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St Petersburg, Florida - Here at home, the Fed is winding down their furiously cramming money into the system to, theoretically, finance a Christmas orgy of buying, but the foreign central banks are stepping up their purchases of US debt to take up the slack, and last week they scooped up another ten billion dollar's worth. Weighing in on the same subject, Marshall Auerback, one of the really, really smart guys in the economics biz and who will not stoop to even being in the same room as me, as evidenced by the stark fact that I have never been in the same room with him, writes that, and here I am putting words into his mouth, that if Alan Greenspan put as much effort into finally learning about economics, perhaps by reading, as he does patting himself on the back and re-writing history to make himself look good, then we would not be in the shape we are in.
Mr. Auerback then writes, "If there is any 'credit' (literally) to be doled out for this unhealthy state of affairs, it is to the Far East that Mr. Greenspan ought to turn his gaze: The real 'saviors' of the American economy, reside not in Washington, but in Beijing, Tokyo, Bangkok, Hong Kong, Singapore and Taipei." These foreigners are the guys who are buying up the tidal waves of debt and money that the Fed is putting out, and if they did not do it we would have to put special tires on our cars, because we would all be up to our hubcaps in US debt. He then goes on to write "As Christopher Wood of CLSA has remarked, Asian central banks have accounted for 58 per cent of US Treasury bond and government agency bond buying by foreigners over the past 12 months, of which 33 per cent came from Japan."
- The U.S. Treasury will essentially default on $4.6 billion in 30-year bonds, mostly individuals. These trusting souls loaned the government money in 1979, agreeing that they would receive 9.125 percent interest every year until their bonds mature in the year 2009. Now the government is calling the bonds, defaulting on the contract.
Ed Henry of the Taxpayers Union has an opinion on that, and says, "No longer will politicians and appointed bureaucrats be able to brag that the United States has never failed to live up to its obligation as the safest investment in the world. Investment is no longer guaranteed." But the Mogambo says that one guarantee is still valid; the US government will always be a lying, corrupt bunch of commie weasels who cannot be trusted.
- On a happier note, I am sure that you are, like me, are anxiously anticipating January 27, which is Mozart's birthday, and you are now busy with the preparations, what with all the buying and decorating the Mozart tree, and hanging the Mozart lights along the eaves of your house, and dying eggs for the big Mozart egg hunt and all.
And this happy time of year, as an example of how it is always feast or famine around here, also coincides with the annual Girl Scout Cookie bonanza, and so the Mogambo will soon be indulging in a orgy of sugary, chocolate treats while listening to the magical, incredible Mozart on the stereo. And I suggest that you do the same, because it just doesn't get any better than that.
- One of the better things that I did back when I had money to spend on such things, is that I subscribed to the Strategic Investment newsletter, and took advantage of every offer to extend my subscription that came with a discount offer attached by sending them a check that probably wouldn't bounce, and in the latest issue we have an article, a fabulous article, a magnificent article, by Addison Wiggin, an article that ought to be required reading for high school kids, and WILL be required reading if and when the Mogambo gets elected as President of the United States, entitled "The Era of Fictitious Capitalism ." This remarkable title is described in the text as when money is freed from the shackles of value, then "Economic growth was no longer restricted by the growth of material goods production. Toss in a few financial innovations, like derivatives, and the 'fictitious' economy assumed the central role in the global monetary system." He quotes a guy named Wang Jian, who is a Chinese bureaucrat who seems to have more than the usual sense of economic savvy, and a hell of a lot more than the execrable economists we have here in America, and who will figure prominently in a subsequent paragraph, who notes that "Money transactions related to material goods production counted for 80% of total (global) transactions until 1970. However, only five years after the collapse of the Bretton Woods, the ration turned upside down - only 20% of money transactions were related to material goods production and circulation." Nowadays it is a "fictitious capitalism" where investment money goes into stocks on the idea that the rise in price of those assets, as a result of all the money going into them, will constitute profits, and that these profits are a bona fide proxy for real profits, the kind that used to be made by making things and selling them at a profit.
Okay, so far we have only one dollar in five actually being involved in making things nowadays, and the other four dollars are buying and selling of houses and cars and stocks and bonds and stuff. Just when you thought it was safe to go back into the water, this Chinese guy drops the bombshell that "The ratio dropped to 0.7% in 1997." I am horrified, and am thankful only that he has not updated his figures for the last seven years, as I am sure that my heart could not take the shock, as I am sure that it is worse. Much worse.
In his terrific article, Mr. Wiggin reports that he has received, through a long a torturous way, a paper written by this Chinese bureaucrat, Wang Jian. I, in doing my part, reprint part of it, as I see no reason why the Chinese government should be allowed to keep these terrific, time-tested ideas all to themselves. "Clouds of war are gathering," he starts off. "Right now, the most important things to do for China are: 1) Remain neutral between two military groups while insisting on an anti-war attitude. 2) stock up on strategic reserves; 3) get ready for a short supply of oil; 4) strengthen armament power."
