G-khan
05-08-2003, 12:57 PM
Richard Daughty
The Mogambo Guru
May 08, 2003
The Daily Reckoning
" ... Money inflation leads to price inflation. Price inflation is historically bad news for anybody experiencing it. And... and this is the part that makes me scream in my sleep and awake in a sweat-soaked panic to empty whole banana-clip magazines of expensive high-powered ammo at anything that moves in the shadows... not only have we HAD monetary inflation for at least six years, not only are we HAVING monetary inflation right freaking now, but we have Alan Greenspan and Ben Bernanke explicitly promising to do even MORE monetary creation! And everybody else is, too! And we are monstrously deficit-spending at the end of a long, long boom where there is zero pent-up demand! Gaaaaaaahhhhhh!.. ."
The jackasses at the Federal Reserve pumped up raw credit in the system by another $6.5 billion dollars last week, continuing that particular filthy fraud. Actually, $6.5 billion is not that bad by recent Fed standards, but still, it is a new record.
I hope you'll pardon me if the typing gets weird right here, as my eyes seem to be glazed over, and several circuits in my tiny little brain have seemingly popped their fuses. Apparently they were wired to the circuits that control bladder and bowel functions, because when I read that the banks soaked up an incredible $56 billion in government debt last week, I might have had a little accident. My hygiene problems aside, this is, as far as I can tell, a new record for a one-week feeding frenzy. Perfect. Just freaking perfect. But, you may be relieved to know, I also plan to lay in a supply of Depends adult diapers for the NEXT time I go snooping around in the banking system.
I mean, bond prices are at record highs, with the result that yields are at record lows, and yet here are these banking losers sniffing around and soaking up scads of debt at these record-low yields and record-high prices, at the exact same time that inflation is heading up and the dollar is heading down! This is beyond absurd! AIU assume that they are merely participating in the on-going Fed program to actively destroy the dollar and the US economy. How special.
Now the only thing left to wonder about is when the foreign holders of US debt start flexing their muscles and say, "No more with that buying-debt thing or we're selling," and then the Fed will cool its extravagance, and will try and stick the banks with a load of debt, which will be falling in price because interest rates are no longer being held forcibly down, and then the banks will start whining about how everybody needs to please please please bail them out, again, of the mess that their own incompetence caused, again. One merely has to glance at the history of banking crises to realize that this exact same damn thing, over and over and over, is what caused banking crises in the first place. Some things DO never change, apparently.
The decline in the Monetary Base statistics that I was lamenting last week has, incredibly, reversed and literally exploded to the upside. I seem to have powers that I did not even know I had! I flex my mighty Mogambo muscles! Now, if I could only get this X-ray vision thing working as well...
At least the morons who run the banks will have a lot of company at the annual Imbeciles' Picnic, as the chumps bid up the stocks of the SP500 to a P/E of almost 34. Thirty-four!
Perhaps the idea, as stupid as it sounds, is that all this monetary and fiscal stimulating will restore a profitable and wonderful future, because laws of economics somehow do not apply to the United States, and all this money will soon be fixing everything that is broken, and that the earnings of the companies will soon rise to such heights that everyone will be employed and rich. Throwing a little cold water on this idea, anecdotal conversations with friends and acquaintances who run retail businesses reveal that they are almost uniformly reporting that sales are down between ten and fifty percent. Yow! And they are quite, quite glum.
Or, maybe, all this bullishness is because it is commonly accepted that Bush will do anything and everything to make sure that the economy is perking along in time for the elections in 2004 so that he can win re-election, and that somehow means that shares will be worth more. We already know that the damnable Fed will do anything and everything stupid as far as it can, and the Congress is deficit-spending like there is no tomorrow, too. So all we needed, according to the bulls, was Bush pushing for what he terms a "bold plan." I have no idea how in the hell the Bush people can come up with something that is bolder, if bold means "committing almost-certain suicide in pursuit of a transitory goal," than what the Fed and the Congress are already doing. I didn't even know that there WAS anything beyond monetary and fiscal insanity! But, perhaps these three things WILL produce a revived economy. Unfortunately, all of these have been tried many times before in history, and they have failed every time in history, with the latest experiment being Japan, where it has failed for fourteen years in a row, so I am not holding my breath.
