 Mogambo: Ruler of The Universe
Fully armed, peering through the gun slits
Richard Daughty
Archives
The
Daily Reckoning
...the angriest guy in economics
The Mogambo
Guru
October 6, 2004
- October has started off with
the national debt climbing to a new record, $7.405 trillion,
easily surpassing the statutory debt limit set by Congress of
$7.384. Now, this could be because the Congress authorized a
new limit and they did it in secret hoping that the Mogambo wouldn't
find out and then he would send them more hate mail ("Dear
Butthead") and tying up their phones all day ("Let
me speak to Butthead!"). But knowing the US government like
I do, I am sure that they don't give a rat's ass about any laws
or limits, and that the Treasury thinks it can do any damn thing
that they want, because all the other branches of government,
and all the people IN all those other branches of government,
all think that THEY can do just about any damn thing they please.
But perhaps a paragraph in
last Monday's Daily Reckoning should be enough to 1) explain
this recent explosion in debt and 2) send you screaming in fear
to the nearest convenience store to buy some chocolate donuts
or other comfort food, because it is going to be a long night,
panicked and shivering in fear about what tomorrow may bring..
They write, "On Sept. 9, a strange thing happened: America's
tower of debt barely grew. The U.S. Treasury held an auction
of its 10-year securities. Typically, foreigners buy about one-third
of the notes on offer, according to reports from the Financial
Times. But at this auction, the central banks of China and Japan,
who can generally be relied upon to take up America's debt, were
oddly quiet. When it was over, they had bought less than 3% percent
of the total."
Three percent! That's almost
nothing! Hell, I get a three percent response to my monthly sale
of Mogambo 30-Year Gilt-Edged Super Safe Debentures Paying 15
(Fifteen) Percent Interest Guaranteed, which are unique in that
1) they are available in face amounts equal to whatever cash
you have with you at the time of sale, and 2) the bonds say right
on them "These bonds are a fraud and a scam, but no more
of a fraud than Ben Bernanke's infamous printing press, and if
you let the Federal Reserve do that to you, without any protest
from you at all, then don't come whining to me because I don't
want to hear it! Now fork over the money!"
In short, foreigners are apparently
deciding that they have choked down enough dollars these last
few years, as they expanded their own money supplies in their
good-hearted attempt to keep the malignant US economy from erupting
into flames and aid their export markets by supplying customers
(us) with both credit and stuff to buy with the credit, and now
their own rates of price inflation are soaring. And, now, so
the story goes, they (especially the Chinese) wish to diversify
out of dollars, because to continue accumulating them is, in
a word, stupid, and with the Chinese emphasis on tradition they
can see far enough into the future that their grandchildren will
one day be standing in front of them and asking "Pardon
the interruption, venerable grandfather, but why did you continue
lending so much money to someone who was already so far in debt
that he could not possibly pay you back? Pardon humble observation,
esteemed elder, but that sounds really stupid. Or, as the Mogambo
says, that sounds really American economist!"
So what to do with the piles
and piles of dollars they already have? Indeed! Well, as Marshall
Auerback notes, in China "reserves have in fact been slowly,
but steadily diversified out of dollars into euros, yen and gold."
On top of this good news, for
those of us who ALSO think that diversification into gold is a really good idea, and I am not saying that
Mr. Auerback is, or is not, diversifying into gold
because I have no idea and I never have a chance to ask him because
as soon as he figures out that it is me calling, he says a naughty
word real loud and hangs up the phone, but he has taken a look
at the Fed's latest Flow of Funds statement and noted that "US
total debt has risen 8.2 per cent year-on-year to a record 298
per cent of GDP at the end of the second quarter." Debt
is rising at 8.2% and is already at a higher percentage than
at any other time in US history, even way back at the tippy tip
top of the bubble of the 20's? The reason that my voice is suddenly
muffled is that I am speaking to your over the intercom from
deep inside the Mogambo Bunker, because this is the kind of information
that sends me into a freaking panic, so for God's sake don't
make any sudden moves that might startle my trigger finger, and
I'm warning you; don't come any closer.
In a related note, the Fed
has stepped up its outright buying of Federal Debt, thereby committing
the ultimate financial fraud: the Fed creates credit, member
banks borrow the money to buy government debt, so that the government
gets money to spend, then the Fed creates more credit to buy
the debt from the banks, leaving the banks with more money, and
the debt just sort of "disappears." What a fraud! And
yet people are lauding this Greenspan crook, and this Bernanke
monster, and all the rest of the corrupt, ignorant jackasses
in the Fed as some sort of geniuses? You think it takes genius
to constantly commit this fraud? You think it takes smarts to
do this, even when I just showed you how simple it works? Do
you really, really, really think it takes a genius to do this,
when you can explain it to any pre-kindergarten kid, and in less
than a minute the kid can do it flawlessly from then on? Jeez!
You're easy to please! If you have any job openings, please allow
me to apply for the position, as I would love to work for somebody
so gullible! "Sleeping on the job? Me? No, boss! You got
it all wrong! I have ESP, see, and I was receiving, ummm, uh,
brain waves from the workers! And the customers! Yeah! Brain
waves! That's the ticket! So now I can, ummmm, do a better job
for you, my boss, the best boss in the whole world!"