Perhaps we should not be too surprised, then, to read that the Chinese Ministry of Commerce has reported that "China's crude oil imports last year rose 31 percent to a record," or that Chinese is a big importer of raw materials.
- The Washington Post had a nice article by a guy named William Branigin who is such a good writer that he can encapsulate the whole message of his text into a headline and a sub-head. And to prove this, I will print verbatim the entire thing, first with the headline "U.S. Consumer Debt Grows at Alarming Rate" and then following that up, as promised, with the sub head, "Debt Burden Will Intensify When Interest Rates Rise." You would think that there is not much else to write, as he has presented all his ideas already. But undeterred, he then goes on to write " According to the latest figures from the Federal Reserve, America's consumer debt has topped $2 trillion for the first time, continuing what debt experts view as an alarming surge in recent years." Alarming? How alarming? Well, since the beginning of America when the Pilgrims stepped off the boat and got all huffy to find that the place was lousy with Vikings and Indians and neither of those groups could make a burrito that was worth eating, all the way up through time that is measured in centuries until 1995, total consumer installment debt was below one trillion dollars. Since 1995, Americans have added another trillion dollars onto their personal debt loads.
Well, he got tired of waiting for the Mogambo to say something insulting about a nation whose citizens would do such a stupid thing, he goes on to quote a guy named Howard S. Dvorkin, who is the founder of a non-profit organization called of Consolidated Credit Counseling Services Inc., who has to deal with these sad-sack people who are being crushed by their debts, and who opines, "It's a huge problem. You cannot be the wealthiest country in the world and have all your countrymen be up to their neck in debt."
This comes as a result of the news, as alluded to earlier, that consumer debt reached $2.004 trillion. This is the ordinary consumer debt, the run-of-the-mill, I'll take one of those and two of those and put it on my credit card, please, and throw in a new car because that would be real nice, too, type of debt, and does not include things like mortgage debt, which is, of course, another huge pile of debt. But if you insist that we include mortgage debt, American households owe close to $9 trillion.
There are only about 100 million people in this country with a job that is not directly a government job, and that debt load now works out to $90,000 for everybody who has one of those private-sector jobs. And I haven't even started adding in those 100 million workers paying anything on the federal, state and local debts that are also reaching equally outrageous proportions. And so not only do this tiny minority of people have to work hard enough to pay the debt and the interest on that colossal mountain of total debt, but also somehow accumulate enough in savings to finance their own retirements, and at the same time as the Fed is publicly stating that they are trying to get inflation cranking up, which will eat into any retirement savings like a cancer. To this statistical impossibility, I say hahahahahaha! Jerks! Hahahaha!
- Speaking of retirements, Reuters reports that the Pension Benefit Guaranty Corp, the U.S. government agency that struts around saying that they provide a safety net to company pension plans that go bust due to mismanagement, will announce a record $10 billion deficit. Apparently some doofus Congressman said that it raised the prospect of, hold onto your hats, a taxpayer bailout. News flash to this unnamed Congressperson: The sole purpose of the PBGC is to dispense taxpayer bailouts! That is why it hardly collects enough in "premiums" to cover its own operating budget, and has never raised premiums enough to cover actuarially sound insurance. Reuters goes on to say, "It would be a record deficit for the Pension Benefit Guaranty Corp, which a year ago reported its worst year ever and has seen its deficit only grow since then." So as bad a ten-billion dollar deficit is, it is only going to get worse and worse, as things are getting worse and worse, as they must.
- Mark Thornton and Robert Ekelund, two guys I never met or even heard of since they have never contributed anything to my main source of news, "The Monthly Journal for the Angry and Dangerous Paranoid Whacko," but who nevertheless wrote an article published someplace else less prestigious, entitled "Tariffs, Blockades and Inflation of the Civil War." I am not a scholar of the Civil War, and about the only thing I am sure of is that a lot of people got killed in a war because half the country hated Abraham Lincoln and his fiscal policies, and who was everything terrible that the Constitution was written to prevent, but the authors have concluded something that I think has some significance. They wrote, "Big Confederate government brought the Confederacy to its knees."
So, once again, we see one more bit of historical proof that big government is always fatal, as California and the federal government are proving today, and that Abraham Lincoln and the Confederacy proved yesteryear, too.
- Chris Temple, editor of the National Investor newsletter, wrote his interesting views in an article entitled "Gold, Stocks and 70's Lite," and published on the Prudent Bear website. Mr. Temple has taken a look at the distorted and dangerous economy that has evolved, mostly under Alan Greenspan, and writes, "In my view, we're on the way toward what I recently dubbed a '70's-lite' type of environment. The dollar will weaken further. Costs, led by commodities, will rise. Eventually, there will be upward pressure on long-term interest rates, in spite of the Federal Reserve's gallant (but ultimately doomed) efforts to hold it off. None of these trends, mind you, is likely to be as extreme as those of the late 1970's; at least not any time soon. However, the pattern will be the same; and Americans will re-learn the word 'stagflation.' " This last term, "stagflation," in case you are unfamiliar with it, is a term that describes stagnation in the general economy combined with inflation, the worst of all worlds.