The latest read on business costs is that the total cost to employ somebody went up 1.3% in the fourth quarter, and a whopping 3.9% y/y. Turning our attention to the cost of mere benefits, they were up 2.2% in the first quarter and a staggering 6.1% from a year earlier.
An interesting quirk, maybe of the statistical kind, was that total wages were up a healthy 2.9% in the last twelve months, but most of the gains were apparently concentrated in the mortgage industry, where wages and salaries surged 5.2%. So, stripping out the higher incomes of those who are participating in the Great Mortgage and Housing Bubble, the wages and salaries of everybody else must have gone, umm, someplace else. Bummer.
And, truth be told, the y/y 2.9% increase in total wages was not enough to offset the y/y increases in consumer prices, which were up 3%. And those wage increases first have to be reduced by about a third by taxes. So, prices increased faster than wages and salaries, even BEFORE taxes. Wonderful. Just freaking wonderful.
To show that we and the Japanese are not the only moronic jackasses in town, there was recently an article in the Financial Times that said that the ECB was considering changing its policy toward inflation, and that, and I quote, "excessively low inflation was bad." The ECB is actually considering, and I know you are going to find this hard to believe because my eyes are spinning in the sockets and making me quite dizzy as a result, adjusting their polices to maintain a MINIMUM of 1% price inflation! Apparently, that is the minimum of "good" inflation. I know what you are thinking; "Who are these idiots? And where in the hell did they get the stupid idea that inflation is good?" I don't know.
Bill Bonner at the Daily Reckoning website writes disparagingly about what he call the "lumpeninvestoriat," which sounds rather Russian, which makes a sort of sense, since the story goes that the first thing that the Communists did when they seized power was to execute all the intellectuals and anybody with an education, so that all that was left was the stupid and the un-educated, and we know how well that turned out for the USSR. But anyway, he writes, "But the lumpeninvestoriat have neither a clue nor a prayer. The happy schmucks don't read the Daily Reckoning and don't seem to be aware of the vulnerability of the dollar, the national savings rate... debt... bankruptcies... jobs disappearing to China... falling profit margins... or any of the other end-of-the-world-type problems we worry about."
Well, this is true, and anecdotal evidence that I have gathered says that the lumpeninvestoriat Mr. Bonner refers to is worried about many, many things, and is happy to leave weighty matters to those who have the smug audacity to claim that they can deal with them. These hapless people are worried about dealing with their pressing personal problems CAUSED by that short list.
And, of course, let's not forget to include foreign investors on our short list of lumpeninvestoriat doofuses. Those people, who almost uniformly speak English with funny accents if they can speak English at all, are loaning and investing gigantic sums of money, at least $503 billion a year if we use the current-account deficit as the benchmark, to a country of us fat, lazy, whining, something-for-nothing, neo-communist weenies, and getting negative returns for their trouble. Maybe they are all Russians, which would certainly explain why they would do such a stupid thing.
Fortunately, the evidence indicates that all foreigners are stupid and all Americans are smart. I mean, this $503 billion per year current account deficit didn't appear overnight, you know. Didn't they notice? At least us domestic lumps, to use a nickname, are taking their losses on a dollar-for-dollar basis. These foreign poop-heads are taking a double-whammy to the noggin when they convert the same losses back into their own currencies for yet another loss, because the dollar is going down. And yet, here they are, day after day, putting more and more money into the dysfunctional mess that the Fed and Congress has made of this country. Morons.
Bill also dryly notes that the Japanese stock market has lost 80% from its high in 1989 to last week's low, with lots and lots of monumental gains and losses along the way. Unfortunately, the losses have outweighed the gains. Perhaps that is why the average Japanese citizen has a much smaller portfolio of stocks now than he, or she, used to have.
Let's not lose sight of the fact that every failed attempt at getting things fixed that the Japanese government has done for the last fourteen freaking years in a row is exactly what our own Federal Reserve bozos have advised them to do, and is exactly what the bozos at the Fed are doing to us right this very minute. It failed for the Japanese and it will fail for us, too, only with a hell of a lot more pain and gnashing of teeth.
And I am not alone in that sorry assessment. Mr. Bonner sees the same thing happening to us over the next decade. Recognizing that always losing money is not the sort of thing that remains popular for long, at the end of the decade he figures that, "By then, people will have stopped paying attention to the Dow. Instead, they will probably keep an eye on the Chinese stock market or the price of gold, for they will have concluded years ago that U.S. stocks are not a suitable place to put money."