- Dr. Gary North, who writes
the e-newsletter, Reality Check, has a new essay entitled "Faith
in the Stock Market" He notes that "The presence of
stock market mutual funds, especially retirement funds, has kept
the market from entering the final collapse of hope that marks
the end of bear markets. There is a floor under this market because
of the automatic monthly purchases of shares by fund investors."
If you are one of those people who thinks that this is good news,
well, I guess it is, in a way. I lean back in my chair and I
stroke my chin in thought, and I seem to recall that anytime
somebody tells me that they have forestalled calamity, then I
usually regard that as good news of a sort, like when a friend
tells me that he messed with the scope on my wife's .30-30 deer
rifle, making her miss me by a mile, although my hat was not
so lucky. Unfortunately, he goes on to say "The 'buy and
hold' philosophy promoted by economists, which paid off after
August of 1982, has produced capital losses on a massive scale
since 2000." Okay, now THAT'S bad news! Especially for those
guys whose "automatic monthly purchases of shares"
kept the market from falling in the first place, and whose misplaced
confidence resulted in something more like "automatic monthly
losses."
In a related vein, on Monday
the Wall Street Journal published its "Mutual Funds Quarterly
Review." How did stocks do? Not very well. How did gold do? It kicked butt, that's how! Gold-oriented funds were up 14.68% for the quarter!
15.3% a year for the past twelve months! 34.28% for the past
three years! And 15.58% a year for the past five years! Hahahaha!
Better than everybody else! Look it up if you don't believe me!
And this impressive performance was in an asset that "everybody
hates," is constantly denigrated by sneering and pompous
"professional money managers" as a worthless relic,
disdained by guys who call themselves "economists,"
and is also an asset that is being manipulated down in price
by the central banks of the world! Imagine what will happen when
any one of these groups of knotheads wakes up and finally abandons
efforts to win the Nobel Prize for "Most Stupid Investment
Advice In History!"
Steve Sjuggerud of the True
Wealth investment service, is as hip to this as anybody, and
his latest essay in entitled "The Midas Touch" reveals
one of the best ways to get rich in investing over the longer
term. He says that there are "Three things I look for in
an investment - super cheap, hated, and in an up trend. You buy
something of extraordinary value at a time when nobody else wants
it. And you sell it at a time when people are willing to pay
any price to get it."
And what investment fits that
list of criteria right now? If you have been paying attention,
you know that we are talking about gold.
But if you were NOT paying attention, then I will turn you back
over to Mr. Sjuggerud, who says, "Gold
coins offer the best opportunity to do this in the investment
world right now."
But the dismal performance
of regular equities tips you off as to why there is such a big
push by The Big Money Management Association Of Hucksters And
Criminals (TBMMAOHAC) crowd to privatize Social Security, by
which you would be forced to invest in the stock market by forcing
your employer to rip the money out of your paycheck before you
ever get it. This would be the ultimate in "automatic monthly
purchases of shares," and would mean a gigantic income to
the liars and ripoff artists of TBMMAOHAC, and will put a lot
of people into that aforementioned "automatic monthly losses"
crowd as a result.
Of all the lies, distortions
and frauds committed by Wall Street and that whole despicable
crowd in the name of The Equity Culture, the most egregious is
that everyone will prosper from investing in the stock market.
This is manifestly not true, even if all you do it look at history!
Show me another time when this was true! Show me! Just one! It
is obvious that it is not true, because it would mean that everybody
will get more out of a market than is put in it? Gimme a freaking
break here! Do I look like I am stupid enough to be a Democrat
or something?
But the government taking your
money and "investing: it in the stock market would make
the stock prices go up, alright, as prices always go up when
there are more buyers than sellers. And the government forcing
people to buy would guarantee more buyers than sellers.
This must be part of Ben Benanke's
"unconventional methods" that he threatened to use.
- On a non-economic topic,
only more serious, I am sorry to report that the Supreme Court
is back in session, and that means that the Constitution of the
United States is under assault again, as those damnable jackasses
seem to delight in finding things in the Constitution that are
obviously NOT in there, and deliberately disregarding things
that ARE in there, and only so that they can "make their
place in history" as they perceive no glory in just deciding
Constitutional issues and doing the boring little job, especially
when they can MAKE a New Constitution In Their Own Image!
And if they ever took the time
to read the Federalist Papers they would know that the Constitution
was written exactly as it was so that there would be no freaking
doubt whatsoever in the minds of anybody who could read at a
third-grade level about what IS in there and what is NOT in there,
and yet Well, suffice it to say that I have no respect for the
Supreme Court, or anybody that has any respect for them. Jerks.
And to be fair, they have no respect for me either, and if you
call them on the phone and ask them "Hey! What do you think
of the Mogambo?" they will have one of their receptionists
say they never heard of me, and they don't want to talk to me,
but I know that they are on the line, listening. I can hear them
elbowing each other in the ribs and trying not to laugh.
- A sentence in the New York
Post can be used as one of the measures of the level of corruption
in America when they write "Executives of Fannie Mae apparently
rigged books just to trigger bonuses."
I am not going to go into the
accounting shenanigans at Fannie Mae, the foul megalithic mortgage
giant, and how they, as a Government Sponsored Enterprise (GSE)
is a filthy, lying clot of corrupt weasels, and how they all
should go to prison for long terms, but since they are so cozy
with the equally-corrupt government we know that nobody will
even lose their damn job. Suffice it to say, because it is axiomatic,
that the level of low-life, scheming corruption always goes to
extremes at the end of long booms.