"For now, stock investors continue to be fixated on what have been or are perceived to be the 'benefits' of the reckless fiscal stimulus and dollar debauching that has occurred in the last year. They still could not care less about what consequences that has sown for the future. As Scarlett O'Hara would say, 'I'll worry about that tomorrow.' "
The guys at Daily Reckoning said something that may be pertinent to this philosophy of the innocents. "You don't make money by knowing the future. You make money by knowing where your fellow investors have erred in the present. You can't know which horse will win the race, we remind you, but you can make a fair guess about where the odds are miscalculated." And if anyone thinks that rampant creation of money will not affect inflation, then they are grossly miscalculating the odds, and you ought to sidle up to the two-dollar window and put some money on gold and commodities to win, place and show, because those nags will soon cross the finish line and pay off big.
- The Financial Times ran an article by two guys named David Pilling and Barney Jopson, who were writing about how Japan is intervening mightily in the foreign-exchange markets to keep the yen from rising, and to keep the dollar artificially propped up, to little avail. They quote one Japanese official yahoo, who said, "We can't continue this intervention policy indefinitely. But if we stop now, the yen might soar. It's a Catch-22."
This shows the problem of translating American novels into Japanese, as this is NOT a Catch-22. In the definition provided by Joseph Heller, only crazy people want to fly dangerous bombing missions during war, and insane people are not allowed to go on dangerous bombing missions. But if you do not want to go on dangerous bombing missions, it means you are not crazy, and therefore you have to fly the dangerous bombing missions. That is a Catch-22.
What you have in this case is the Japanese government trying to suppress the yen, and if they stop, the yen will rise. It's as simple as that, and it has nothing to do with anybody catching anything, either a 22 or a case of common sense.
To use this definition of Catch-22 in the context of Japanese intervention in the currency markets, only crazy people want to intervene to debase their own currency by manipulating the currency market, and crazy people should not be allowed to intervene in the market. But if you do not want to intervene, then you are not crazy, and therefore you should, umm, no, this is not working out, and so it just proves my original objection, namely, it is NOT a Catch-22.
- Michael Hodges, the guy who runs The Grandfather Economic Report and I suggest that you NOT go there, as he has tables and graphs and narratives that prove, beyond a shadow of a doubt, that America is a country of imbecile wastrels, and if you do go there and take a look at all of that stuff, then you will end up never looking at your fellow countrymen in quite the same way ever again. Anyway, he writes, as if to prove my point, "America has become more a debt 'junkie' than ever before with total debt of $34 trillion, or $119,442 per man, woman and child. 61% ($21 trillion) of this debt was created since 1990, a period primarily driven by debt instead of by productive activity."
He poses that he calls "2 great questions: Can the production of debt forever replace the production of goods? Can Americans forever borrow their way to prosperity?" Well, before I could even raise my hand, he answers the question for me. " NO WAY!" he says, and the way he uses all capital letters indicates strong conviction, although if I wanted to indicate strong conviction then I would have said "No freaking (insert long string of obscenities) way, Jose!"
And I would have like it on the record that I was going to say the same thing, although I am having some doubts. For instance, every time I look in the mirror - eek! - I am reminded that things are not like they used to be, and am horrified that they are worse, and we have a fiat currency now, which is worse, and am horrified about that, too. And we have a dangerous loose cannon in the Fed named Ben Bernanke who is fond of reminding us that he can, and will, print up as much money as anybody needs, which is horrifyingly worse, too, because if you have studied any economic history at all, then you know that anybody who advocates such a preposterously insane thing is, hmmm, I see I already used "preposterously insane," so I will call him a poopie head, because it is simultaneously humorous AND disrespectful, which is another fine example of the Mogambo demonstrating fabulous productivity by doing two things at once.
Therefore almost anything is possible, including printing up the entire $34 trillion dollars necessary to pay off the debt that Mr. Hodges refers to. In a stroke, neither America nor anybody in America would have any debt whatsoever. That is the beauty of a fiat currency, and that is also the horror of a fiat currency, because governments are incapable of resisting the siren call of free money, and all that money finds its way into prices, and higher prices beget higher prices, and soon the poor and the not-so-poor and the almost-poor and the becoming-poor find that they cannot afford to buy the things they want, and then prices rise a little more and they find they cannot afford to buy the things they need, and then prices rise a little more and they find that they are cold and hungry, and then prices rise a little more they find that their children are also cold and hungry, and then they get angry, and then everybody starts getting testy, and then the whole thing collapses, and then out of the rubble climb the survivors who swear that they will never again fall victim to the horrors of a fiat currency, and then they write a Constitution that they figure requiring that money be only silver and gold will preclude the remote possibility of ever again having a fiat currency, and then a bozo commie-bastard elected yahoo decides that what the country needs is more money and government programs, and then he threatens the Supreme Court to allow him to do whatever he damn well wants, and then debt and money accelerate, and then prices rise, and then the Fed and promises to print up as much money as anybody needs, and then the Mogambo starts having a conniption fit and starts writing in these long run-on sentences that apparently have little punctuation at all and seem to go on forever. Oops. There's a period. Looks like we are done.