Even that aside, the statistical comparison between the USA and Japan is flawed because "There is one major difference between the U.S. and Japan. The Japanese never saved less than 10% of their incomes (in the U.S., savings rates fell near zero) and never had to rely on foreigners to finance their economy."
John Myers, a noted big-shot expert on commodities in general and metals in particular, writes, "Net-net, something is stirring in the base metals markets, and that 'something' looks an awful lot like a major rally."
What could possibly cause such a major rally? He explains, "We note that the latest PBOC money supply data revealed a 19.2% year-over-year pace of M2 expansion in China, its sharpest expansion since the 1998 Asian-Russian-Brazilian debt crisis. Adding even more fuel to the fire is the fact that the money supply expansion is being led by an explosion in the supply of currency in circulation (up an exuberant 29%, year-over-year, in January) and is fully supported by concurrently high growth in bank deposits."
In short, China's government is going down the monetary expansion road. The Chinese have the pedal to the metal on rapid industrialization to satisfy a growing domestic demand. Mr. Myers characterizes the explosion as a juggernaut, and notes that it "... is having a discernible impact on the pricing structure for London Metal Exchange (LME) base metals, which reflects a tightening supply-demand dynamic."
I like that phrase; "tightening supply-demand dynamic." It smells of, sniff sniff, money. And here I am going to re-use a sentence I recently penned, both because I am too damn lazy to construct anything new to say and because it was mildly clever, and believe me when I say that there is nobody more surprised than me when I realized that I had finally written something that was not laughably moronic. To A. DeLuca, a delightful and thoughtful reader who was kind enough to send me an e-mail that was not a death threat, a final demand for immediate payment, and did not actually contain the words "restraining order" or "lawsuit," which is a real nice change of pace, I wrote "And if there are two damn things in the whole freaking universe that I am one-hundred percent sure of, one is that money goes where money is being made, and the other is that a lot of money will be made helping money get to where money is being made."
Greenspan, testifying before the alarmingly-clueless dimwits in Congress, said that this country needs inflation so that profit margins can improve. This ridiculous statement demonstrates proof-positive that Alan Greenspan has lost all his marbles. And putting this, umm, person in charge of the Federal Reserve will actually prevent America from ever emerging from the abyss into which the unbelievable stupidities of the Fed have thrown us.
Let me be completely frank; there is never been any economic theory that I have ever heard of that propounds the idea that price inflation is anything other than baaaad news, except for that theory I developed that postulated that gravity waves from the planet Venus impacts currency exchange rates and inflation, but teams of psychiatrists working around the clock were finally able to disabuse me of that stupid idea. On the other hand, the entire history of economic crises is one of government and central-banks causing inflation, and thus destroying one country after another with waves of misery. So the entire corpus of economics literature has been completely free of the preposterous idea that inflation is somehow something one would EVER want to engender. Until now, that is. Now we have Alan Greenspan, America's premier pompous jackass, uttering such a preposterous statement.
To the uninformed nitwit it seems correct that when companies charge more money that they will make more money. Duh. To the informed nitwit, like me, it is axiomatic that paying higher prices for the inputs of materials, capital and labor means you will NOT make more money. What it means is that everything will merely cost more.
And what THAT means is that when it takes your entire paycheck to buy a loaf of bread, then there is not much left to buy anything else. And if you are in the business of manufacturing that anything else, then nobody is going to be buying your output, because customers are using all their money to buy bread, and you will fire the workers, and then those poor bastards will not even be buying bread.
The people who are the final consumers will find that their paychecks always lag the rise in prices, so they must necessarily buy less and less stuff every week. And it is a law of economics that people buying less and less stuff is NOT the road to economic Nirvana.
At this point, the only way that we can possibly be saved is if some miracle happens, with the salubrious result that the final consumers end up with more spending money at the end of the week, and then this now-moneyed collection of consumers goes out and spends the money. And this is, unfortunately, the same "looking for a miracle" that every economy that pursued an inflationary policy has ended up looking for. And not one has ever found it, because there are no miracles.
Marshall Auerback, perusing the ramblings of various Fed people, writes, "In the lexicon of economics, Mr Reinhart is telling us that the Federal Reserve has no idea what happens to the money demand curve when they start promoting an explicit inflationary policy."
