 The Deep, Deep Doo-Doo of
Deep, Deep Debt
Richard Daughty
The Mogambo Guru
Written
December 24, 2003
Posted December 30, 2003
While the domestic breed of
monetary rats have been strangely quiet this week, the foreign
species of rat has been very busy, and bought up another $9 billion
of US debt and stored it at the Federal Reserve. These intellectual
paupers and economic hoodlums, with their funny foreign accents
and their strange customs, always whispering secretly among themselves
and looking furtively at us over their shoulders and then whispering
some more, bought up and stashed at the Fed - in one year, mind
you! - $214 billion of US debt! Two hundred and fourteen billion
dollars! Almost a quarter of a trillion dollars! In one lousy
year! Now I am going to say it again for emphasis, but this time
I am going to trill the "r" for a dramatic effect;
trrrrrrrrrrillion dollars. Now, and I am obviously just showing
off here, I am going to trill ALL the "r's;" a quarrrrrrrrrrter
of a trrrrrrrrillion dollarrrrrrrrrrs. In one yearrrrrrrrrrr!
Oh, damn. Now I have little
specks of spittle all over my computer. But it is a small price
to pay for such exquisite emphasis, especially one that results
in the tip of my tongue feeling all tingly! Perhaps that little
bit of extra emphasis, the extra dash of verbal oommph, will
be, after enough iterations of the system to enable Chaos Theory
to operate, sufficient to change the course of the future. Yeah!
That's the ticket! Change the future! In fact, I'll bet that
if I go out right now and get into my space-cruiser and actually
warp into hyper-space to the future and take a look, I will find
out that, well, perhaps I have said too much already. Never mind
about the space cruiser thing. Forget I even mentioned it.
No, better yet, let me change
that to say that we were casually talking about Captain James
Kirk, captain of the Starship Enterprise, which will one day
be on its fabled five-year mission which will be to, as you recall,
explore strange new worlds, seek out new civilizations and some
other stuff, I dunno, go where no man has gone before or something.
So he has these space cruisers, only they called them Shuttle
Craft, see, and you got a little confused, and, well, that's
my story and I'm sticking to it as regards this space cruiser
and visiting the future thing, and now that you mention it, I
don't recall ever talking about them at all, so it must just
be your imagination.
But continuing relentlessly
with this Star Trek metaphor, Captain Kirk, or Jim as he is known
to his friends, who are, parenthetically, some humorless and
flattened-affect alien being named Spock, a far-Leftist has-been
doctor named McCoy, and a drunken mechanic called Scotty, may
have been constrained by the Prime Directive, which was some
proscription against interfering in the natural development of
the aforementioned newly discovered civilizations. But the Mogambo
is under no such stricture! I rise to my feet, turn my handsome
and chiseled jaw into the wind, and with my blue eyes sparkling
and glinting in the sun, raise my fist in pure defiance and say,
"I am the Mogambo! And the Mogambo is above the law! No
Federation of Planets can command the Mogambo! I will change
the course of the future as suits my whim, and I choose to interfere
with the repellent development of this planet which they call
Earth! And thus - thus! - will the Mighty Mogambo get this sickly
world back to a sustainable path! And Mogambo does not use ray
guns or photon torpedoes, but with emphatic trilling! Which doesn't
involve me even getting up off my fat butt, much less having
to do real work! Or, worse yet, having to donate money! That's
why I am the Mogambo and you are not! Sing the praises of Mogambo!
All hail Mogambo!" And then I will hand out some "Mogambo
for President" bumper stickers.
But, looked at another way,
which has nothing at all to do with Star Trek for a pleasant
change of pace, in one year foreign central banks have bought
a mountain of debt that is the equivalent of roughly $2,000 per
person who has a job in this country! At a measly 5% interest
rate, each person with a job in America owes another $100 per
year, every year, just in interest, to foreigners! That's almost
nine more dollars a month, each, forever!
And, increasingly, the debt
was bought by those nasty foreign central banks by printing up
their own currency to buy the dollars, effectively "printing
money out of thin air," just like we are doing! And if there
is one thing that all economists agree on, even American economists,
who are the most stupid of all the kinds of economists in the
world and in the universe as far as we can tell by using powerful
telescopes and gigantic amounts of government funding, it is
that printing excess money has always been bad news, and will
always BE bad news, both now and in the future, including that
time in our future where the people are so angry and tired of
suffering the miseries of their tragic circumstances caused by
printing up money that they actually dig up the graves of FDR
and all the rest of the horrible Leftist commies, and sell the
recovered remains as cat litter to 1) desperately try and make
a few bucks and 2) show raw, undisguised hatred for the laughable
Leftists, whose ridiculous philosophies caused the ruination
of the United States and the resultant universal suffering.