- Bill Gross at PIMCO calculates
that inflation would be higher every year since 1987 if the despicable
"hedonic adjustments" were not made. Remember, that
1987 is when the horrid Alan Greenspan took over the Federal
Reserve and things started going downhill. Coincidence? Anyway,
he says that "My sense is that the CPI is really 1% higher
than official figures and that real GDP is 1% less."
And how much price inflation
is actually produced, and paid for in higher prices, at a rate
of 1% for 17 years? 18.4%.
- China's government has announced
the takeover of the biggest mining company in Canada. An ABC
news article says that "Chinese firm, Minmetals, which is
owned by the Chinese government, is said to be paying about $US5.7
billion, for Noranda Mining. It has also been reported that the
Chinese oil company Sinopec, which is controlled by the Chinese
government, is in talks to acquire a large lease of oil bearing
land."
Oil and gold!
The Chinese are using their gigantic hoard of dollars to buy
the two things that I have been screaming at you to buy. So the
Chinese have been listening to the Mogambo, and they are going
to prosper because of it. How do you say "All hail the Mogambo"
in Chinese?
Well, how much money do the
Chinese have on hand to spend on this kind of stuff? Well, the
China Daily notes, "At the end of 2000, China's foreign
exchange reserve was US$165.6 billion. By the end of 2002, it
rocketed to US$286.4 billion before it soared to US$403.3 billion
by the end of 2003." I think I am perceiving a trend here,
but perhaps that is only because the Magnificent Mind Of The
Mogambo (MMOTM) sees patterns where mere mortals see only randomness
and cheeseburgers. Catching us up-to-date, they sum up with "By
the end of June this year, the reserve was registered at a staggering
US$470.6 billion." Staggering? Hell, that is less than our
trade deficit accumulated in one year, much less over the last
decade! It is also less than this year's federal budget deficit!
But nobody pays any attention to the Mogambo, and they continue
"About two thirds of the reserve is dominated by the US
dollar. As the dollar goes down, China will suffer great financial
losses."
Well, I got some news for the
China Daily. Regardless of what the author of the column thinks,
I am sure that China has no intention of suffering "great
financial losses." They are not waiting until the US dollar
collapses, but they are spending that money now, before it loses
its buying power, to buy real asset-type things by which they
will prosper, such as oil and gold and
other commodities. Notice that the Chinese are NOT buying American
tech stocks and bonds! But Americans still are! Hahahahaha! Americans!
The Chinese buy gold and oil, and we buy tech stocks and
government bonds yielding some of the lowest interest rates in
US history, at a time when the Fed is tightening, at a time of
gigantic budget and trade deficits, at a time of outlandish debt
loads! What a bunch of idiots we are! No wonder nobody has any
respect for us!
- Alan Abelson, in his weekly
Barron's column, does a nice job of reviewing Bill Gross's acerbic
dissection of hedonic measurement, the unholy bastardization
of the Consumer Price Index in which the government blatantly
lies and cheats in order to disguise actual price inflation and
how it is slowly gnawing your legs off and one day you are going
to get real angry when you realize that your entire weekly paycheck
is no longer enough to afford the Big Three of American Manliness,
namely a tank of high-octane gas, a copy of Playboy magazine
and a six pack of beer, and you will probably erupt in violent
anger, grab a flaming torch from the Mogambo Flaming Torch and
Café Mocha Outlet, and take to the street, bent on violent
overthrow of the government, because that is what happens when
a government gets to be this corrupt and inflation-happy at the
end of a long boom financed by pure, raw credit, in order to
perpetuate what Mr. Gross calls a "con job" and which
the Mogambo has long called much worse, mostly involving loud
obscenities repeated over and over, and some rude hand gestures,
too.
Then Alan, and don't tell him
that I called him Alan because he is a bigshot editorial writer
and I am just the ugly little guy who needs a bath and who is
always digging around in his garbage can looking for ideas and
talking to himself, goes on to present a graph by Ray Dalio of
Bridgewater Associates that shows where the profits in America
came from, starting in the 50's, and then proceeds to show where
the profits come from today, by which you can compare and contrast
the two time periods, which is a technique found on the SATs,
so it must be useful somehow. Anyway, it used to be that American
manufacturing got 60% of the profits, as we made stuff labeled
"Made in the USA" and sold them to a world that was
happy to get quality stuff, and the financial sector made 10%
of the profits. Nowadays, it is the financial sector that makes
the most profits (45%) in the USA, and manufacturing is making
less than 10%. So who are these financial sector profit-makers?
The usual suspects, namely bankers (crowd erupts "booooo!"),
investment bankers (another chorus of "boooo!) , Wall Street
sharks ("boooo!") , hedge fund operators ("boooo!")
and the equity-hawking gang of liars and con-men ("booooo
and boooo!").
