up, gobble gobble slurp! As Dr. Richebächer so pithily puts it, "The United
States is the one and only country in the world where monetary
policy was systematically designed toward the goal of inflating
the market value of assets - stocks, houses and bonds - virtually
making wealth creation through inflating asset prices their explicit
goal."
But when the party inevitably ends (as it must, because if there
WAS a way to get rich by constantly going deeper and deeper and
deeper into debt, somebody else in all of history would have
made it work, and they all tried, and they all failed), then
the Baby ("All You Need Is Love") Boomer generation,
now fat, older, and more stupid than ever, will let out a gigantic
burrrrrrrrrrp, poop in the diaper of America, and their own children
and grandchildren will be called in to work like slaves to clean
up the mess.
How embarrassing to be a Baby ("It Takes A Village")
Boomer.
From another perspective, namely the Up Close And Personal view,
Social Security is like when I tell my kid to get a paper route
and start making some money mowing lawns and babysitting somebody's
brats. And I will, as the benevolent father who loves her and
wants to protect her, will take -- poink! -- a sixth of everything
she makes, off the top. She starts yelling and screaming "Mom!
Daddy took a sixth of my money, and he won't give it back!"
and so my wife yells up the stairs for me to give the money back,
and so I go out into the hall and patiently and calmly explain
my terrific new plan to Save Our Daughter's Future, which I cleverly
call The Mogambo Plan To Save Our Daughter's Future (MPTSODF),
by yelling back "Shut yer hole, ya crazy old bag, before
I come down there and shut it for you!" which was apparently
the wrong thing to say, because the next thing I know, I hear
shells being loaded into a pump 12-gauge shotgun and she is yelling
"You stay right there, mister! I have had all of the Mogambo
crap I am going to take!" Deciding to test whether the window
is a good emergency fire exit, I quickly found myself outside,
and so I went to the bar and had a few rounds, and then
everything started looking better. I wrote an IOU on a bar
napkin, which I thought was really poetic in its own way, but
I probably won't get any credit for THAT, either!
But sitting
there on that barstool, hour after hour, gave me time to think
about how I will tell them that I am taking this money ONLY to
save it for her college and eventual retirement, and how this
is in her best interests, and how everything will be wonderful,
if you trust me. I mean, I give a little of the money to her
older sister, who is obviously closer to needing an education
and a retirement, and the rest I spend on myself and my hoodlum
friends. But instead of admitting that I am stealing her money
outright, because it sure as hell LOOKS like I am stealing her
money outright, and since everybody knows the kind of dirty,
treacherous back-stabbing gutter-rat that I really am, I will
leave the aforementioned IOU in the piggy bank! Then it will
NOT be stealing, see? Then when she gets ready to go to college,
and she looks into the piggy bank, and all that is in there are
these IOUs that smell like stale beer and cigarette smoke and
one of them has the phone number of someone name Trixie written
in lipstick, which is a lot harder to explain than you would
think. Then, when she is grown and banging on the door, shouting
"Daddy! Wake up! Where is all my money?" then
all I have to do is tap her younger sister on the shoulder, hustle
her lazy butt out the door to get a paper route, pick up some
extra money mowing some lawns, and babysitting somebody's brats.
Then I will take a FIFTH of HER earnings, which is more than
enough to pay back some of the IOUs, and there is still plenty
still left over for me to spend on myself and my hoodlum friends!
Whoopee! And then I can take my new-found expertise onto
the campaign trail, so that I can get elected as a Congressman
from one of the blue states, which actually believe this kind
of crap, and then I can parade around and explain how I want
to Save Social Security by doing this exact same thing, and everyone
will love me, and re-elect me year after year after year.
- In case you were idly wondering, "Hmmm. Methinks, whither
interest rates?" vis a vis the Fed, the Optimist
newsletter is "happy to advise that the next FED meeting
will result in an interest rate increase of no more than a quarter
point, and the meeting after that may well be a surprise reduction
in interest rates! Even though inflation will be increasing at
a rate which cannot be disguised by clever hedonic adjustments,
the Optimist offers the positive view that interest rates will
not be permitted to rise to the level where the few remaining
USA jobs are threatened. Since jobs will be the limiting factor,
the Optimist is happy to share the good news that interest rates
will be kept well below the true rate of inflation for the foreseeable
future." Which is, oddly enough, exactly what I figure will
happen. So what does one do with the fabulous information, other
than sending me and this Optimist bunch a lot of congratulatory
bouquets of roses with cards that read "Bravo, Mogambo!"
which will probably be real confusing for the people at the Optimist?