And this is the correct thing
to do, as only the Leftists are so mentally ill, and I am talking
literally divorced-from-reality-as-it-really-exists whacko and
need to be on some kind of medication, but are probably already
taking so much medications that their symptoms could be caused
by the sheer tonnage of Ritalin and Prozac and every psychoactive
chemical that can be bought either at a pharmacy or from a guy
named Carl that they are pumping into themselves, and their children,
and their children's teachers, and their bosses, and their elected
representatives, to still believe that communism and socialism
and fascism and all the rest of the government-taking-control
idiocy can possibly work, which the entire corpus of history
proves over and over and over does not work, has never worked,
and never will work, and always results in failure and suffering
that is best described as Biblical, in both scope and scale.
Instead, and this is the part
that I find so hard to actually believe, and that is why my whining
little voice rises hysterically like this so that I start sounding
more and more like a Munchkin, and I start getting angrier and
angrier, and then I really start getting worked up and start
using profanity, and get louder and louder, and then you make
the big mistake of coming over here and asking me to clean up
my language and maybe keep it down, and then I remind you what
happened to the last person who asked me to "chill,"
and if I never hear that silly expression again it will be too
soon, just who in the hell ARE these morons who actually believe
that high levels of government programs, and the creation of
excess money and credit and taxation to support these programs,
are NOT guaranteed to destroy us, just like it has destroyed
every other pathetic, society of idiots that dared to adopt this
terrible, cancerous, low-IQ philosophy?
Now, maybe it is just me, the
Magnificent Mogambo, who is so enlightened and attuned to stark
reality and the workings of the cosmos, but whenever I see that
the same horrible result has resulted 100% of the time it has
EVER been tried, then that, in itself, IS a guarantee! Isn't
it? When I bonk you on the noggin with a hammer, and you always
say "ouch!" isn't it a seeming guarantee that when
I propose to hit you over the head with a hammer, that I can
pretty much take it to the bank that you will say "ouch?"
Now we get news that even Germany,
which is where this whole idea of government bestowing permanent
benefits on classes of people got started, is scaling back! These
Germans are finally admitting that it is bankrupting them. Germans!
The guys who have been at this government-program game for longer
than anybody else, and who are thus best able to recognize the
persistent failure of the system, are taking their first steps
towards reversing it.
And France is trying to do
the same thing, but with the usual limited success. A host of
ex-Soviet countries are getting rid of it. Russia is already
kaput from it. South America is a basket case because of it.
China is trying to throw off those shackles, too. The IMF has
given Britain a stern warning, and one can only cringe at how
embarrassing THAT is!
But here in America, we Yankee
Yahoos, we are not impressed with the experience of the whole
rest of the world as regards governments ruining an economy,
and we are still expanding it! And we have a whole cadre of loathsome
Democrat fellow travelers running for President right this very
minute, whose every platform is nothing but more expensive program-expanding,
made necessary because all their previous government programs
are suffocating us!
And then we turn around and
think that the rest of the world was supposed to give us this
big respect for doing this? How CAN you respect someone so deliberately
stupid? Hell, I'm an American myself, and I have no respect for
us at all! I mean, how stupid can we be and not have mental health
professionals come banging down the door and drag us away kicking
and screaming and lock me up for my own good and me dragging
my feet the whole way into the ambulance and screaming that I
was framed and I promise to take my medications if they will
just give me one more chance? Jeesh!
And now we want to secure these
miserable lessons in democracy to the rest of the world? So I
can almost see the point of the Muslims, who desperately want
to prevent us from polluting the minds of them and their children,
and I gotta say that, as regards the direction that the Democrats
want to take us, and the direction that we have already taken,
this is certainly a point in their favor.
And now, and I hang my head
in shame as I say this, the damnable Republicans are at it, too?
And worse than the Democrats ever dared? Arrrggghhhh! Now you
know why the stairs to my concrete- and steel-reinforced bunker
are worn down from me constantly running in there, screaming
my head off in a panic like a banshee whose genitals are caught
in a bear trap, slamming the door and feverishly locking myself
in with Maximum Level Four security devices, and then sitting
in the dark and whimpering in fear, holding my flannel security
blanket against my cheek with one hand and a grenade launcher
with the other.
But getting back to the foreign
holdings of US debt held at the Fed, how embarrassing to be an
American, now reduced to being a bunch of dirtbag beggars, losers
who have to rely on foreigners to loan us money to buy shiny
SUV's and luxury goods, who are in that predicament because we
already spent all of our own money and all the money we could
borrow, decades of raw, unwholesome, gluttonous consumption,
and wiping the grease from our chins with our grimy sleeves,
still crave more, more, more! How embarrassing that horrible
people, like Democrats, would be elected, and are elected by
ostensibly educated and literate people. And now Republicans,
too, who have become so repulsive as to make the Democrats seem
benign by comparison.