He notes that "At the micro level, consumers have not been exhibiting any greater fear of inflation, and very few of them have ever heard of Bernanke or his printing press threat." Well, why should they? Didn't they all graduate from a government school? And isn't one of the Big Messages of government schools the idea that the government knows best, and that the government will take care of you, and that everything will be wonderful once we all vote the straight Democrat-ticket and have our level of esteem raised by that singular act?
The Bloomberg news organization writes that "Federal Reserve Chairman Alan Greenspan said he remains confident that the U.S. economy will expand at a faster pace, provided that corporate executives shed their pessimism and begin to spend more." Well, duh. So, taking my cue from Sir Alan, I exhort American corporations to forget that the consumers have no money to spend! Forget that inflation is already reducing their incomes even more! Forget the crushing burden of under-funded retirement plans that will need to suck up every dime the corporation makes for the next few decades! Forget the vast unused capacity that exists in every business in America! Forget everything you ever learned in getting that stupid MBA and everything you learned in the real world, too, and just go out and spend, spend, spend!
The dollar hit a four-year low. Next year the news will be that the dollar has hit a five-year low. Or more.
Dean Baker, co-director of the Center for Economics and Policy, writes in an article entitled "Greenspan's Unfortunate Return," casts a disapproving eye at how we need to borrow more than $1.5 billion every day from foreigners. "This process cannot continue for long. At some point the country literally will run out of things to sell - in about 20 years at the current rate, if foreigners don't lose interest in the United States long before that. Whenever it happens, the dollar will drop, sending import prices and inflation soaring, and U.S. living standards will plummet."
Please note that Mr. Baker's estimate of how we will literally have mortgaged everything in the country in twenty years is predicated on the idea that the current rate of borrowing does not increase. Hahahaha! Mr. Baker is truly an optimist!
And what do you think is going to happen to bond prices? Well, let me put it this way; people are now locking up their money for up to thirty years or more at rates that are historically at the extremes of the low end. In most cases, almost all government debt is issued at rates that are, after taxes, less than the rate of inflation.
And it is being issued in huge, huge amounts. Amounts so large that experienced bond traders stand in awe, like I stand in awe. Well, actually, I am not standing at all. If you look closely at the photograph identified as Exhibit D, you will no doubt notice that I am the one waaayyy over there in the far, back corner, cowering and whimpering in some bizarre, fetal-like crouch. Although I am obviously convulsed with fear, according to both the court indictment and vilification by the popular press, everyone else is stalwart and brave, heroically girding themselves for the orgy of buying and selling this tsunami of new debt.
But Mr. Baker believes that, in the meantime, things will improve. "Again," he writes, "Greenspan seems happy to let this debt continue to grow, happy to pass this problem on to future generations." I have less optimism, in case you ain't noticed. I figure that future generations will rise up and murder us all in our sleep for what we have done to them.
I interrupt today's important and highly entertaining broadcast to announce that I received a catalog of books, and one of the tomes offered is "Fiat Money Inflation in France," and the little blurb supplied by the publisher says, "Classic account of how deficit spending led to ruinous runaway inflation and tyranny during the French Revolution."
Well, you can imagine how intrigued I was. We, right here in America, have deficit-spending in the neighborhood of "insane." Okay, I will admit that I am not the guy they call on the game show "Who Wants to be a Millionaire?" especially when it comes to questions about the French Revolution. All I remember is guillotines and toothless old women cackling and knitting at the beheadings. In fact, the only things that I ever learned about the French Revolution were from the movies, and that is why I am able to flawlessly imitate Charles Lawton's classic character, Quasimodo. "Esmerelda! Sanctuary! Esmerelda! Sanctuary!"
But getting back to the point for a change, I call your attention to the publisher's remarks about this being "classic," which I interpret as meaning "textbook example, and what will happen to you if you dare get into the habit of deficit-spending."
Another point is the publisher's use of the alliteration of "ruinous runaway" inflation. That is, if I get this patent-thing going according to plan, I will hold the everlasting copyright on alliteration, and everybody who uses such a literary device will owe me, oh, let's say two cents. No, make that a nickel.