I am not the Optimist, and in fact I am a HUUUUUUGE pessimist
from the word "go" and that is why I don't trust anybody,
and I think you should not trust anybody either, not even your
own father or husband, and if you think I am kidding, then all
you have to do is ask my daughter or wife about that, and for
the next several hours they will happily give you a real education
about that particular point. So while they are the "glass
is half full" people and I am the "glass is half-empty
and I'll bet that they guy who drank half my beer has cooties,
and if I drink the last half of this beer I will catch the cooties
and probably die, or worse," but we are eerily similar when
we reach the same conclusion, which I will reveal by quoting
these Optimist guys when they say, "silver and gold investments
will prosper greatly over the years ahead."
- Reuters reports that Alan Greenspan, chairman of the
Federal Reserve, has again urged Congress to take steps to curb
the growth of both Fannie Mae and Freddie Mac, saying this "was
vital to cut the risks the mortgage finance giants pose to the
U.S. financial system." Hahahaha! The guy who made all the
money available to create these mortgage giants and create all
these debts now figures that that they "pose a threat"?
Where in the hell has he been for the last freaking decade?
But how to do this? Who is going to pick up almost a trillion
dollar's of mortgage debt? The article says "In testimony
prepared for delivery to the Senate Banking Committee, Greenspan
said stiffer regulation alone was not enough to ease, and could
worsen, the risks the two government-sponsored enterprises (GSEs)
pose." My God! If regulation will not do it,
then what in the hell is left?
Reuters also reports that last Thursday, U.S. Treasury Secretary
John Snow, who has been more than instrumental in our government
amassing the most debt per year, both nominal-wise and percentage
of GDP-wise, wants to get his two stupid cents into the mix and
said, "Mortgage giants Fannie Mae and Freddie Mac could
threaten the economy if Congress fails to curb their investment
activities."
Hell, they should leave the investment activities alone, and
start homing in on the fraud and corruption in Fannie Mae! According
to Dan Gainor, writing an essay entitled "Fannie
Mae's Bailout Tab" writes in the Washington Times, "Fannie
Mae, the government-sponsored mortgage association, has been
battling a mounting scandal since last year. It has accounting
errors of about $11 billion. That's more than nineteenfold Enron's
$567 million error." Wow! Nineteen times bigger!
But it doesn't even stop there! He continues, "Fannie Mae's
whole mess caused the departure of Chief Executive Officer Franklin
Raines and several other top executives. At the same time, Fannie
Mae stock has dropped roughly 30 percent: from nearly $80 a share
to around $55." And, lest we forget, for this egregious
mismanagement and fraud, Raines has awarded himself a nice pension
of over $120,000 a MONTH for the rest of his damn life! Hahahaha!
Even Doug Noland has been looking at this Fannie and Freddie
mess, and if it catches HIS eye, then it must be bad. But as
bad as it is, it is just the tip of the iceberg, as we learn
when he writes, "Fannie and Freddie, with their combined
books of business of $3.8 Trillion backed (hopefully) by a little
sliver of shareholder's equity. Troubled GM and Ford have total
liabilities of $740 billion with equity stated at $45 billion
and absolutely dismal prospects. AIG has total liabilities of
almost $700 billion (SH Equity of $83bn). Combined, these five
companies' exposure of almost $5.3 Trillion is in the neighborhood
of 30 times reported equity."
He is pretty gloomy as to what this means, because if you are
even vaguely familiar with the Austrian Business Cycle Theory,
or have ever passed by economic textbook that was laying on somebody's
desk and you were drawn to it because the guy who owned the book
was sitting there trying to read it, sitting with his head in
his hands and muttering to himself "This is scary as hell!,"
then you realize that we are, hmmm, what is the word that means
"really, really, really, really screwed"? I shall call
on the Awesome Powers Of The Mogambo (APOTM) and come up with
a new word, a neologism is you will, and that will be, umm, let
me think, ummm, how about "hyperscrewed"? Or better
yet, "hyper-mega-screwed." But Mr. Noland says merely,
"To witness such a massive and pervasive Credit system problem
at this pinnacle stage of system excess and asset inflation portends
a devastating down cycle."