And how perfectly predictable
that other societies would be aghast that we are trying to jam
such a foul, low-IQ, self-defeating and suicidal lifestyle down
their throats. And how predictable that we would react to their
objections by invading them and killing them.
A humorous juxtaposition on
the front of last Wednesday's Wall Street Journal was the item
"The U.S. farm economy is booming amid a robust price rally
in grain, livestock and other agricultural commodities"
which was placed right above "Core consumer prices fell
last month for the first time since 1982, bringing the underlying
inflation rate to a 40-year low."
The first one comes from actual
prices. The second, the "underlying," one comes from
the fertile imagination of government wonks, who are under orders,
either explicit or implied, to lie their heads off and to put
as rosy a spin as they can, on everything they can, to make sure
that Dubya is re-elected next November, and that is why they
call it "underlying inflation."
Now if you first look at one
of these items and then the other, and then keep going back and
forth between the two, you will get very dizzy, and in your mental
confusion you will note that it will be a perfect item for you
to take to school for Show and Tell, as it is a very good indicator
of the level of insanity that is inherent in government and government
statistics.
Bill Bonner of the Daily Reckoning
is likewise confused, and he writes "It is a confusing picture.
Things that can be manufactured and shipped - such as cars, clothes,
furniture - are falling in price. Things that are produced locally
- often with much government interference - such as health care,
education, and housing are rising. Commodities are also going
up - presumably because the dollar is falling... and because
China is buying so much of the stuff. Oil is almost $34 a barrel.
Cattle have risen 36% in the last 12 months. Scrap steel is up
42%."
So let me see, here. Some prices
up, some prices down, and so the government has declared that
there is, on net, no inflation. I guess the lesson is to eat
your furniture, burn your clothes for heat, never seek medical
attention, and live in your car. And when you do, there will
be no inflation! See how easy this is when I explain it to you?
Mr. Bonner continues, "Could
these trends could continue - falling prices for manufactured,
globalized goods... rising prices for commodities? Yes."
And although Mr. Bonner is too nice of a guy to bring the subject
up, I am not nearly so nice, and I will boldly ask the impertinent
question "Can these trends permanently continue so that
there is never any net inflation?" The answer is, in a word,
no.
Charles Price, wrote a nifty
little article entitled "1987 Bond/Equity comparison with
2003," replete with very many graphs, on the Prudent Bear
site. In trying to compare the two periods, he runs into a little
problem, and writes, "Finding a simple and logical starting
point for an investment comparison between 1987 and the present
is far from easy - so much has changed so significantly and yet
still seems disconcertingly familiar." Sort of like me when
I take a look at a photograph of me in 1987 and then look in
the mirror, except Mr. Price doesn't end his little comparison
with hysterical screaming and blaming Bill Clinton like someone
I know, namely me.
"For one, the US economy
now more closely resembles a gigantic out-of-control hedge fund
using unprecedented leverage and financial engineering, compared
to the still recognizable and relatively straightforward
economy of the late 1980's."
How far has this, using his
terminology, "unprecedented leverage and financial engineering"
taken us? Well, he figures that "S&P 500 earnings need
to rise 22% to bring the valuation back into line with current
10-year bond prices." And this is using today's absurdly
low yields and absurdly high bond prices, all thanks to despicable
central banks providing the money to generate this kind of inflation
in stock and bond prices!
And, although he does not mention
it, probably because he is such a classy guy, I will note, because
I am NOT such a classy guy by a long shot, that the same "unprecedented
leverage and financial engineering" has driven bond prices
to insane levels, as only a certified idiot (or a corrupt government,
which is apparently the only kind that exist anymore) would be
buying long-term debt at yields so astronomically, bizarrely,
unnaturally and insanely low.
Oil is trying to go through
the $34 per barrel mark, or, more precisely, I assume that government
people are trying to keep the price of oil from going through
the $34 per barrel mark, although it almost certainly will happen.
They do this by reminding oil producers that we can crush them
like a bug anytime we want, as Iraq has found to its dismay,
and that their own dysfunctional economic paradigms will one
day need bailing out, and that we control where the IMF money
goes. So if they know what is good for them, then they better
play ball as regards the price of oil.
So as the value of the dollar
keep going down and down, the price of oil does not go up and
up, which is what you would expect. So OPEC looks like a bunch
of retards, and Dubya looks great.
Dan Neel, writing a nice piece
entitled "Fancy Greens and Pusherman Blues" at the
NY Press, looks at the new twenty-dollar bill. When I see one,
it is usually in the hand of a stranger, and I always think to
myself "Man! I wish I had a bunch of those! Or even one!"