- Well, living in Florida I
have had the pleasure of being hit with a fourth hurricane, and
have experienced all the joys of living without electricity for
four days. And if you are going to tell me that I should be ashamed
of myself for my whining self-pity when there are hundreds of
thousands of my fellow Floridians who have had their houses destroyed,
their businesses destroyed, have been without power for almost
two months, and their whole rest of their lives have been ruined
boo hoo hoo, then save your breath. If you look up "Mogambo"
in the dictionary, you will see that it means "Nasty, brutish
little man who a) thinks only of himself and b) who thinks that
central banks committing excesses of money and credit should
be a felony, and if you need somebody to go up and arrest Alan
Greenspan, Ben Bernanke, Bob McTeer or any of those lowlife weenies
connected, even tangentially, with the Federal Reserve, and then
drag them kicking and screaming into a John Ashcroft Super Secret
Police Squad Car for ultimate disposal under the new auspices
of the Patriot Act, including those secret, nasty parts that
they don't let anybody see, then I'm your man."
No, the reason I bring this
up is that as I was sitting around in the heat, sullenly plotting
revenge against the power company and listening to my wife reading
aloud some choice excerpts from her new book "Things That
Are Seriously Wrong With My Idiot Husband, Volume 4." My
mind was pondering all this devastation, and wondering if I would
soon be reading how this hurricane is a good thing. This is known,
in the economics business, as Bastiat's Broken Window Fallacy.
The idea is that if somebody's window is broken, then there will
be a flurry of economic activity, as the glazier sells a new
pane of glass, a workman makes money installing the new pane
of glass, the glazier will replenish his stock of glass by ordering
a new sheet of glass, the manufacturer of glass will get the
new order, the workers at the glass plant will have work to do,
and the providers of all the raw materials to make glass will
book new dales, and all the energy to convert those raw material
into the glass and transportation of the raw materials and the
glass itself, etc. will be a boon.
In short, this preposterous
idea says that everybody achieves economic Nirvana because this
one window was broken, including the police and the whole criminal
justice system who have used their Official Junior Policeman's
Fingerprint Kits and have found my fingerprints on that rock,
because I pick up a lot of rocks, because that is my hobby, namely
picking up and putting down rocks without breaking things, especially
windows, and hour after hour I tell them that if I WAS going
to be hurling rocks through windows, I would go the Federal Reserve
in Washington and heave a big, heavy one through their windows
and maybe knock that Alan Greenspan on the head and maybe it
would knock some sense into him and he would stop committing
the kinds of monetary excesses with which he is now synonymous
and then America would not be sent any farther down the Road
To Economic Hell And Ruination (RTEHAR) and then everyone would
love me for saving America and then maybe I would have some friends,
or at least not as many enemies.
But that whole Broken Window
As Economic Panacea idiocy was debunked over two hundred years
ago, and many, many times since then, and there has never been
anybody who has defended such a ridiculous theory. And so I know
that there are very few real idiots out there who are so short-shrifted
in the smarts departments that they could still believe in that
sort of stupidity. Naturally, I figure that the chances of anybody
committing that error was slim.
And then I was encouraged as
I listened to my wife drone on and on about my many faults, as
my wife is a pretty smart cookie. But if she was stupid enough
to marry a loser like me, then there must be lots and lots of
really stupid people out there! Then if somebody would say such
a stupid thing, then I would have something to write in this
stupid newsletter, because if I don't get something juicy pretty
soon then I am going to resort to listing all the people who
are out to get me, and once I get started on that, there seems
to be no end to it.
And sure enough, my prayers
were answered! In the September 30 edition of my Leftist rag
of a hometown newspaper, the St. Petersburg Times, the top story
on the Business section was "Storms Create Lucrative Times"!
Four paragraphs into the article we get this gem "Some financial
watchers anticipate that within a year or less Florida could
see a multiyear economic upswing because of the billions of dollars
in reinvestment that is headed for the state." It's Bastiat
all over again!
Now it is an easy thing to
deride the ridiculous Leftist newspapers, because making fools
of themselves is what the Left does. And so picking on intellectual
cripples (Democrats) is not the highest pinnacle of good sportsmanship.
And the author of the piece, Joni James, could be a young intern
who probably doesn't know any better, since I don't remember
seeing her name before.
But the author of the article
decided to put her two cents in right away, and said "History
shows that short-term losses sustained in a hurricane generally
are eclipsed long-term by the extensive rebuilding that follows,
financed by insurance and the federal government." Wow,
let me write this down! The insurance companies are going to
pay out millions of dollars in claims, and will then hike premiums
to recover that money, and this is something good! And the federal
government borrowing and spending more money, the very thing
that is at the core of our problems now, is somehow going to
be another good thing! And all of this is to just get us back
to Square One, which is where we were before the hurricane caused
the damages! And this all adds up to an economic wonderland of
some kind! And people wonder why I am screaming in outrage at
the media!
So, after this introduction
to the Bastiat Broken Window Fallacy, I was licking my lips in
anticipation to reading the names of anybody else so stupid as
to say such a thing, because what I really want to do is run
into the plush library of the Mogambo Mansion, slide down the
Mogambo pole, jump into the Mogambo Mobile and roar out of the
Mogambo Cave, and lead the police on an exciting high-speed car
chase to where those morons live. Dashing inside their offices
with a 26-ounce framing hammer in one hand and a machete in the
other, I would chant the Mogambo War Cry ("Go, go, Mogambo!