- Kurt Richebächer, one of the most incandescent stars
in the school of Austrian economics, who never has any time for
The Mogambo (except for him yelling into the phone "Will
you PLEASE stop calling me, you horrid little man? Go away!
I am NOT going to loan you any money!" and rudely hanging
up, time after time after time). But I notice that he apparently
has lots and lots of time to talk to OTHER people, and probably
let them borrow his barbeque grill, and maybe fork over a few
bucks to tide them over until payday, and yet he still has time
to write a newsletter. It is from one of these that we read that
he agrees with The Mogambo, in that this our current economic
mess is nothing new, as everybody and every country, in every
era of time, all tried to buy more stuff than they could afford,
and they went into debt to do it, and there were always sharp-tongued
hustlers who were whispering to them "Go ahead! You can
pay back the debt with your higher income!" Hahahaha!
But he does not even mention The Mogambo when he writes
"Sharp falls in saving and soaring trade deficits are nothing
new in history. Yet compared to the past, there are two great
differences now. One is in the contrasting reaction of policymakers,
investors and economists; the other is in the enormous, unprecedented
size of today's imbalances."
Now, this is all well and good, and it does nothing for you when
you are trying to hide the television remote control from your
wife, and she is looking all over for it, and you don't want
to give it to her because she will want to change the channel
to watch one of her dumb shows, the ones I hate. But the lack
of specifics and the fact that the remote is safely hidden under
my big, fat butt are the only things making his comments bearable.
But then he shatters ("kerrr--rash!") our placid little
world when he writes, "Typical of the superficiality of
economic thinking in the Anglosphere is the indifference to the
changes occurring in the composition of GDP growth, however drastic
these may be. During the four years 200004, personal consumption
captured 87.1% of U.S. real GDP growth, as against a longer-term
average of 67%." American? Gluttons? Americans over-consuming?
Americans going into debt to consume more and more stuff? Shocking!
But while we are enjoying a good joke at the good doctor's expense,
he apparently gets a little cheesed off about it, and hits us
right between the eyes when he goes on to write "Including
government spending, overall consumption absorbed well over 100%
of GDP growth. At the same time, net national saving plunged
from 5.8% to less than 1% of GDP. Nor do they find anything wrong
with the fact that this consumption-driven pattern of economic
growth is causing a horrid escalation of indebtedness."
But he acknowledging that consumption-via-debt is pandemic in
the world, as he admits "In Britain and Australia, the associated
borrowing-and-spending binges are even worse than in the United
States. Central bankers who celebrate this as 'wealth creation'
and even explicitly animate people to exploit the possibilities
of easy credit to lift their spending on consumption are unique
to America."
- Tony Allison, in a guest editorial at FinancialSense.com entitled
"Delayed Gratification, the Case for the Roth IRA,"
writes "Despite the economic storm clouds and general gnashing
of teeth, there are ways to prepare and protect one's golden
nest egg. Which brings us to the Roth IRA. Of all the retirement
vehicles, it is the only one that allows all savings and investment
earnings to be withdrawn (after age 59 12) totally tax-free.
No income tax. No capital gains. Zippo. That may not seem like
a big deal today, when you can get a tax write-off with a regular
IRA, but it could be a huge deal in 10 or 20 years from today."
Theoretically, he is right. But to that I say, and you can quote
me on this, "Hahahahahaha!" If you think for one minute
that the government will allow you to keep tax-free gains, when
they are obviously going to desperately need as much tax revenue
as possible, and how you are one of "the blessed" in
this country, to quote one of the loathsome Democrat loser weenies
I had the stomach-churning misfortune to have witnessed her saying
recently, I forget her name or where she is from, but she thinks
that people with money are "blessed" and so these "blessed"
people should be happy to share their bounty. And when it comes
to bounty, I can see them peering at you with high-powered telescopes
and noticing that you are doubly-blessed, as you, firstly, had
enough money to sock away in a Roth account, and then blessed
again that you made money with the money, and now you have a
BIG chunk of money that is, and forgive me to keep harping on
this one point, you "blessed" but you are not going
to pay any tax on it? Fear not! The socialists and communists
in the Congress of the United States will share it for you! Hahahaha!