But Mr. Neel is more advanced in his thinking than that. "The
U.S. is making an incalculable profit on the roll-out of the
snazzy new twenties." He figures that the profit comes from
the underground economy, who are being roiled by this new regime
of currency issuance. "Wholesale drug resellers as close
as two tiers above street-level distribution have begun asking
buyers to separate older twenties from new ones to more quickly
direct the old currency at laundering operations and retail purchases.
The result is an accelerated rate of tax revenue for the U.S.
government."
Now, I freely admit that my
experience with the drug trade is very limited, although I wish
I had a big ol' drug problem so that I could qualify for some
of those luscious federal program benefits, with free food and
housing and medical care and case workers to handle all my problems
for me, and keep people from hassling me because I would be certified
as a Person With A Disability And Therefore Possess Powers Beyond
Those Of Mortal Men. But the few drug dealers I have run into
always wanted cash, and I patiently tell them that I thought
the first ones are supposed to be free, and that is how they
get me hooked, and it is only AFTER I become an addict that they
start charging me and they make all their money on the back end
of the service period, but this is just the beginning of the
service period, and therefore the drugs are free to me. But that
is, alas, only in the movies, and in real life there is only
that awkward moment when they are just staring at me in stunned
disbelief, and then they tell me to get the hell away from them
before they whomp me upside my freaking head, and I do.
But getting back to Mr. Neel,
he explains that "Such transactions are also the key to
a little-recognized form of seignorage. Call it paranoid seignorage:
a spike in tax revenue from resurfacing notes when the government
refreshes its currency. Think of it as yet another way the government
makes money from making money."
In case you are new to the
concept of seignorage, he explains "Seignorage is the difference
between the value of money and the cost of its production. In
the case of notes, the Fed buys at four cents apiece and sells
them to banks at face value." Well, in actuality, the banks
sells some T-bonds to the Fed for the money, or the Treasury
deposits the money in the banks to use to pay government employees,
and therefore the banks don't spend a dime or even have to do
anything other than record the transaction in the books.
But looked at another way,
it is also a shining example of glorious government productivity,
as two things are accomplished at once, namely, 1) some debt
is extinguished and 2) the money supply is enlarged, committing
both a fraud (the artificial extinguishment of debt) AND a horror
(the precondition for resultant price inflation, as this extra
money works its way into prices).
But I regret that he really
falls short of the mark when he quotes "post-Keynesian economic
theorist William Hummel," who has the temerity to write,
"For a few cents worth of paper, the [U.S.] notes buy foreign
goods and other assets at their face value, and as long as those
notes remain overseas, those assets are effectively cost free."
Well post-Keynesian economic
theorist or not, if this Hummel fella thinks for one lousy minute
that there is no effect on economies because of a large influx
of US dollars, or an outflux of US dollars, or large influx of
any currency, or a large outflux of any currency, or a medium
sized influx or outflux, or even a small influx or outflux of
money, influx outflux influx outflux in any country anywhere
on the planet, and if he further believes that US nationals burrowing
themselves under a mountain of debt so as to finance raw, naked
consumption are included in his definition of "cost-free,"
then I can only surmise that the term "post-Keynesian"
means "complete idiot," because I am here to tell you
that any movement of even the most insignificant amounts of money
has far-reaching repercussions, because it must, and of all the
words in the world that I would pick to describe the effects
of money piling up anywhere, the very last descriptor on the
list, down there at the very, very bottom of the list, is "cost-free."
And if you don't believe me, then watch carefully what happens
the next time my wife asks me for ten bucks, and you will note
the HUGE effect that it has on me, starting out with the usual
"What? Ten dollars? Do you think I'm made out of money or
something?"
"Cost-free." Hahahahaha!
I love it.
Eric Fry at the Daily Reckoning
web site has a remarkable gift for summing things up with the
perfect and memorable turn of a phrase. To illustrate that, he
writes "America is a land of economic marvels: No one saves
money, but everyone spends it. Consumers buy things with money
they don't have... but never seem to run out. Home prices skyrocket...
even though the majority of Americans can't afford one. Bull
markets flourish on Wall Street, even though the average stock
sells for 35 times earnings. Commodity prices soar, yet the inflation
rate barely budges. And most incredibly of all, the dollar's
value collapses, but foreigners still buy billions of dollars
worth of Treasury bonds every month. Will America's delicious
economic fantasy ever end?"
The answer is no, probably
not. Not as long as we can continue to revel in the fantasy,
and as evidence of the longevity of fantasies I will point out
that I have had a crush on Elizabeth Montgomery since I was a
teenager, which was a long, long time ago, and even today I cannot
pass an opportunity to watch an episode of "Bewitched,"
even though she is dead, and if that ain't proof that an American
cannot stop wallowing in delicious fantasies, then nothing is.
I got a big charge out of the
latest inflation readings, which shows that in the whole fair
land there are no prices that are rising, and that everything
is just peachy. Which I am going to turn over to my lawyers to
use as proof that they are all out to get me, because I am the
only guy in the whole freaking country who has to pay higher
prices for things. The only guy! Me!