- The Fed's beige book came out and said that wages are not rising. Separately, the Producer Price Index of the Labor Department was released and it showed that, in one year, Finished Goods are up 4% in price, Intermediate Goods are up 3.9% in price, and Crude Goods are up 18.5% in price.
To put a spin on it, they decided to take the 4% increase in the price of Finished Goods, ignore the hefty inflation in Intermediate Goods, and ignore the roaring inflation in Crude Goods, and back out food and energy out of what is left, and that brought that index down to an inflation reading of 1%. They think this is real clever.
Then the CPI came out, and it was up 0.2%. Food prices were up 0.6% for the month, education costs rose 0.4 percent, health care costs rose 0.6 percent and housing prices rose 0.3 percent. But, and this passes for good news, I suppose, apparel prices fell 0.4 percent and transportation costs fell 0.2 percent. These are MONTHLY increases in prices, so to get the annual increase, multiply each number by twelve, which I would do for you, but given my adroit handling of a calculator it would take the rest of the afternoon for me to do that, and I would get it wrong anyway. But I will get you started, and will conscript a passing fourth-grade kid to do the math, and tell you that multiplying 0.6% by twelve equals a 7.2% annual inflation in food.
Of course, the lying weasels in the Fed and in the government proper are all strutting around saying how inflation is tame, quiescent, non-existent. To which I say, as you knew I would, "What a load of crap!" Three-percent annual inflation in food and energy used to be enough to cause heart attacks in bankers and bond holders, and here we are looking at a trend that is more than TWICE that!
And it was this intriguing happenstance that allowed me to start getting a handle on why those Mid-east Muslims are trying to kill us and stop infecting them and their children; we are a nation of morons with nuclear weapons! I mean, the government people are showing you the actual data about an inflation that is screaming inflation, and right in front of our eyes they are lying to us, and yet we don't even notice! I gotta tell ya, I am finding it harder and harder to hate those Muslim bad boys, since I am mad as hell, too, at my government and the American jackasses in the government and the media who allow them to do it.
I pride myself that I have always stopped short of actually taking the law into my own hands and going after these weenies with rocket-propelled grenades and get them before they get me. As the professionals in charge of my case put it, it is one of the few things about me that didn't go abnormally wrong, although they are taking the precaution of keeping me over-medicated, just in case. So maybe the whole Mid-east thing is a matter of putting them all on powerful tranquilizers and having the CIA keep an eye on them. I mean, look how well it works for me!
- The Super Secret Homeland Security Praetorian Guards Keeping Us Safe From Enemies Within Our Borders have failed a little test. They did not notice a large suspicious-looking package placed in plain sight, and they were even discovered sleeping on the job! One of the worst of the Leftist Losers in America, Eleanor Holmes, says that it all okay, and this is just a matter of them needing better training! Huh? You gotta train these Homeland Security blockheads to take notice of a large, suspicious package, wrapped in black plastic, placed against a white marble background at a national monument, in plain sight, in the middle of the day? My God! And you gotta spend money and time training these guys not to sleep on the damn job? We're doomed! And the head moron, the big cheese in the organization, says that he has seen the report and has taken steps to correct the deficiencies! So let me get this straight: The guy who is responsible for our security is an obvious incompetent bungler who has no idea what in the hell he is going, and everything is now going to be okay because he has taken steps to correct the "deficiencies"? I scream in outrage! He has been placed in the wrong job! This guy belongs in the Federal Reserve!
- The Daily Reckoning is a collection of people who have a firm grasp of real economics, and write, "And now that crude oil is comfortably over $35 a barrel, take a seat and make yourself comfortable, as you are going to see some fireworks, as regards inflation. U.S. citizens and Wall Street shills might venerate the wonders of currency debasement, but the receivers of U.S. dollars, particularly OPEC, are not as gullible, and detest payment in debased lucre."
Well, I have noticed that OPEC did not raise the price of oil to compensate themselves for their lost buying power, and so figured that it would be a no-brainer to eventually talk them into accepting pretty beads and a few ratty blankets for their oil, and get out of paying them money completely.
But counting on OPEC to be a bunch of low-IQ idiots forever is not something we should count on. In that regards, I note with dismay that Reuters reports that former Malaysian Prime Minister Mahathir Mohamad has told Saudi Arabians they should "sell oil for gold, not U.S. dollars, to avoid being 'short-changed' by a decline in the U.S. currency." Mr. Mahathir says, "The price of oil is $33, but the U.S. dollar has declined by 40 percent against the euro so you're effectively getting $20. So you're being short-changed."