Hell, he admits himself "the future appears to be inexorably
moving toward an environment of higher inflation, higher interest
rates and ultimately higher tax rates." So all of
us chumps out here, working in our pathetic little jobs and paying
higher taxes and higher prices, which is making our domestic
lives into a hell on earth because we can't afford to do any
of the things she wants to do or buy any of the things that she
wants to buy, are going to sit here like morons, watching you
cashing in your fabulous tax-free gains and living it up out
in Hollywood, cavorting with starlets who are willing to both
believe that I am a Hollywood producer (Movie Producer Mogambo
(MPM)) and that I can make her a movie star (Mogambo Big Fat
Lie Number Twelve (MBFLNT))?
Recognizing the gruesome reality of my words, he concludes that
"There are those (including some in this office) who believe
that the U.S. government will unceremoniously pull the rug out
and renege on the Roth's tax-free withdrawal status at some point
down the road. That threat will continue to exist."
But even so, he says, it is better than the alternative, because
you can choose what to invest in, as "For most 410-k owners,
their savings can only be invested in a very limited spectrum
of choices, usually plain vanilla stock and bond funds and company
stock."
He then may have inadvertently given us a tip on a good investment
when he asks the question, "Would you rather have the flexibility
to invest in the Central Fund of Canada (gold and silver bullion)
or be stuck in stock and bond mutual funds?"
I raise my hand! I know the answer to this one! Call on
me! But he has left the stage, and I am here with my stupid
hand in the air, hoping he will come back and call on me to answer
the question, and people are laughing at me "Look at the
stupid Mogambo with his hand in the air! Hahahaha!"
- Speaking of people laughing at me, there have been an
embarrassing number of people writing to inform me of things
like errors in recent issues of the MoGu, mostly involving some
typographical mix-up between millions and billions and trillions,
and of course there is the old classic misunderstanding where
I innocently asked some woman for directions to the train station
and she makes this big, shrieking, hysterical scene because she
mistakenly thought I had offered her ten bucks to strip down
to her skivvies, dance the hootchie-cootchie and pant like a
dog. So you can see how innocent mistakes are made. Sorry. But
apologizing and promising to do better in the future is what
I always do, and nothing ever changes.
- Dan Denning, of Strategic Investing newsletter, writes that
the low VIX, which is a measure of market volatility and is now
indicating a remarkably calm stock market, reminds us that
"It's one of the market's strange ironies that low readings
on the VIX do not actually mean the market is stable, but that
pressure is building for a big move."
Which way will the market move, up or down, when it DOES move?
He ignores my question, yet answers obliquely when he says "Let
me put it in plain terms for you: America is increasingly dependent
on foreign central banks to sustain the value of the dollar.
High consumption is made possible courtesy of the world's savers.
We are getting a free ride into indebted servitude to foreign
bondholders. The ride into indebtedness may be free, but getting
out is going to be very expensive."
As a case study in how the Mind Of The Mogambo (MOTM) works,
I will re-write Mr. Denning's last line as "It is a lot
easier falling into an open cesspool than it is to climb out
of one, all covered in greasy, slimy crap, and trying to crawl
up the side of that stinking hole and sliding back down into
it, and there is your neighbor, The Mogambo, standing over you,
laughing at your plight, and he is saying 'I told you not to
go down into that debt-financed consumption crap, using a fiat
currency, in a banking system utilizing out-of-control degrees
of fractional-reserve leverage!' and you are screaming 'Don't
just stand there, you idiot! Throw me a rope!' and The Mogambo
laughs even harder and replies 'Oh, so now it's moral hazard
insurance you want, is it? You always want somebody to come bail
you out of your messes, never taking any responsibility for yourself'
and of course by this time you are yelling and crying and begging,
and the stink is starting to make you woozy, and to tell you
the trust it is also causing my eyes to smart, too, so I think
I'll just go around to the other side of the hole and stand upwind,
and continue to laugh at you Americans some more, and then I'll
go home and watch the Simpsons. And maybe grab a brewski.