Go, Go Mogambo!") while I smash their phone system ("Economic
Nirvana thanks to Bastiat's Broken Phone Theory!") and whack
at the fax machine ("Economic Nirvana due to Bastiat's Broken
Fax Theory") and slash the carpet ("Economic Nirvana
due to Bastiat's Ruined Carpet Theory"), and as the police
jump me and pin me down under a pile of Boys in Blue, with a
brave effort I will reach out with my one free hand and set the
curtains on fire ("Economic Nirvana due to Bastiat's Flaming
Curtains Theory!").
Alas, all the people quoted
in the article seemed to be wary of saying this really stupid
thing, and they were all being really subtle. The best I could
get was a guy named Richard Brown, who is the chief economist
for the Federal Deposit Insurance Corp, who was "bullish
on Florida's economy after Hurricane Charley," which can
be interpreted many ways, and Moody analyst John Incovaia who
said "everyone expects (the hurricane damage) will be a
long-term benefit" which I am pretty is exactly what I am
looking for, but Moody's has such a good security system that
I wouldn't get very far. Damn.
- One of the things that I
do is to look at tables of numbers, especially those that I can
access easily, mostly by having them set down in front of me
so that I don't have to take precious time away from picking
at my toenails with a letter opener. And then I kind of look
for hidden messages put there for me to read by Intelligent Life
Forms From Outer Space, and sometimes I can't help but notice
that some numbers have taken a strange turn.
I can see by the number of
hands raised that you want to know why in the hell I brought
this up. With a snotty edge to my voice, I say that if you had
just waited a minute, then I would have gotten around to explaining
to you that I brought it up because several of those moments
occurred recently in Barron's.
One of them was that the "Mtg.
Bankers Assoc Refinance Index" went from 2,052 to 2,211
in one week, which is, if I have done the math correctly (and
there is only a small chance that I have), an increase of 7.7%.
In one week! Personally, I have no idea what this means, if anything.
But I note that in the fine print at the bottom of the table
we learn that 1) I need some stronger reading glasses and 2)
the statistic comes from the "Weekly seasonally adjusted
Mortgage Bankers Association of America Release (Base period
March 16, 1990=100.0)"
Out of the corner of my eye
I see that the pretty little girl in the third row is raising
her hand, and so I say "Yes, I see you have a question!
Why don't you come on up here, and you can sit in my lap while
you run your fingers through my hair and stick your tongue in
my ear while you ask me your question?"
Instantly, a wave of disgusting
gagging noises and rude comments sweeps though the auditorium,
but I am able to shut them up by screaming "Who wants a
piece of the Mogambo?" while reaching menacingly to the
shoulder holster under my coat. After the hubbub dies down, I
realize that she is the epitome of class and gentility, as she
doesn't say a thing in response my crude comment. Casually flipping
me the finger, she says "What does an index of 2,211 mean
against a base of 100 in 1990?" I tell her "It means
a big increase in something! And it has something to do with
mortgages! And if you had been a little nicer to me, if you catch
my drift, maybe I would have given you a fuller explanation!"
But it's not WHAT it is that
gets me. It's how much it changed in so short a time.
- Even though the government
is doing everything it can to make sure that you don't get the
true picture on inflation, the new Gross Domestic Product Deflator
came out and it is back up to, and I hope you are sitting down
for this, 3.2%.
And this brings up an interview
in the new Barron's, entitled "The Buck Stops Here,"
with James Turk, who is so kind to bring up the historical tidbit
that 2% inflation is NOT tame, or benign, or anything other than
what it really is, which is, to use the semantically correct
term, Bad News In Spades (BNIS). This is because, and notice
how I have gotten your attention by promising you a quote from
the estimable James Turk but have now thrust myself, unbidden,
in your face, so that I can scream at you in a loud, irritating
voice, that all the way through history a 2% inflation has ALWAYS
been BNIS. It is a Universal Constant that inflation over 2%
is always BNIS. That's the way it was throughout history (and
notice that the background music has changed to ugly discordant
horns and kettle drums pounding, pounding, pounding out what
seems to be somebody's heart (mine) having a cardiac arrest or
the theme from Jaws, which is where I stole the riff) until we
get to the current crop of laughable pinheads called American
Economists, who have suddenly decided that everybody else in
the entire course of history is wrong about this inflation thing,
that they have always been wrong, and persistent, gnawing inflation
that caused economic misery, which happened 100% of the time,
were all, somehow, mere anomalies.
But I can't help but notice
by the way you are screaming and crying and trying to make me
to let go of your shirt so that you can get away, that you are
not here to hear me run my big fat mouth. And so bowing to your
wishes and your promise not to report me to the Principal again,
we again turn to James Turk, who said "We talk about 2%
or 2 1/2% inflation being tame today, but back in the early 1970s
Nixon imposed wage controls when the inflation rate got to 3%."
See? See what I mean? Only recently has 3% inflation been regarded
as "tame."
Again I startle you by suddenly
grabbing you by the front of your shirt and haul you in close
to me so that I can again scream in your face, "Doesn't
this mean anything to you? You are completely unimpressed by
the fact that a former President of the USA felt forced to seize
dictatorial powers over the economy to combat a lousy 3% inflation?
This means NOTHING to you?"