And not little things either!
Oh, no! I just got my new health insurance invoice, and it is
only up the customary 5% this quarter. But 5% is a lot higher
than zero percent, which is apparently what the inflation report
says should be happening. And I got my new ad valorem property
tax bill, and it is up the customary 5%, too. And when you add
the total dollars that these represent, then compare that to
the amount of money I actually bring in every year, you will
soon realize that total inflation of prices is soaring.
Government inflation statistics?
What a load of crap!
And the worst part is that
every dime of these increased prices means that I will have that
much less money to buy anything else. And then I have to listen
to local vendors whining about how their sales are down, and
how they don't make as much money as they used to, and how all
those new shrink-wrapped issues of "Hot and Horny"
beckon to me from the magazine rack, pleading "Buy me! Buy
me!" But I can't. That is the horror of inflation.
Scott Trask, writing on the
Mises.com website, wrote a nifty little article entitled, "The
Fed's Predecessors in American History," in which he reminds
us that the USA had a couple of previous encounters with a central
bank, and they, too, turned out to be horrors.
He quotes Condy Raguet, who
is the publisher of "The Free Trade Advocate and Journal
of Political Economy." He began by arguing that a free and
unfettered exchange market was "the best regulator of [national]
currencies and the tendency of metallic money to flow abroad
during periods of inflation was the only effective check upon
excessive bank issues. As a result, anything that disturbed the
'natural' or 'market rate' of exchange was pernicious."
In an episode of the horrors
of central banking, he notes in particular the escapades of the
president of the Bank of the United States, Nicholas Biddle.
"In July 1832, when President Andrew Jackson vetoed the
bill to extend the charter for the Bank of the United States
another 20 years, Biddle sought to contract the economy to deny
him reelection in the fall. When that failed and Jackson was
reelected, Biddle continued to constrict credit for another two
years in order to destroy Jackson's popularity and coerce a re-charter."
Thus we see the corruption
of power, especially power that is entrusted to a central bank,
and things have not gotten much better since, although the Fed
has enlarged its mission from merely hurting the President to
that of literally destroying the currency and the economy and
all the people who depend on either.
The Big Dig in Boston, the
long and expensive project to dig a gigantic tunnel so that people
can get around easier, is finally over. In true Massachusetts
fashion, and I say this as a state that I figure is so bereft
of intelligence that they blithely re-elect a drunken, arch-communist
coward and all-around whacko named Ted Kennedy time after time
after time, a man whose entire career has been dedicated to trying
to prove the filthy proposition that increasing government control
of every aspect of your life and confiscating more and more of
your wealth so that the government can redistribute it is not
the bankrupting horror which the Founding Fathers feared more
than anything, the tunnel cost $14.6 billion dollars, more than
three times original estimates, and they were successful in forcing
the rest of the nation to pay more than 60% of the cost. Perfect.
Exactly what I would expect from Massachusetts, which I have
already castigated as mental defectives.
The bigger bad news is that
the gigantic mal-adaptations, where whole sections of the economy
were involved in this project and made their livings from the
waste, corruption and all-around stupidity, are now idled with
little to do. This is just another egregious example of how government
distorts and destroys economies. And, of course, there will be
some damnable government plan to correct this, I suppose, because
one idiocy always deserves and engenders another one, and another
one, and another one, ad infinitum.
So the next time somebody from
Massachusetts wants to tell you his or her opinion about anything,
you have this to remind them that they are obviously not qualified
to have an opinion about anything.
Of course, they might be so
tacky as to point out that I am from Florida, where our egregious
governor, Jeb Bush, just jammed a quarter of a billion dollars
of public money into bribing the Scripps research lab, and their
mere handful of jobs, to relocate here.
Gary North writes the always-informative
newsletter Reality Check, and in a recent essay entitled "Addicts
and Pushers," he compares the US to drug addicts, but addicted
to debt. Well, not debt exactly, but the things that we buy with
the debt, and he does a really nice job comparing addiction to
debt with addiction to drugs.
Beyond that, Mr. North proves
that the horrendous error of debt, especially deep debt, and
doubly especially the deep, deep doo-doo of deep, deep debt,
was known thousands of years ago, when he writes, "Approximately
3,500 years ago, Moses wrote these words
of warning to the Israelites: The stranger that is within thee...
shall lend to thee, and thou shalt not lend to him: he shall
be the head, and thou shalt be the tail. Moreover all these curses
shall come upon thee, and shall pursue thee, and overtake thee,
till thou be destroyed." This lending and borrowing thing
was, so he says, one of the Biblical no-no's as outlined in Deuteronomy
28, although I have no idea, as my personal teenage big no-no
was the Ten Commandment about not coveting my neighbors slave,
nor his ass, nor anything belonging to my neighbor, and I sure
was coveting my neighbors daughter, whose name was Nancy, and
I spent many a wistful hour sinning my little brains out with
all that coveting, and I sure as hell wasn't go to go poking
around in Deuteronomy for MORE things to be guilty of, and I
ain't gonna do it now, either.