Okay, I can see where that is a little long, so perhaps it is
best that we use Mr. Denning's original phrase, "The ride
into indebtedness may be free, but getting out is going to be
very expensive."
But, wait! Now that I think about it, this is MY damn newsletter!
So, in my unbridled arrogance, I will take another crack at tearing
this Denning guy down, so that maybe I can make myself look like
a big shot. And since he is not here and thus not able to defend
himself, I consider him a sitting duck. Sucker! But still
smarting from my abortive attempt to improve on his original
phrase, I now choose to, instead, expand on it, thus showing
that he only gave you half the story ("The cheap bastard!"),
while you can trust The Mogambo ("All Hail The Mogambo!)
to tell you ALL the facts, (audience rises as one and cheers
"Yay, Mogambo!") and these facts are that when he says
the word "expensive," he does not only mean the money.
Higher prices can be called "misery," and if you have
ever seen me blow my whole allowance on one lousy donut when
I really wanted two donuts, and I remember the days (last month)
when I could buy two donuts, but now they have gone up in price
and I can only afford one stinking donut, and when you stick
it into your mouth in one bite so that your cheeks puff out like
some bizarre squirrel, it doesn't last very long, either. Then
you will know that there are many, many subtleties to the word
"expensive," one of them being how miserable I am looking
in through the window of the donut shop, drooling all over myself
and everybody is complaining to the manager about the street
bum in the drool-soaked shirt licking the window and scratching
his butt, which stinks so bad they can actually smell it THROUGH
the glass, then the total suffering from higher prices, and the
inevitable well-meaning-but-disastrous response of Congress,
will give you a whole new perspective on the meaning of the word
"expensive." And when you truly comprehend the enormity
of it all, it will give you the screaming willies and one lousy
donut, which is never enough to cure a case of the screaming
willies.
- MarketNugget.com has taken a look at the projected growth of
China and India, and has come to the same idea that The Mogambo
came to, namely that money will be made from, as Jeffrey Simon
says, "the industrialization of Asia. A solid portfolio
can be built around the growth story of the decade." Decade?
Hell! Longer than that!
But it will be a long, hard road, as the monetary looseness (monetary
inflation) of all the world's central banks, including China's,
is feeding into the world-wide resurgence of price inflation,
and will continue to do so for a long time, right up to the time
when everything is re-ordered in relative value and all the money
is finally incorporated into prices.
And I figure that the big reason, the Big Reason, the BIG REASON
that this area will prosper is that the population, per capita,
is relatively unburdened by debt, and they can all qualify for
credit cards! And when consumption starts surging as they
begin consuming more stuff on credit, which means more imports
of raw materials and widget parts, they are going to need a strong
yuan to keep inflation down.
To show you the vacuity of thinking by American elected officials,
which seems to be an oxymoron, the Associate Press reports that
politicians in Washington, D.C. are NOT down on their knees,
begging China NOT to devalue the dollar and please, please, please
do not cut the yuan's peg to the dollar. Instead (and I find
this hard to believe), the AP reports "Congress, for the
second time in two days, gave notice to both China and the Bush
administration that it will take action if nothing is done about
undervalued Chinese currency that gives Chinese goods an advantage
over U.S. competition." U.S. competition? Hahahaha!
And if the Chinese currency is, as they assert "undervalued,"
then the dollar is automatically "overvalued"? Wow!
Wait until OPEC hears that they have been selling oil, their
only asset, for too little real money! Who was that talking about
$100 per barrel oil? Now you know where they got that idea!
- Doug Noland, who takes a lot of time to read lots of stuff,
is pretty gloomy as to what this all means, because if you are
vaguely familiar with the Austrian Business Cycle Theory, then
you realize that we are, hmmm, what is the word that means "really,
really, really, really screwed"? I shall call on the Awesome
Powers Of The Mogambo (APOTM) to come up with a new word, a neologism
is you will, and that will be, umm, let me think, ummm, how about
"hyperscrewed"? But Mr. Noland says merely, "To
witness such a massive and pervasive Credit system problem at
this pinnacle stage of system excess and asset inflation portends
a devastating down cycle."