- ContraryInvestor.com's October
commentary entitled, "The Outer Limits" was a very
interesting read, and for those of you who are fond of saying
how there was some wonderful budget surplus under that damn Bill
Clinton and his horde of collectivist-think morons, these guys
handily debunk that by noting what REALLY happened. They say,
and here I am putting words in their mouths because that is the
kind of lowlife that I am, that Congress decided that since they
found that they could lie their heads off because nobody in the
mass media has enough smarts to see through the transparent lies,
because they are all "journalists" now, whatever in
the hell that is supposed to mean, that they would eclipse themselves
and count things differently. They note "The U.S. government
counts the annual surplus in the Social Security Trust Fund as
a windfall to the Treasury rather than as a long-term obligation
of the Treasury, which it is. So, even under Clinton, there was
never a budget surplus except in the technical accounting sense
that Social Security obligations are counted as off-budget obligations
of the U.S. government." Note the important point, which
is that THERE WAS NEVER A BUDGET SURPLUS
- Leaving the realm of stark
numbers, we are now taking a pleasant little drive down into
Technical Analysis country. Citigroup has a technical analyst
named Louise Yamada, who says that she is pretty sure that the
patterns she is seeing means that the market benchmarks are headed
for a decline. The Dow, for instance, has dropped below 10,000
again, for the fifth time in 2004, and she said that she doesn't
see the Dow going over it on a permanent basis any time in the
next 10 years.
She says that "Volume
is the weapon of the bull,'' and notes that trading on the New
York Stock Exchange is averaging 1.1 billion shares a day, "or
20 percent below average for the year."
Another technical analyst,
Ben Inker of Grantham, Mayo, Van Otterloo. Says "Our forecast
for the next seven years is that stocks are likely to tread water.''
Don Delavan of Market Waves
Newsletter is equally pessimistic, and writes that "The
charts are showing DJIA dropping to around 3000-3200 by the fall
of 2006." As if that wasn't bad enough, it gets worse, and
he goes on to say "The S&P500 chart below shows a much
weaker picture than the DJIA chart."
And them just when you thought
it couldn't get any worse, it does, and he goes onto say "The
Nasdaq composite chart below shows a much weaker picture than
the SPX chart."
Apparently, we are in what
is known as a Wave C down, and these waves are known for "relentlessly
falling prices."
Speaking of chart action, Richard
Russell was looking at the divergence between the daily chart
of the Dow Jones Industrial Average and a daily chart of the
DJ Transportation Average, and he was so struck by what he saw
that he was so upset that he could not talk to me about loaning
me a few bucks to get me through the weekend. His voice kind
of trailed off as he said "I can't talk to you now, Mogambo,
but" So I start yelling "What is it, Mr. Russell? Are
you okay? Talk to me! What is wrong?"
He said "I call the seven
months since February a period of the most flagrant divergence
and series of non-confirmations in the history of the US stock
market. I've never seen anything like it. And nobody else is
writing about it. Does anyone else even recognize what has been
happening? Knock, knock - is anyone home and awake?"
- Bob Moriarty of 321gold went
to China and says "I sorta thought the demand from China
might be responsible for 50% of the price of any commodity. Wrong.
All I could see was building cranes and worker bees swarming
over construction sites seven days a week." So, his original
estimate of 50% may be too low? Wow!
He went on to say, "China
doesn't just have an impact on commodity prices. Prices are going
up from here on copper, iron, moly, silver, gold,
oil and everything else you need to construct a modern economy
in the shortest timeframe in all of recorded history."
And that brings up some vague
recollection about something called supply and demand, and I
get the feeling that this huge up-swelling of demand ought to
mean something as regards prices and profits, but damn if I can
put my finger on it!
- The deputy chairman of the
Bank of Russia is a guy named Oleg V. Mozhaiskov. Thanks to the
devilishly handsome Peter Spina who reported it on his site Goldseek.com,
we learn that GATA has received a translation of a speech he
gave. Says Peter, "The central banker acknowledged that
the great increase in the use of derivatives and central bank
leasing of gold have depressed its price in recent
years."
Mr. Mozhaiskov also has revealed
himself to be a clued-in dude as concerns economics when he vociferously
"denounced 'the blatant lack of discipline' " of United
States fiscal policy and "the social and economic injustice
of a world order that allows the richest country in the world
to live in debt, undermining the vital interests of other countries
and peoples."
Hooray for Mr. Mozhaiskov!
It is indeed a sad day for the world when a former "evil
Empire" has to be the ones to tell us the truth about the
monetary and fiscal insanity of the United States.
He also noted that the dealing
in derivatives of gold is huge, as "Last year turnover
with gold derivatives was about 4,000 million
ounces (or 129,000 tonnes), but physical metal actually sold
totaled 120 million ounces or some 3,860 tonnes." So the
derivatives monster lurks not only in stocks, bonds and currencies,
but on gold, too.
He has concluded, as I infer
from his saying "One conclusion, at least, is clear,"
that "Gold is predominantly a financial asset,
not merely a precious metal. In this capacity gold
is competing with other financial assets on a variety of parameters.
Being inferior in terms of returns, it is far more reliable than
anything else for protection against war-related, political,
financial, economic, and credit risks, and also provides a high
level of liquidity and lower management costs. However, since
the rate of return is the main measure of success for financial
institutions under normal conditions, investment-related decisions
depend directly on the stability of the international monetary
system, strength (or weakness) of the dollar, and the level of
interest rates on financial markets, the growing interest of
investors in real assets, gold in
particular, is more than justified."
In short, dangers abound, and
gold is your protection from those dangers.
And since you won't listen to the Mogambo, perhaps you will listen
to the only central banker that seems to be telling the truth.
