The Royal Screw Job

Richard Daughty
...the angriest guy in economics
The Mogambo Guru
Provided as a courtesy of Agora Publishing & DailyReckoning.com
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Sep 13, 2007

"Now the poor old buck has broken the 80 level on the dollar index, a...milestone of sorts, as there are rumored to be lots...of big bets using that level as the dividing line between breaking even and getting killed by the exchange rate of the dollar."

I am deep inside the Mogambo Last Line Of Defense Bunker (MLLODB), locked and loaded, and scared out of my Freaking Mogambo Mind (FMM). Total Fed Credit was up $6 billion last week, which was about par for the course for a Federal Reserve that has interpreted its mission as the total destruction of the United States and its money by urging us to gradually borrow-and-spend ourselves into bankruptcy and an inflationary hell by lowering interest rates until we do.

To those of us who were watching the loathsome Alan Greenspan all those years, this is nothing new, as is my venom about the whole stinking mess.

The thing that WAS new was the surprise in the Fed's account called, "U.S. Government Securities Bought Outright", which was down last week! Down! By $5 billion! They were not creating money, but were instead soaking up a little money from the banking system? Whoa! This can't be right! What in the hell is going on here?

As mysterious as that was, there is nothing mysterious about the dollar falling in value, thanks to the Federal Reserve always creating more and more of them, and thanks to the desperate, no-holds-barred government actions behind the scenes, which are always a sure sign of a government in Deep, Deep Trouble (DDT).

Now the poor old buck has broken the 80 level on the dollar index, a historically significant milestone of sorts, as there are rumored to be lots and lots of big bets using that level as the dividing line between breaking even and getting killed by the exchange rate of the dollar.

As I recall, whenever the dollar heretofore fell below 80, bad things subsequently ensued, as prices for things went up and caused a lot of misery. And not only for us, but for everybody, as any foreigners getting paid dollars under a contract signed weeks or months ago (or, horror of horrors, years ago!) is experiencing what is officially known in currency exchange jargon as the Royal Screw Job (RSJ) when they try to convert those dollars into units of their local currency, and they see with horror how they get fewer and fewer of them as time goes by, and pretty soon the stupid owner of the stupid business is sending your stupid supervisor into your office yelling something that sounds like, "Ha chow, mu gow!" which is (as I understand it purely from context) an ancient Chinese idiom that translates loosely as, "You stupid idiot! Pack your stupid crap and scram, because you are fired!"

The problem is so familiar that I smile in warm recognition, which is that the owner's wife, like everybody's wife, like my wife, wants all the money that the husband has, just to spend on herself and the damned kids, probably for clothes, proper nutrition or medical attention for their numerous imagined ailments that they are always whining about (e.g. "But daddy, my arm really is broken!"), all of which are expensive. And now the poor guy is getting even less money per day because of the stupid contract denominated in dollars, and the stupid dollars buy fewer and fewer of the local currency, so he makes less profit! Less!

The foreign business owner's problem is that dollars that are being inflated to worthlessness, which I hesitate to bring up because many of you are clearly tired of my same old Typical Mogambo Rant (TMR) about inflation and how it is an economic and societal killer, and how incomes always lag the rise in prices, making people upset, and making me upset AND angry because I actually KNOW that it is a government plot, and that naturally leads to calls for Americans to rise in noisy righteous outrage and to follow The Mogambo, rallying behind his Mogambo Flying Fists Of Outrage (MFFOO) to march on Washington, D.C., a juggernaut on a rampage of open rebellion, proceeding relentlessly from one taco stand to another, and from one vendor of tasty beverages to another, and then to anywhere that has a toilet, the whole freaking way.

Instead of subjecting you to that again, I will merely turn the podium over to Scott Burns, appearing courtesy of DailyReckoning.com. He reports, "wages grew less than inflation during eight of the nine years between '88 and '96." Yikes!

I had anticipated that you would be saying things like, "That was more than ten years ago! Then what happened?" My plan was to jump up and comically say, "It got worse! Hahaha! We're freaking doomed!"

But almost as if on cue, I was preempted by Mr. Burns immediately saying, "Then, in the most recent 10 years, wages beat inflation in almost two of every three years. But the gain was so slight - just $10.61 per week for the whole period." Hahaha! What? 26 cents an hour is the total gain? Hahahaha!

In short, "Incomes have been stagnant for at least a generation." And that exquisite phrase means that nobody made squat in higher income in almost 20 years! This is the genius of the Federal Reserve's management of the economy? Hahahaha!

And to see the horror of that, compare that with the huge, gigantic, unbelievable rises in the size and cost of government, which is still rising exponentially today, and is being paid for by just 120 million of us non-government worker guys, whose incomes are not going up.

Hey! I was right! We're freaking doomed!

Sep 12, 2007
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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