- Paul van Eeden has posted his latest essay, "Word
from the World Bank" at Kitco.com, and his attitude
has not improved much, either. He reports that "According
to the World Bank, the global economic recovery has peaked. The
bank sees the best-case scenario as a mild slowdown in global
economic growth over the next few years, yet warned that a new
global recession is a possibility."
He goes on to say "The bank specifically suggested that
the US shrink its budget deficit, as it saw the US's need to
borrow from foreign entities to finance its trade deficit as
a major risk factor for the global outlook." Hahahaha!
The government is going to shrink the budget deficit? Hahahaha!
It makes you wonder what the World Bank has been smoking!
- It looks to me like the gold lease rates are going back up,
so the orgy of selling (to get the price of gold down with this
influx of massive new selling of this newly-leased gold), should
be about over.
- Will Reishman, who is writing for Euro Pacific Capital, has
penned an essay that shows that he is truly cognizant of the
real source of all the world's problems, and this highly-informative
essay is entitled "The
Hirelings Are Running the World." If you don't believe
me, then here are his own words: "With corporate scandals,
accounting fraud and the like in the headlines again, allow me
to share a bit of my personal understanding of what's at the
root of all this. Other than, of course, the fallen condition
of sinful humanity, a prime cause of corporate corruption is
that the U.S. financial system is founded upon dishonest money,
originating with the institution of the Federal Reserve in 1913."
- I read the Democratic National Committee's "week in Review"
and of course they say they are all wonderful and Republicans
(in general) and the Bush White House (in particular) are all
a bunch of stinkers, and oddly enough I agree with the second
half of that statement, and I have gotten into the habit of laughing
at Democrats as a reflex. But the truth of the matter is that
they are telling the truth when they write "Democrats have
proven they can lead our country in delivering critical services
AND cutting government debt!" because the facts show that
debt always goes up a lot more when Republicans are in control!
Weird! What the hell happened to the small-government,
low-tax, low regulation Republicanism, so that now, even I use
Mogambo Scorn Of Contempt (MSOC) like it is going out of style
on them AND the damn Democrats alike? My world is being torn
asunder! As part of the MSOC Syndrome (MSOC) I refer to
all of them as "scumbags" and they usually refer to
me as "the defendant."
But the Democrats, of course, still take the lead in idiocy,
as they want the government to do a long list of things to benefit
one population subset or another, and then end it with their
"Quote of the Week" in which, out of all the things
that a Democrat said all week, they highlight this gem:
"The first lesson we teach children when they enter competitive
sports is to respect the referee, even if we think he might have
made the wrong call. If our children can understand this, why
can't our political leaders?" -Senator Jim Jeffords
(I-VT), New York Times 4/8/05. discussing Republicans who seek
to undermine the Courts because they do not like their decisions."
I suddenly want to shout "Dear Butthead Jeffords,"
which is what I am now calling everybody who says such things,
and every time the phone rings there is always somebody on the
line who is, as it turns out, a butthead. And now, since we are
talking about buttheads, I will take a few moments to demonstrate
a little glimpse of the high-efficiency side of The Mogambo (THESOTM).
When I tell you what it is, you are going to slap yourself on
the forehead and say to yourself, "Brilliant! Why didn't
I think of that? Bravo Mogambo!" But here is my official
entry in this year's Efficiency Award contest; I now answer the
phone with "Hello, butthead" instead of just "hello,"
which lets them know -- right off the bat! -- that
I know that they are a butthead, and so they can stop wasting
everybody's valuable time saying things that make them sound
like a butthead (e.g. "How's the weather where you live?"