This could have something to do with the Islamic Gold Dinar that is, ostensibly, gaining ground as a new currency, and is a Muslim-approved alternative to the dollar, which is the money of the devil, which is, I am sorry to report, us, according to them.
- The King Report also had an interesting take on the latest employment report:
"The details of the report are more troubling than the headline numbers. Temp workers (+30k for month; 166k for 2003), education & healthcare (21k, 301k for 2003) and other low-paying gigs are the main job generators. Manufacturing lost 516,000 jobs in 2003 and has shed 2.8 million jobs since July 2000...The average workweek for production or nonsupervisory workers on private nonfarm payrolls decreased by 0.2 hour in December to 33.7 hours, seasonally adjusted. The manufacturing workweek declined by 0.1 hour to 40.7 hours, and manufacturing overtime edged up by 0.1 hour to 4.6 hours. The index of aggregate weekly hours of production or nonsupervisory workers on private nonfarm payrolls fell by 0.6 percent to 98.8 in December."
So much for the vaunted recovery, which is more and more contained solely in stock prices, bond prices, oil prices, housing prices, healthcare prices, food prices, gasoline prices, etc., and not in people getting high-paying jobs and paying their bills and having fun.
Kurt Richebächer's take on the subject is, "The production side with high-paying jobs is contracting, while the consumption side with low-paying jobs is booming."
- Bill Fleckenstein writing in the Contrarian Chronicles, opines that "We have folks running the Fed (and the Treasury, for that matter) who are the most incompetent and irresponsible of all time. That's old news, but what's new, in my opinion, is their full-blown display of arrogance. They talk about keeping interest rates low indefinitely, while paying lip service to deflation or disinflation, when the opposite is happening in nearly every commodity market."
And that profound statement by Mr. Fleckenstein is why I strongly recommend that we proletariat boobs out here in the real world bow to him when he passes by, and murmur "We're not worthy, we're not worthy!" because you will have to go a long time before you will read anything that approaches such transcendent wisdom, and with sneering, snarling contempt thrown in for free.
The money being created willy-nilly has to go somewhere, and Mr. Fleckenstein's clear eye has noticed that. too. "The Fed, the money-management industry and the public, to some degree, are all in. Folks are either leveraged to the hilt in housing or real estate investments, and/or they are piling into stocks. In both cases, the rationalization is some variation of the greater-fool theory."
To which I helpfully reply, "No, it isn't a variation at all, Bill, and I hope you don't mind if I call you Bill. But this IS the greater-fool theory, revealed in all its glory!"
Waxing metaphorical, he writes "And we have this giant anvil dangling from dental floss above the balsawood structure, with the anvil being our burgeoning debt and collapsing currency. The outcome of this whole tragedy to me is quite clear: I believe that stocks will at some point collapse."
How far will they go down? Well, Mr. Fleckenstein says "It's so clear to me that when stocks go down next time, they're going to go down for real. I anticipate that we will see a huge decline, with the major averages falling over 50%."
- Jay Taylor of Taylor Hard Money Advisors writes "We have a world awash in excess supplies of every good and service imaginable, thanks to the permissive fiat currency regime of the post-1971 era. That has led to vicious competition in the global economy, which along with the enormous debt the U.S. holds, threatens to throw the U.S. economy into a major depression." Threatens? I say it is waaayyyy past "threatens," and if we DON'T get a devastating depression, which we deserve in spades, then it will be only through divine intercession.
- Bill Bonner of the Daily Reckoning team is one of the wittier of the guys on the economics gadfly scene, and proposes that "soak the stupid" be the slogan of the Republicans. "They cut taxes... but increased expenses. Who then will pay for their programs of guns and drugs? Rather than soaking the rich or wringing out the poor, the Republicans want to hose anyone dumb enough to lend money to the Bush Administration at Eisenhower-era rates. They borrow... and then degrade the currency in which the debt is calibrated."
He also quotes Terry Reik of Clapboard Hill Partners, who has an eye on capital flows across borders. He says "An ominous harbinger for U.S. financial assets has been the stunning collapse in foreign-capital flows... From a peak of $110.4 billion in May, net foreign flows have fallen to $90.6 billion in June, to $73.4 billion in July, to $49.9 billion in August, to $4.2 billion in September."
Bill, I mean Mr. Bonner, has also noted that real income, that is, income that is adjusted for buying power, is falling. "An American who earned $20 per hour in 2001... earned the equivalent of only $12 last year. In terms of real money, Americans are losing income faster than at any time since the Great Depression." Fabulous.