- I am proud to say that I
was asked by the congenial David Bond to be a speaker at the
recent Silver Summit, and I was not arrested nor even picked
up for questioning! I am glad that I agreed to do it, as everybody
was real nice to me at first, and what they said afterward is
probably just an ugly rumor spread by, I assume, the CIA or somebody
like that. Anyway, it was very nice to be around people who recognize
the importance of sound money, and who did not have to be shown
the egregious errors made by anybody so foolish as to rely on
government officials to act in a responsible manner as regards
money and credit, and that naïve, ignorant foolishness about
the dangers of fiat currencies and fractional banking has to
be paid for in terms of misery and suffering, and that is because
of an unwritten, secret Iron Law of Economics, whose mysteries
are whispered about only in hushed tones, in the shadows, late
in the dark, deadly night, by mainstream economists when they
gather together to sharpen their pointy heads and hatch their
evil plans.
But now, for the first time
ever, I , The Mogambo, am going to tell you, the reader, this
Mysterious Secret Of Economics (MSOE)! So remember where you
read this, because you are going to be talking about this at
work today, and the day after that, and the day after that, day
after day, until people ask you to shut up about it, won't you
please please please shut up about it, and you won't, because
you can't, and then you notice that they start going into their
offices and shutting the door and locking it whenever you walk
by, but that is not important anymore, because I, the Mogambo,
have revealed a secret that is better than friends and colleagues,
and that is the MSOE that is, written out in its entirety, "Because
that is the way the world has always worked in the past, and
that is the way that it is going to work now, too, and that is
because people were people in the past, and people are people
now, and there is a reason, make that a big, big freaking reason,
that the whole field of economics was originally known as 'political
economy', and it is the political arena that authorizes this
whole filthy mess and so that tells you who is really at fault
here." The shorter patented version is, of course, "Because
Mogambo says so, that's why." (Note for the future: After
I am elected Ruler of the Universe you will be required to bow
your heads and intone "All hail Mogambo, whose infinite
wisdom surpasses transcendent!" whenever I make any pronouncements
like that).
And speaking of voting, remember
that if my name isn't on the ballot in your district, then that
proves that they ARE out to get me, just like I've been saying
all this time! So just write "The Mighty Mogambo" on
your ballot like everybody else.
But we were talking about the
Silver Summit, and being the kind of intelligent people that
they obviously are, they prove, once again, that thinking people
(like them) and paranoid lunatic people (like me) will take action
to protect both themselves and ourselves, and will make a buck,
too, by buying precious metals and the stocks of companies that
mine them. The best of all worlds!
And that includes not only
buying precious metals like gold and
silver, but buying the shares of companies that mine gold and silver, and talking to their relatives about
them buying gold and silver, too, and getting laughed
at by those relatives, who, for reasons that defy explanation,
refuse to buy gold and silver even when shown the supreme
folly, with graphs and charts commentary and all kinds of things,
for NOT doing it! Then I stand there with my mouth open, shaking
my head in bewilderment. Then I remember a line from the movie
"Blazing Saddles", where Gene Wilder was explaining
to Clevon Little that he ought to give the narrow-minded townspeople
some slack, because they were something like (and I am quoting
from memory here) "Just ordinary citizens. Your common people.
The salt of the earth. You know, morons!"
So, thanks to David and Chuck
and Bjorn and Roy and Ray and Charles and Karin and all the rest
of the charming people who were nice to my face, and especially
to Rebecca, the pretty Vegas craps dealer who provided the Mogambo
Moment Of Enlightenment And Self-Awareness (MMOEAS-A) when she
put a silver ounce in my hand and suggested that I mention in
my newsletter the notion that it is not "throwing away your
vote" to vote for a third-party candidate, but it is a crime
against your neighbors to cast your vote for one of the two major-party
candidates when you know they are both wrong and bad for your
country. Or something to that effect, I forget exactly what,
because I didn't write it down. And, looking at that gleaming
ounce in rapt fascination, I heard myself say that I would do
that. And now I have. All of which proves, as the MMOEAS-A, that
I am revealed as lazy, as corrupt as anybody else, and I sell
out really cheap, too. Sort of a Mogambo Trifecta.
- On a lighter note, John Mackenzie,
a money manager, refers to the current economic regime as "the
New World Financial Odor." Hahahaha! Odor! Hahahah! Very
clever! Hahahaha! I can't stop laughing! Hahahaha!
- On the Mises.org website,
which is the one place you should go to read about real economics,
because I wish I had gone there when I started out learning about
this economics stuff because it would have saved soooOOOooooo
much time, has an excellent new essay entitled "The New
Deal Debunked (again)" by Thomas J. DiLorenzo. Mr.
DiLorenzo is reviewing an article in the August 2004
Journal of Political Economy entitled "New Deal Policies
and the Persistence of the Great Depression: A General Equilibrium
Analysis," by Harold L. Cole and Lee E. Ohanian, who are
economists at UCLA. Although I usually find it a huge waste of
time to read anything written by Californian eggheads because
it is usually just more ridiculous Marxist trash written by people
who are so absurd that they don't even realize how laughable
they are, I am glad that I overcame my natural anti-California
bigotry and bias, because they sure don't sound like the typical
California Leftist commie-jackass knotheads.