or "Quit tampering with the brakes on my car!"), and
they can get right to the point of their damn call, which seems
to be that they are spying on me and delight in waking me up
from a nap, or interrupting me when I am watching TV, or eating
something, or sitting on the toilet wishing I had not eaten those
leftover burritos and thinking about how this is the perfect
damn metaphor for my whole stinking life, or I'm yelling at a
neighbor about how his bratty kid is also a perfect metaphor
for the irresponsible monetary policy of the Federal Reserve
and the idiotic avalanche of deficit-spending by the Congress
that is going to destroy us all, as both of them are fat and
bloated, it makes me sick to look at them. Anyway, the reason
that these people are bothering me with their incessant phone
calls is that usually, they wanting to know when I am going to
be sending them some money on my account which, according to
their stupid records, is seriously in arrears, or they want to
warn me to stay away from them or their families and stop bothering
them all the time, just because I promised, in a moment
of weakness, that if they loaned me some money that I would stop
bothering them, but I lied, and now they are all real pissy about
that, too! And I got up and answered the phone for this?
But I was going to, before I got sidetracked with this butthead
thing, explain to this Jeffords weenie how stupid and laughably
ridiculous for a grown adult to blindly accept the say-so of
judges and referees, who get senile, and mentally ill, and stupid,
and corrupt, just like the rest of society, by which I mean,
obviously, Congress and all government weenies. And so their
decisions, due to the awesome power these judges and referees
wield, must be examined in excruciating detail, so that we can
more quickly find out who is losing his or her marbles. And when
you examine the decisions of the Supreme Court, you soon figure
out for yourself that MOST of them are incompetent jerks.
- People send me stuff that they think is interesting, a lot
of it concerning the pacts and alliances and cross-border dealings
around the world, mostly with China, and how we Americans are
being cut out of the deals. Exactly. This is what happens to
the big, rich bully when the big, rich bully ain't so big or
rich anymore.
But first there has to be a lot of extortion, as, for hypothetical
instance, making us Americans spend over $250 billion dollars,
more than a quarter freaking trillion dollars, on rebuilding
whole swaths of the world over the last year and a half, so that
China, India and Russia can have a lot of buyers with an intact
infrastructure when they take over the economic throne.
- The trade gap widened again last month, so that, for February,
exports are $61 billion more than exports. CBS News.com opines
that, laughably, the falling US dollar will one day reverse the
deficit. They write "The U.S. dollar has been declining
for three years, a fact that should help narrow the trade deficit
by making imports more expensive to American consumers while
making U.S. exports cheaper." My eyes bug out in disbelief.
Imports will cost twice as much? I raise a trembling hand to
my perspiring forehead, and with a stupefied monotone I ask,
"Where is the freaking benefit of this stupidity?"
If the dollar dropped by half, then imports would cost double?
We would have 100% inflation? And even if the dollar DID drop
by half, wouldn't American exports STILL be the most expensive
in town?
Unfortunately for CBS and the rest of the clowns who parrot this
silly stuff, Peter Schiff of Euro Pacific Capital has looked
at the data and has concluded "If anything, the statistical
record is showing an inverse relationship between the dollar
and the deficit. The more the dollar falls, the higher the deficit
rises. The reality is that a falling dollar, by itself, only
exacerbates the trade deficit, by increasing the cost of imports."
And although Mr. Schiff is too polite to mention it, I do not
have a polite bone in my body, and with a loud, screeching voice
and spittle of outrage flying from my lips, I say that this devaluation
of the dollar is the inevitable result of the damnably incompetent
monetary arrogance of Federal Reserve policy and their ridiculous
theoretical trash known as, I assume, neo-Keynesian crapola.
Or maybe just crapola. I dunno. But either way, it is highly
descriptive of Federal Reserve policy, and what we are going
to find ourselves in up to our necks as a result. Ugh.
**** The Mogambo Sez: Drive-offs, which is when
a guy fills up his car with gas and then speeds off without paying,
has gotten real bad around here lately. But totally expected:
When the country is so indebted, and so short of money that they
are charging living expenses on their credit cards, they are
suddenly going to have MORE money after a near-doubling of energy
prices in two years? Hahahaha! Welcome to the down side
of the monetary inflation! Now you will learn why all educated
people actually tried to NOT to get to this point, and why the
current fashionable trend of actually encouraging indebtedness
and inflation is so damned insane.
Or, as reader Robert B always appends to his emails, " "If
a Nation expects to be ignorant and free, in a state of civilization,
it expects what never was and never will be" -Thomas
Jefferson.
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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