- A Washington Post headline tells us that Fed officials believe that the U.S. economy is gathering strength. Keep this in mind, because this brings up a very interesting sidebar that appeared in the January 3, 2004 issue of the Economist, entitled "A Bet Comes Due." It is priceless, and follows another similar article, in the same magazine, about the same guys, and which I noted in a prior Mogambo Guru, and I would have to be crazy to do a search to tell you which issue and the date and all, because I would have to read through all of those back issues, and very soon I would be more confused than I already am, and wondering what in the hell I was talking about, and "What in the hell did I mean by that?" But it isn't necessary anyway, and if you were here right now I'd reach down and pick up a bugle to blow a little fanfare - da da, da daaahhhhhh! - and then switch to stock footage of a gigantic, thunderously cheering crowd, stretching to the horizon. Then the camera focuses in on a tall handsome figure of a man standing on a platform in front of that massive happy throng, and as the camera pans in we see that it is the Mogambo! Even from a distance you can perceive the regal bearing, and a slow zoom shot to my ruggedly handsome chiseled face, highlighting a penetrating gaze and twinkling blue eyes, and you instantly know that, and actually here is where the fanfare was supposed to come in, I Am The Mogambo! And if you are properly educated in the Ways of the Mogambo, you know my motto is, "I never lie, and I'm always right," which is a line I stole from Fire Sign Theater, a shameless bit of plagiarism that I can get away with because I cry so pitifully and blubber like a little child when lawyers call that almost nobody ends up following up on their threats of legal action. And therefore you know that you can trust me completely. So much so in fact, that I suggest you liquidate your retirement account, and send the cash to me, and then trust me because it will probably be very, very safe.
But the point was, and to tell you the truth I had to go back and look to see what in the hell I was talking about and maybe I can glean some clue as to what in the hell I was talking about, that the Economist magazine asked the attendees at the Jackson Hole a few questions at their annual symposium of what is supposed to be the smartest and brightest and most powerful financial people and financial institutions in the country, including the Fed, and actually sponsored each year by the Federal Reserve Bank of Kansas City. The writers asked these hotshots, and you can tell by the way I used the term "hotshots" that I am consumed with a simmering hatred and loathing of each and every one of these lowlife people, whom I usually refer to as a parade of preening putzes, which is stupid-sounding but alliterative, so they cancel out. But they were asked, in 2001, "Is this a bubble?" and they all said, and you will want to keep score, so go get a piece of paper and a pencil, "no." The fact is plain, and that period of time is now proved to have definitely been a bubble, so they were wrong. Now to keep score, you write a "zero" for every time these laughable idiots are wrong, and a "one" for every time they are right. So far, they have scored a single zero.
They were also wrong when they unanimously said in 2001 that they "Ruled out an American recession," to which I shout "Wrong-o again, you ignorant bastards!" which is an audible signal for you to score another zero, and they also got it wrong when "Last year they predicted what interest rates would not fall to 1%." So that's another wrong answer, as indicated by my jumping up on the table and screaming "Nice going chumps! I got your economic savvy right here, you pathetic morons!" and I grab my crotch in my fabulous imitation of Michael Jackson, only simmering with a seething, raw hatred that wows the critics, and I don't mean to brag, but there has been talk about an Oscar for my riveting performance.
Now, on my score card I have recorded three zeroes, and a little drawing that looks kind of like a bagel, but with lightning bolts coming out of it, which does not mean anything to me or to you, but is apparently highly significant to the people assigned to my case.
The story goes on, as in "update," and thus the reason for the sidebar in the first place. This time the Jackson Hole weenies were asked in 2003, "Will the dollar fall to $1.25 against the euro at any time in the next twelve months?" They all, except one, said "no." They were wrong about that, too, so they score another big, fat zero. So getting out the calculator and a pot of coffee for some marathon calculating, I add zero plus zero plus zero plus zero, hit the "equals" button, and I peer at the readout in puzzlement, and this is just the preliminary result and I am performing some statistical tests on the data to verify the answer, roughly, ummm, zero.
Now since this was a binary system, we can convert these data to indicate competence in economics, with "zero" signifying zero competence and "one" signifying complete competence. A few quick calculations later, and we find that the Fed, and the dimwits they hang around with, score the lowest possible score, zero, indicating a complete lack of competence.
Next, we take a stroll into the Statistics Laboratory, bulging with computers, and take that data and multiply each score by 100, so they new distribution should have a mean of 50. But alas! Our computers are going berserk! The distribution has a mean of zero! A standard deviation of zero! And a graphical plot of all the data points is a single point at the origin! By this time the computers are spinning and the hard drives are all humming, and the phones are all ringing and the dogs are all barking, and I am running around, pulling my hair out and screaming about how we are falling in to Black Hole where even the laws of statistics are reduced to The Point of Singularity, and since nobody can seem to calm me down, they all decide it is a good time to go to lunch, and that will probably be the last time we ever see any of them again, as I expect us all to fall into the Big Black Hole Of Statistical Nothingness at any moment, and almost surely before they get back.
So you can see why I have no respect for the Fed or any of the dimwits that they hang around with, which is ending on a preposition, and so I happily re-write that as "The dimwits with which they hang around," because it gives me another chance to heap a little more disrespect on their heads. And now that I think about it, when the Mogambo is elected President, my first Executive Order will be to require that all the officials at the Fed and all their - what did I call them? - dimwitted friends all have to wear a large conical hat with the word "dunce" written on it all the time. In this way, it will warn other people about their abysmal, arrogant incompetence. Nah. Now that I think about it, I will just fire them all, and use the resources to hound them to their graves, which is a hell of a lot better than they deserve.
