Mooncakes

Richard Daughty
...the angriest guy in economics
The Mogambo Guru
Provided as a courtesy of Agora Publishing & DailyReckoning.com
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Oct 3, 2007

Demand Sacrifices Quality Packaging

"This, then, is how the rich get richer! And the poor get poorer because they are the ones paying the 'silent tax' of higher prices (inflation in prices) caused by the inflation in the money supply, which was created to buy the bonds in the first place!"

One of the problems with debt-as-money and excesses-of-debt-as-excess-money is that not only do prices of some things soar, and then the prices of all things soar as the money diffuses through the economy, but that there is a huge disparity of wealth created, to a few very, very, wealthy, wealthy people and a lot of poor people.

The situation arises because the poor cannot borrow money to buy government bonds! It's that simple! The middle class gets to buy a few, but mostly out of savings and through their retirement plans at work, which are (as I gather from a lot of nervous emails from people unlucky enough to be stuck in them) seen as a looming death sentence for accumulated wealth.

But the rich already have lots of money and assets, and bankers like to loan lots of money to guys who have lots of money and assets, because if the rich guy defaults on the loan, then maybe the bank can get its money back by suing them in court.

So the rich guys borrow all this money from the bank (which creates the money on the spot - poof! - out of thin air), and the rich people take the money to buy government bonds, which the government will pay back WITH INTEREST! The rich get all their money back, and more, besides!

This, then, is how the rich get richer! And the poor get poorer because they are the ones paying the "silent tax" of higher prices (inflation in prices) caused by the inflation in the money supply, which was created to buy the bonds in the first place! And more and more of the middle class start hurting, too, and start slipping down to the class known as "poor" because things cost so much more.

For example, at atimes.com we read the headline, "Inflation eats into China's mooncakes" [read] which means that, "The beloved national tradition of nibbling sweet pastry mooncakes and admiring the fullness of the harvest moon in the Mid-Autumn, or Moon, Festival has been hit by China's runaway inflation, forcing vendors to opt for frugal variations of the rich treat.

"The pastries are round, and traditionally eaten and given away as gifts during the lunar festival, and have been affected by to inflationary pressures along with 'all other food products', as 'the cost of raw materials to produce the cakes has increased by 15-30%.'

In fact, "Annual inflation in China hit an 11-year high of 6.5% in August." Only from Antoaneta Bezlova from Inter Service and atimes.com, perhaps, will you read the real reason WHY this inflation thing is such a big deal; the inflation is "raising fears of rapid erosion of living standards and potential social unrest." Social unrest! Exactly right!

Naturally, "producers of mooncakes have found themselves in a bind" because, on the one hand, the government is "worried that surging prices could touch off unrest across the country" and so the government has, "issued stern edicts warning against price gouging and dictated that the prices of the traditional treat should be kept stable."

Now, after "Once splurging on luxurious packaging of wood, silk and even gold to entice their customers to choose from a tantalizing variety of mooncakes, vendors now have to reduce production costs by settling for plain and down-to-earth packaging."

Of course, the government and all of us rich people think that the poor and the middle class are a bunch of whining, stupid, stinky suckers, and it is their lot in life to be abused by their betters because they dress so badly, and nothing ever matches, and they are always crossing the street in front of you when the light turns green, and when you honk your horn at them and yell at them to get the hell out of your way, they act all surprised, like, "Who? Me?" and actually stop right in front of your damned bumper and look at you, and say stupid things like, "I am sorry, but I can't move as quickly anymore because I am poor, and old, and sick, and disabled", like any of that sob story crap is going to make my wait any more pleasant while I have to wait, wait, wait, burning valuable, valuable gasoline, and waiting and waiting for them to move their old, lazy butts out of the way of my nice, shiny car!

And if I inch forward and let my bumper kind of, you know, hurry them along, the old guy falls down! This is the kind of insensitive crap I have to put up with all the time! Jeez!

I bring this up because do you know on whom the government is going to spend this borrowed money? This old man! And where is this extra money going to come from? The only places it CAN come from: borrowed, printed or collected from more taxes!

The American government chooses to deficit-spend. And thus the rich get richer, faster and faster, more and more, as the amount of money and the amount of debt and the amount of government bonds and the amounts of money being paid as interest on those bonds rise faster and faster and more and more, all of it going to the rich, and the amount of inflation in prices that the poor and the middle class have to buy rises faster and faster and more and more as all of this money creates inflation in prices.

In this regard, I got a real charge out of Theonion.com, which had the headline that, "Widening Gap Between Rich And Super-Rich Threatening American Dream" [read] Hahahaha! Now the über-rich are forcing the not-so-über-rich to suffer the pangs of falling behind! The absurdity of the rich getting poorer, but still being rich! Hahaha!

Ugh.

Mogambo sez: Through the steel-reinforced walls of the Mogambo Bunker Of Incredible Defensive Capabilities (MBOIDC, I think I hear people screaming in fear as they watch their accumulated paper wealth of financial assets and a little bit of equity in their houses disappear.

And then I realize that they are too fixated on their own pathetic, little lives to hear me chuckling in self-satisfaction as my gold, silver and oil keep holding their own in value, meaning that those of us inside the bunker are winning the rat race, while those of us outside are losing, but they are the only ones who do not know how bad it will get for them, or how good it will get for me.

And then I chuckle again, which they didn't hear, either. And that makes me laugh all the more! Hahaha! Good ol' gold, silver and oil!

Oct 2, 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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