Anyway, the point is that there was not just inflation, make that "ruinous runaway inflation," but that there was a lot of tyranny involved, too. Now, I don't know why, but when I read the word "tyranny" I immediately thought of Janet Reno and John Ashcroft, although, to be fair, Mr. Ashcroft is not shooting twelve-year old boys in the back, burning groups of religious fanatics to death, or sending armed and armored government agents to kidnap children at gunpoint in the middle of the night like the blood-thirsty Ms. Reno.
And, and here is where the spooky thing happens, as I was writing the above, Philip Spicer came by, a real nice fella and a big muckety-muck at the Gold Trust of Canada, fortunately at one of those rare moments when my Anti-Trespass and Intruder Intercept System was down for maintenance and reloading, and in the course of a very pleasant conversation spontaneously mentioned that this very book is a good one. Spooky, huh?
Not only that, but he loaned me the most remarkable book. Every page a gem! It is called "A Man of Principle. Essays in honor of Hans F. Sennholz." And if you want a book that brightly illuminates the Austrian School of economics and the incandescent brilliance of Hans Sennholz, then get this book.
Philip, who says that I can call him Philip when there is nobody else around, is the guy who actually suggested the title. As much as I like the guy, he obviously suggested the title before he read it, because if he had read it then he would have known that it was vitally important to get this book into as many hands as possible, and a dull title like that ain't a-gonna do it. The Mogambo Way is to re-title the book, "Austrian Economics and Beautiful Naked Ladies." And of course the publisher would have to stoop to include actual pictures of naked chicks, and as an aside, in case anybody from Grove City College Press knows somebody who knows somebody who knows somebody who knows somebody who read down this far in this run-on sentence and they hear about my terrific idea and are willing to take a gamble on the re-printing with the new title and inserts, I would be happy to volunteer my time to help pick the good photos to include, and am willing to put in many, many hours culling the stacks and, hopefully, more stacks of them.
But getting back to the point, which was something about the French Revolution, the point is that money inflation leads to price inflation. Another salient fact is that price inflation is historically bad news for anybody experiencing it. The third fact, and this is the part that makes me scream in my sleep and awake in a sweat-soaked panic to empty whole banana-clip magazines of expensive high-powered ammo at anything that moves in the shadows, is that not only have we HAD monetary inflation for at least six years, not only are we HAVING monetary inflation right freaking now, but we have Alan Greenspan and Ben Bernanke explicitly promising to do even MORE monetary creation! And everybody else is, too! And we are monstrously deficit-spending at the end of a long, long boom where there is zero pent-up demand! Gaaaaaaahhhhhh!
And this is at the exact same time that consumer price inflation is at 3% and rising! Raw materials are rising at double-digit rates! Employment costs are rising at 6%! Housing prices at double-digit rates! Debt loads rising! And here is the Federal Reserve committing an act that would cause price inflation when there was none! And who the hell knows what will happen by committing monetary creation when inflation is already high and rising? Who knows? Who the hell could possibly know?
Well, just relax, my little darling. I am happy to report that I, personally, know. And when I explain to you my new theory of economics, in yet another pathetic and ultimately-abortive attempt to get a little respect from the Nobel Prize people, you will know too.
First, to understand this fabulous new theory, you have to imagine this large toilet, see. There is a limited supply of water available per day. The government, in the guise of an agent assigned to provide round-the-clock protection by living in your house, can either drink the water, which will cause it to need to use the toilet, or use it to fill the tank of the toilet, with which to flush said toilet. Then each day, the amount of government, ummm, using the facilities goes up because it is always drinking more and more of the available-in-limited-quantities water. The tank thus cannot fill to capacity because the government guzzled the water supply, and thus cannot completely flush the bowl. And the government starts drinking more and more of the available water, using the facilities more and more, and leaving less and less water with which to flush the toilet.
For this next section of the explanation of this exciting theoretical breakthrough, I refer you to a graph showing the rise in the level of, umm, toilet bowl contents, as compared to the dashed line, up here at the top, that indicates maximum capacity of the bowl. Note the narrowing of that gap.
Then, just as the gap disappears, the scene fades to black, and all you hear is the sound of somebody drinking glug glug glug, tinkling streams of water, toilets weakly flushing, and the new, ever-louder sound of water sloshing onto the tile floor, over and over. As the light comes up, the camera comes into focus on your beautiful photogenic face as you walk down the hall, dressed in your snazzy chenille robe and fuzzy slippers, to the bathroom. You turn the doorknob. You go in.