And, I am happy to note, that the Economist magazine has the same degree of disrespect for these pompous, arrogant weenies as I do, as when they write "In short, they provide an excellent contrarian indicator."
With that background, you can appreciate the humor in a headline that appeared in the Wall Street Journal last Thursday, the 15th, which was "Upbeat Fed Sees U.S. Economy Improving and Inflation Tame." This excellent contrarian indicator, which is what the Economist has uncovered, says that you will make some big money if you bet against the asinine opinions of the Fed, and wager that the U.S. economy is deteriorating, and that inflation is not, ummm, tame.
- I ran across an execrable article entitled "' Hasta La Vista' For the Poor and Sick," that was written by a guy named Robert Sheer who writes for the Los Angeles Times, a Leftist Loser newspaper that is world-famous for being at the fringes of sanity, that very few people have any respect for, meaning me and all my multiple personalities, and that was re-printed in my own Leftist Loser rag of a newspaper, the St. Petersburg Times.
First off, from the depth of his analysis I assume the author is a teenager, and I hope to be able to tone down my seething disrespect for the guy and his worthless opinion, because I would be embarrassed to think that I would attack someone so young and childishly ignorant, instead of picking on a fully formed adult who can bring his faculties, education and experience to bear on the problem, and is therefore a worthy opponent.
But he is upset and having a hissy-fit that California is going through some tough economic times, the result of their acting like profligate, mentally impaired morons as regards money, and for an extended period of time stretching over decades and decades. And as a result of whole populations being engulfed in the comforting, smothering web of subsisting on government benefits and actual money, uncountable hordes of people are suddenly, for the first time in their lives, not getting enough free money and benefits to suit either them or him.
And now we are treated to the laughable spectacle of, and I will provide the quote because if I didn't you would accuse me of making this up, but one of the things that are completely unacceptable to him is that the state of California will no longer be able to pay the full cost of free post-high-school education, and thus he is aghast at the terrible plight of "high school graduates who will be shunted to community colleges instead of universities." My God! How low have Californians sunk, that they will shrilly shriek that it is not enough that the taxpayers put people through college - oh, noooOOOooo! - but it is an insufferable indignity to force them to go to a lowly community college instead of a university? And how low has the Los Angeles Times sunk to print this idiocy? I laugh mirthlessly - hahahaha! - at him and his whole California-commie philosophy! I hope my open display of contempt will not stunt his growth and development, and that one day he will still grow up, and maybe evolve, develop and learn enough to have an opinion that wasn't simplistic and laughable.
But he did do one nice thing; he provided us with an example how excess money and credit creation always filters through to prices, which is inflation, and how the poor are the first to feel the detrimental effects of that. His exact quote is about "reneging on an already approved cost-of-living increases for mother and children on welfare." It is, again, not enough that welfare recipients make as much as they were making - oh, noooOOOOooo! - and therefore be still on their "job" of collecting unearned benefits at the same level as last year, but that prices have risen so much that even THAT level of free money is so inadequate that it is cruel, and to not give them more is barbaric, regardless of the budget crisis!
He calls Governor Schwarzenegger a "blowhard bully boy," which is a phrase that I like because it has that alliteration, so at least the guy's efforts aren't completely wasted on me. The next sentence is, and I quote, "Lacking the guts to take on the entrenched special interests ...he now proposes to do what all cowardly politicians do: balance the budget on the backs of the poor." Again, this demonstrates how inflation is first felt by the poor, so the guy actually ends up making my argument for me.
At the back of the crowd of reporters the pretty redhead reporter raises her hand to ask a question, and so I say, "Yes! You in the back! Yes, the pretty one, and pray make your question as profound as your beauty, which has transfixed by heart and completely enthralled me so that I can think of nothing except throwing myself prostrate at your feet and begging you to make me your love slave!" She blushes slightly, mutters something under her breath that I didn't quite catch, but which started off with "Why, you filthy little..." and asks, "Well, the two questions that bedevil my readers are, one, who are these 'special interests,' and the other is, how did they get 'entrenched?' "
I clear my throat while I think to myself, "Well, it is interesting that you would use the term 'bedevil,' you little vixen, because the delightfully wicked thoughts now swirling through my head have probably condemned me to Hell for eternity," but pulling myself together and trying to act halfway professional here, I explain "The term 'special interest' is any group that has managed to live at the expense of everyone else, namely getting the government to give them money or power. The money originally came from the simple expedient of the federal government creating excess money and credit, literally printing it out of thin air, which provided the funding and therefore their vital life blood as it finally filtered through to the government via taxes. They became 'entrenched' through sheer longevity, and now they are too big and powerful to control, as their webs of influence and corruption have spread like a cancer through the entire society, as they took the wise precaution of hiring the wives and husbands and sons and daughters and nieces and nephews and cousins and family members of politicians who control the purse strings, and also the wives and husbands and sons and daughters and nieces and nephews and cousins and family members and the children of their friends and political allies who ALSO can control politicians who control the purse strings." I noticed a fleeting cloud of confusion flit across her beautiful face, and so I helpfully offer to take her back to my room for a little in-depth, one-on-one discussion. She said, surprisingly, that would be fine, and so I announce "That will be all for today, ladies and gentlemen! Thank you for coming, now get out, get out, get out!" and then they all turned to leave. Then the beautiful reporter plunges a dagger into my heart and says that he just remembered that she can't come to my room, and she has other commitments, and so I shout out to the leaving press corps, "Wait! Wait! Come back! It turns out that we DO have time for a few more questions!"