Mr. DiLorenzo writes
that these two guys have dispelled The Myth of the New Deal,
but only because of their sticking to looking at "economic
reality" instead of the idiotic and slavering devotion to
"neoclassical model building," which is the tack taken
by, and notice that I am using my most sneering and snotty tone
of voice to say this, American economists.
Finally, after all these years,
other people are recognizing what Murray Rothbard showed in his
book America's Great Depression, namely that "It was the
easy money policies of the early and mid 1920s that created all
the malinvestment that was the trigger for the Great Depression."
And, while none of these guys are saying it, I am here to tell
you that one day there will be another guy writing essentially
the same thing about us, namely "It was the easy money policies
of the 1990s that created all the malinvestment that was the
trigger for (whatever in the hell they will call the calamity
that will have to befall us)."
To compound that folly, the
authors note that "virtually every single one of FDR's 'New
Deal' policies made things even worse and prolonged the Depression."
And, in likewise similar fashion, that selfsame writer of the
future will say "virtually every single one of the Democrat
Party's collectivist, commie-think policies made things worse
and that is why the Mogambo spent all those years locked away
in some dank cell, screaming his head off in outrage and only
getting enough psychoactive drugs to keep from going homicidally
ballistic, but not enough to get a good buzz on." He notes
that "Austrian economists have known this for decades,"
and he is talking about FDR's jerk-face economic policies, and
he is NOT talking about how Austrian economists have known about
the poor old Mogambo, although I suspect that they DO know, and
HAVE known, and did nothing to help, but were instead laughing
at me the whole time, the sorry bastards. But and he is hoping
that, maybe, now that the truth about FDR is becoming better
known, perhaps "the neoclassical model builders have finally
caught on."
He sums up with "In short,
it was capitalism that finally ended the Great Depression, not
FDR's hair-brained cartel, wage-increasing, unionizing, and welfare
state expanding policies." Too bad he doesn't extrapolate
that to the current crop of FDR-wannabes who are, even as we
speak, continuing down that same lugubrious path, only on a more
gigantic, pervasive and ugly scale.
Ugh.
*** The Mogambo Sez:
As I breeze around the internet looking for stuff to plagiarize,
ideas to steal and pornography to download, I see a lot of charts,
and I am impressed that the Good Economic Things (GET) seem to
be tracing out what is commonly referred to as "lower highs
and lower lows," which translates into continuously falling
averages of the Good Things That We Want (GTTWW). The Bad Economic
Things, (BET) however, seem to be putting in higher highs and
higher lows, which correspondingly translates into continuously
rising averages of the Bad Things That We Don't Want (BTTWDW).
So, GETs are getting worse,
and BETs are getting even worse, and this whole acronym thing
seems to be getting worse, too (GWT). And if you are the kind
of person who maxed out the Verbal half of the SATs in high school
and then walked around bragging about how smart you are and then
you stood around with your snotty friends laughing and pointing
at the poor old Mogambo who spent the entire time trying to figure
out how to write his name in those damn tiny little circles on
the answer sheet and no matter how small I wrote I always
ran out of room and subsequently got a zero on that part of the
test, then you are probably already aware that both of those
things have the word "worse" in common, and you have
learned something from that. And then you quit reading, jump
in your new red Ferrari and go out for a day of partying with
your rich and beautiful Hollywood friends and having a wonderful
time.
And for you people who got
the majority of your education, and constantly proved it by hanging
out with your hoodlum friends down at the far end of the playground,
mostly smoking cigarettes and spitting a lot and plotting revenge
against people because we are envious of their success and good
looks, then you instantly recognize that these two "worse"
things indicate, as is the case every damn day of your pitiful
life until sometimes I think I can't stand it anymore, that this
is a Sign Of More Trouble Ahead (SOMTA). But we do not have snazzy
Ferrari cars to jump into, red or otherwise, and the only Hollywood
stars that we know are the ones who are always having their lawyers
file these Restraining Orders against us to keep us from ever
again bothering them with our adoring fan mail, our phone calls,
our constant begging for photographs, autographs, and small loans,
and preventing us from going through their garbage, hoping until
our little hearts are bursting to find something of theirs that
we either make a creepy shrine out of in our living rooms, or
sell on eBay. So the only thing that we can do is cry ourselves
to sleep and then wake up refreshed enough to take our frustrations
out on somebody smaller than us.
But, having everything getting
worse is what you gotta expect. But because I expect invaders
from outer space to steal my car doesn't make me like it, either.
And if you want to see what
this fear looks like, the cover of the October 2-8 issue of the
Economist magazine is a photo of what seems to be the Mogambo
as a youngster. The scene is a wicker basket, and peeking up
out of the basket is a wide-eyed, frightened boy who has been
hiding in there. The caption is "Scares ahead for the world
economy". My sentiments exactly, and they have not changed
in all these years, which shows a little consistency, anyway,
except that now I am wearing full body-armor and hefting powerful
weapons, and am not peeking out of some stinking little wicker
basket, but the Cold Eyes Of The Mogambo (CEOTM) are peering
through narrow gun slits of the massively over-constructed Mogambo
Fortress Of Solitude (MFOS).
There is plenty to be scared
about. Especially you, because I am in here, and you are out
there, alone and unarmed.
Oct 5, 2004
Richard Daughty
Archives
 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.
321gold Inc
|