Anyway, Mr. North says that
Deuteronomy 28 "lists blessings for obedience and curses
for disobedience, but the section on the curses is four times
longer than the section on blessings." And although Mr.
North didn't mention it, I think that curses always outweigh
blessings in most everything, and I say this as a guy to whom
sugary treats are a real blessing and there is an apparently
endless list of curses associated with that one lousy blessing,
including total strangers taunting me with "Fat, fat, the
water rat!" when all I wanted to do was waddle into the
store for a donut. With frosting. And maybe some sprinkles.
He relates this to Proverbs
22:7, "The rich ruleth over the poor, and the borrower is
servant to the lender." But when the borrower "becomes
the lender's main client, the borrower is no longer servant to
the lender. It's the other way around. 'Cut off the funds, and
I'll declare bankruptcy,' threatens the borrower. 'Then where
will you be?' "
So you see the games that are
played. And you know who the loser will be. And we have known
it, as Mr. North reports, "for 3,500 years." And now,
also thanks to Mr. North, we know that the curses we shall endure
are more numerous than the blessings the debt gave us.
Walter E. Williams, writing
on the website Townhall.com, has been writing a nice little series
of articles about what a piece of crap, excuse my French, that
the government has turned this country into, and noted that his
articles have inspired " ...fellow Americans expressing
disgust and fear over what our nation is becoming."
That's an idea already being
explored by Free State Project. Their plan, as stated on their
website (freestateproject.org) is: "20,000 or more liberty-oriented
people will move to New Hampshire, where they may work within
the political system to reduce the size and scope of government.
The success of the Free State Project would likely entail reductions
in burdensome taxation and regulation, reforms in state and local
law, an end to federal mandates and a restoration of constitutional
federalism."
Why New Hampshire? Well, the
author thinks that maybe it has something to do with the fact
that in 1788, New Hampshire was instrumental in voicing fear
of "undue Administration of the Federal Government."
To guard against this "undue Administration of the federal
Government," Mr. Williams notes that "The Ninth and
Tenth Amendments, which mean virtually nothing now, were added
to our Constitution in response to these fears."
Like the federal government
is going to allow a bunch of citizens to dictate to it what powers
it has? Hahahaha! Anticipating this, Mr. Williams writes, "While
members of Free State Project have not proposed it, I would imagine
that if New Hampshire's elected representatives couldn't successfully
negotiate with the U.S. Congress to obey the Constitution, the
only other alternative would be that of making a unilateral declaration
of independence and go our own way just as our Founders did in
1776."
Now I really am laughing! The
federal government is going to allow a state to secede from the
Union because it doesn't like the way the federal government
is doing things! Hahahaha! I am incontrollably doubled up with
laughter, and out of the corner of my eye I notice that one of
the CIA snipers has to quickly adjust his aim at my sudden movement,
and this makes me laugh some more, because I am already half-blinded
by the incessant laser-targeting sights of these government goons
zeroing in on my forehead day after day, and all I ever did was
to one time suggest the opinion that I'd like to secede from
the damn Union because I AM sick and tired or the way the damn
federal government is running things. This, of course, reminds
me of the South trying to secede from the Union in 1865 to get
away from the North, which included New York City, which the
Southerners probably could plainly see, even then, was so corrupt
that they would eventually elect such terrible people as Charles
Schumer and Hillary Clinton, and so I can see why they would
risk everything to get out from under the corruption of the North
in general and New York in particular. But the rest of the sorry
story is how that horrible little creep Abraham Lincoln ran roughshod
over the whole Constitution, and declared war on the citizens
of the South, for proposing this exact same thing. A more recent
example is Saddam "Call me Abe" Hussein keeping those
Kurds from seceding by emulating Lincoln, namely killing them
all, because he believed so fervently in "preserving the
Union."
And he notes, as I have noted
both when I am wide awake and in my dreams so that I wake up
screaming in fear almost every night, that depending on the Supreme
Court to prevent the federal government from trashing you, your
liberties and everything to hold near and dear is a huuuuuuuuge
mistake. Here's what he quotes Thomas Jefferson as saying about
allowing the Court to hold a monopoly on the interpretation of
the Constitution: " ...the opinion which gives to the judges
the right to decide what laws are constitutional and what are
not, not only for themselves in their own sphere of action but
for the Legislature and Executive also in their spheres, would
make the Judiciary a despotic branch." QED, brother. QED.
Robert Blumen, writing at the
incomparable Mises.com website, has penned "The Dollar Crisis."