So, they all come trooping back and a grizzled professional raises his hand and asks "Are you going to comment about how this Robert Sheer, Boy Reporter, is upset that the governor's plan involves asking local governments to kick in money to Sacramento?" I'm thinking to myself that I was not, and in my mind I am still snuggling up to that gorgeous redheaded Siren and confiding to her that my name is Bond, James Bond, and am ordering a bottle of Lafitte Rothschild '39 champagne up to the room to, umm, lubricate the quiet conversation that I was planning on having with someone far more beautiful than you, and if you want a news flash, I suddenly realize that, and you can write this down, old timer, but grizzled media professionals don't get me hot.
Instead, I say, "Actually I was not, as I assume that all of you are capable of easily demolishing such a stupid argument. To those who are too drunk, and I assume all of you are, as this is far too boring a news conference to attend cold sober, it goes like this: The guy thinks that if the state more heavily taxed the people directly, that would be okay. But the fact that the state asked the local governments to collect the money and THEN send it on to the state, that is somehow unacceptable. But it is six of one, a half-dozen of the other."
Warming to the subject, I shinny up a nearby flagpole as an attention-grabbing device, and holding on with one hand and gesticulating wildly with the other, the voice of the Mogambo rises to a crescendo, "The whole thing is that the damnable creation of money and credit by the Fed, coupled with the irresponsible growing of a gigantic government supporting everyone, always causes prices to rise, and that means increasing economic pain of a lower standard of living for the lower-income people, and that requires higher taxes to feed the legions of the state's dependents, and that means higher taxes, and that means people who pay the taxes have to charge higher prices, and, higher prices means more economic pain, and that means higher taxes, and that means..."
I pause, as my head is swimming from the whirling spiral I am describing, and I slide slowly down the pole until I am finally slumped at the bottom, weary and spent. I sum up with "There is no easy way out of an excess money and credit-fueled boom, and that is why, as I continue to bellow with every ounce of strength I can muster, that it is imperative that America not get into that mess in the first place, and then you will not have me climbing up your pole."
I was hoping that the reporters would leave enlightened, but I have since learned that editors across the land spiked the story of my news conference, as it boiled down to "Raving lunatic. Climbs poles."
- The economic big-brained dudes at Cornerstone Investments, are almost as dyspeptic about Greenspan as I am, and write, "If you haven't noticed, Mr. Greenspan has often referred to the period from 1995 through today as an 'experiment.' He is experimenting with the economy. He has followed policies that have always failed in the past. Simply put, his experiment is to solve all economic problems with liquidity. The premise is that if you throw enough money at a problem it will go away."
It doesn't. I know it. The guys at Cornerstone Investments know it. You know it. And the proof is simplicity itself; if you could solve the problems created by printing up too much money by merely printing up more money, then there would be a least one instance in the entire history of economics where it worked. It never has. Never.
- Doctor Dinero, and I have a feeling that this guy is using a pseudonym, is a chemical engineer by training and economics commentator by avocation. His specialty is to take facts and figures and run them through his analytical test tubes and see what pops out. In doing so, he writes, "Today (early January 2004) the theoretical value of gold is $2,566 per ounce." That is music to my ears, as my wife has some jewelry plated in real 10-karat gold just sitting there in a box on her dresser.
But he is not done explaining the results of his experiments, and figures that "We are still at the start of a major economic disaster."
- Speaking of gold, Europe's central banks, which hold more than 14,000 tonnes of gold, have been offloading bullion for years to allow their brain dead socialist/communist/statist governments to fund their persistent budget gaps and keep from falling into well-deserved bankruptcies that stem from their profound intellectual bankruptcies.
Selling the family jewels to buy a few more days of Big Expensive Government. How special. And they are ostensibly on the verge of finalizing a plan to do it some more. Even more special. Ugh.
---Mogambo Sez: President Bush is set to deliver his State of the Union address, and he is rumored to have some more glorious and wonderful ideas to lay on us. Given the level of brilliance of his ideas for the last three years, I can only scream in horror at the prospect, and expect the world to erupt in flames by his merely enunciating them.
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.