He writes "Under the current system, the United States year
after year imports goods from the rest of the world for consumption
and pays for them with dollars. The dollars are then used by
foreign central banks to purchase debt instruments from either
the Fed or the private sector, in addition to U.S. stocks and
real estate. Where these are treasury securities, they are created
out of nothing, requiring no savings by any American consumer.
Under this arrangement, Americans are now freed from the ponderous
burden of saving and the onerous requirement of first producing
in order to later consume. Their consumption is offset by a growing
indebtedness of the private sector and the Fed to foreigners.
This state of affairs is unsustainable, and will come to an end
with a deep fall in the exchange value of the dollar relative
to other currencies." As we are now seeing, if you pay any
attention at all to the fate of the dollar, every day.
He draws extensively from a
new book by Richard Duncan, "The Dollar Crisis: Causes,
Consequences, Cure."
Mr. Duncan writes, "How
much longer will the rest of the world be willing to accept debt
instruments from the United States in exchange for real goods
and services? It is only a matter of time before the United States
will no longer be considered creditworthy. It is only a matter
of time before the United States will not be creditworthy."
If it was me writing that, I would have capitalized that last
sentence to read " It is only a matter of time before the
United States will not BE creditworthy."
The dollar must collapse, forecasts
Mr. Duncan, because it will become impossible for the U.S. to
continue to sell one-half trillion dollars worth of debt securities
each year (the amount required to offset the trade deficit) for
very much longer, because foreigners, who are obviously a real
stupid bunch of people, are not so stupid that they will never
get smart enough to stop doing it.
Now this is the place where
I take exception to that, as the great advantage of a fiat currency
is that we don't have to sell nuthin' to nobody, much less a
bunch of debt. We can print up all the money we want, anytime
we want. We can have so much money floating around that we can
retire the entire national debt in one stroke if we want. However,
the resultant monetary inflation will, of course, filter through
to inflation in prices, and then all the poor people start starving
to death and getting uppity, and commerce falls to zero as everyone
is afraid to go to the mall and have to wade through mobs of
angry, homicidal people.
But Mr. Duncan anticipates
that very objection when he says, "The more familiar effect
of inflation, consumer price inflation, is the bidding up of
the money prices of consumption goods as the money supply expands.
However, inflation does not always take this route: asset price
inflation occurs when credit money creation flows into financial
assets." Namely, stocks and bonds and houses. Which is what
we are seeing nowadays, as if that is okay somehow. It is not,
in case you were wondering.
This brings up an interesting
point, where the Mises.com website linked to an article by Larry
Kudlow, entitled "Bush's Inflation-Free Boom" which
he wrote as part of his duties as the new Economics Editor for
National Review Online. The Mises site lampooned his effort with
the title, "National Review Repeals Laws of Economics."
In it, Kudlow has looked at
the cooked numbers for inflation, disregarding the wealth of
information about how they are doing this because they are such
a bunch of lying, corrupt, mentally ill rats, and then ludicrously
says "So inflation remains nonexistent." Apparently,
Mr. Kudlow has a new definition of inflation, as prices of houses,
cars, stocks, cable-television bills, bonds, insurance, taxes,
fees, and a long, long list of other things that Americans buy
are zooming, but they are not, according to this Kudlow fella,
inflationary. Even though they are soaring in price right in
front of his eyes, Mr. Kudlow opines that they are not inflationary.
And he is, and I find this hard to believe, the Economics Editor
of the National Review.
So that brings up the interesting
question, "How low has National Review sunk?" If they
had given him the title of Clueless Bullish Stock Tout, okay.
But Economics Editor? Not in a million years!
But back to the Blumen essay,
he goes on to say, "Bubbles are followed by busts, which
usually result in banking crises, and then fiscal crises generated
by the ensuing costly bailout of the banking system by the government."
Not to mention, of course, the inevitable bailout of every dirtbag
country and THEIR banking systems that have fallen victim to
the IMF's ministrations, which is the exact same thing on an
international scale. And not to mention the bailout, in this
case "debt-forgiveness" of Iraq and Afghanistan, since
we decided to invade them and destroy their economies, which
means that we taxpayers eat another huge cost.
I saw an advertisement, apparently
for a numismatic/bullion company, which said, "Each Silver
Eagle coin minted by the government reduces the debt, gives jobs
to Americans, and best of all gives your bottom line a boost.
The product is money/silver coin."
Well, pretty much the same
thing can be said for enema bags, if the government used American
labor to make enema bags, except for the part where it "gives
your bottom line a boost." And then again, after I think
about it, depending on how you define "bottom line"
and how you define "boost," perhaps it does. But one
does not tout the benefits of enema bags as economic salvation.
The point is that no actual
debt reduction occurs when you buy a Silver Eagle coin, unless
the money is then used to buy back, and thus extinguish, debt
that has already been issued. But they do not do this. In reality,
the government spends the money you use to buy the coin, so you
are encouraging more government spending. Debt is unchanged,
at best, and total spending merely goes up.
And it may give jobs to Americans,
but it also gives jobs to plenty of foreigners too, as no economic
transaction can take place without it affecting the whole world
in some tiny, or not so tiny, way, as all things are tied to
all things.
The one real benefit is that
it gives you a chance to buy something with depreciating, as
in soon-to-be-worthless, dollars, so that you can get rid of
the damn things, in exchange for something that will retain its
value. A humorous metaphor would be to think of dollars as firecrackers
with lit fuses. You want to hold onto them, or would you like
to trade them for something valuable? I know which one I prefer,
and I bet you do, too.
Reuters reports that the future
of Brazil is getting bleak, because in the present they are getting
ready to have a government-debt-created boom, as it is reported
that their new working-class president, which is apparently a
new euphemism for "raging idiot," is preparing, and
I hope you are sitting down for this and are fully dosed with
your current heart medication, a "New Deal" for Brazil.
He says his main priority is to improve the lives of Brazil's
millions of poor (crowd murmurs "Oooooohhhhhhh!"),
in this case by destroying everything and everyone in the country
through the simple expedient used by the other commie idiot that
foisted a New Deal on an unsuspecting population, FDR. As explained
by Walder de Goes, who is apparently a political analyst in Brasilia,
"What (Lula's) Workers' Party will introduce that is new
in 2004 is more government, more government, more government."
This proves that Brazilians
are utter morons and are completely undeserving of any respect
whatsoever, as they are just now digging themselves out of the
bankrupting mess caused by previous presidents running huge government
programs, and their complicity with their neighbors' running
huge government programs, and now they turn right around and
do the same damn thing again! Impossible to believe! But true!
And if you are willing to take a suggestion as to how you should
play this scene to really get the point across, try putting a
pause between each word, as in " ...and now they turn right
around and do the same (pause) damn (pause) thing (pause) again!"
As reported by Reuters, "That
entails mass public spending in areas like housing, sanitation,
big public works, above all construction which uses lots of cheap
labor and distributes money immediately" and other such
things as paving a road through the Amazon, hydroelectric dams
and installing gas pipelines. The one I like the best, of course,
is "A massive project to change the course of a northeastern
river is even under consideration" where we see that moron
government jackasses plan to gouge out whole swaths of the topography
of the planet to suit their wishes, with the tacit understanding
that if the planet knows what is best for it, then it had better
cooperate.
Note carefully that none of
these things produce anything to sell to anybody, and so will
rely on us gringos to loan them money again, so that they can
squander it again, so that the whole economy of Brazil can be
destroyed again, so that they IMF can come in and bail them out
again, so that Americans will be asked to bite the bullet and
extend Brazil some debt forgiveness again, and things can get
back to normal again, which I now define as South Americans in
general and Brazilians in particular acting like the embarrassingly
ignorant commie jackasses that they obviously are, again, and
electing another stupid communist as president again, who will
propose more huge government programs again, that will end up
destroying everything it touches. Again.
Reuters goes on to helpfully
explain, "The New Deal refers to U.S. President Franklin
Roosevelt's spending on public works in the 1930s to take the
United States out of the Great Depression," which proves
that Reuters may be very good at reporting things, but as economics
analysts they really bite the big one, because FDR did NOT "take
the United States out of the Great Depression." He merely
made it worse and longer lasting, year after year, and finally
the growing anger of the weary, destitute population forced that
foul commie bastard FDR to manipulate things to get us into WWII
so that people would start hating the Germans instead of him
and his worthless collectivist rot.
The report goes on to note
that Lula loves that old "chicken in every pot" campaign
rhetoric and "He has also promised three meals per day for
all of the Brazil's 45 million poor by the end of his four-year
term."
So the new Brazilian president
is promising huge and expensive government programs, with money
it ain't got, to provide roads, houses, electricity, and even
food to the teeming masses. The only part that he is not proudly
proclaiming is that he is also promising them yet another death
of their economy and utter devastation for everyone of them,
because that is, as far as the lessons of history are involved,
the only possible end result of yet another socialist, communist
and fascist fiasco. How special. Ugh.
---Mogambo Sez: It is almost over. You spent the whole
year being good. Let's hope it pays off better than it has in
years past.
Richard Daughty
written December 24, 2003
Copyright ©
2000-2003 Agora Publishing, Inc. All rights reserved.
The
Mogambo Guru Lives!
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.
The Daily Reckoning
"Financial
Reckoning Day: Surviving the Soft Depression of the 21st Century"
by Bill Bonner
and Addison Wiggin.
You can buy
it
online from Amazon.
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