I am happy to announce that I may be on my way to my fifteen minutes of fame, in that the Mogambo Guru, the most worthless and ridiculously-inept economics commentary in publication in the USA and the world, and probably the whole solar system as far as I can tell, is reportedly, but erroneously, being mentioned as appearing in a lawsuit by the SEC against some other guys, who are being looked at for offering investment ideas that hold the promise of outsized returns. Imagine my delight and excitement as I was provided with a link showing the purported indictment, and then imagine my profound disappointment when I discovered that I am not mentioned even once. Not once! Damn. I wanted to be in there so bad! Because then, when I died, my obituary will read with a little more spice and sparkle, as in, "Village idiot dies. Nobody knew him or liked him. Was mentioned in an indictment once." But now, alas, another dream gone.
It's not that I don't have some fabulous ideas to produce spectacular speculating results, because I do. It's just that whenever I pitch them to any investors they are always put off by the Hannibal Lector-esque wire mask I am required to wear, so I have now resorted living in gloom, withdrawing into my shell and hating the world.
And it certainly isn't because I am not a bad apple with an attitude, a tragic-yet-endearing-and-handsome Rebel Without A Cause. I am the Original Bad Dude! For example, when I am driving down the Interstate highway and the speed limit is 70, sometimes I go 75 or even 76 miles an hour! And sometimes I ease through stop signs without coming to a complete stop! Speed limits? Laws? I laugh in scornful disrespect - ha! - at your puny laws! I am above your stinking laws!
I am also hoping that somebody from "60 Minutes" will come by and stick a camera in my face, because I have PLENTY to say about a lot of things, especially about rap music, most of which is tuneless and boringly repetitive as far as I am concerned, and I would love to have the opportunity to run my big, fat mouth about whole constellations of things I know absolutely nothing about, as there is nothing that I love better than the sound of my own voice. In anticipation of their visit, I even cleaned the place up a little by kicking all the old fried-chicken bones and empty pizza boxes under the couch and everything. But so far, again, nothing. Rats.
Ditto the SEC. Not only am I not mentioned in the whole thing, but I was never even called on the damn phone! This is the first I have heard of the whole thing! I'm insulted! They don't call, they don't write, they don't serve me any papers, or at least send over an agent to document my theory about how mysterious aliens from outer space are involved in a government conspiracy somehow. But, so far, another big fat zero.
I was purposely kept in the dark, until I got an e-mail this morning, wherein this whole thing was revealed to me.
"And exactly when," and here he paused, "was that, Mr. Daughty?" asked the arrogant prosecuting attorney. The gallery was instantly hushed. I cleared my throat, pretended to think about it for a moment, savoring the anticipation, and said, "Friday, May 02, 2003 at, oh, about eight o'clock in the morning." He quickly exclaims, "I object, your Honor. I asked the witness for the date, and was NOT going to ask the time!" to which I would leap to my feet and say "Yes you were, you slimy little weasel of a lawyer!" And then he would hotly deny it, and I would press the point in a louder voice, and then back and forth, back and forth, until I would probably scream a grossly insulting remark to explicitly imply that he had some unwholesome sexual relationship with his own mother, and then the judge would jump in and caution me with that contempt thing again and I would leap to my feet to not only quote Mae West, but impersonate her to a disturbing and disquieting degree of perfection, and say, "Am I showing contempt of court, your Honor? I hope not! I'm doing my best to hide it!"
Anyway, I thought SEC lawsuits were supposed to get a lot of unwarranted attention and maybe get me booked into a guest spot on "Hollywood Squares" or something, but, so far, the whole thing is turning into a big bust as far as I am concerned.
In case, and I realize I am really losing touch here, one of my multiple personalities had taken over my body and actually did something, umm, untoward, I spent part of the morning practicing my "perp walk," parading back and forth in front of the mirror pretending that my hands are handcuffed behind me, trying to find a way to imprint the whole process with my own, you know, unique mark. "Making it mine," as it were. And I soon found that I can grab my own butt with my hands handcuffed behind me as I am being escorted to the waiting squad cars! In my hypothesized vision of the near future, we, using the editorial "we" which means, paradoxically, "you," turn to Channel Nine, and the TV screen is filled with the scene of what appears to be every policeman, federal agent, newscaster, and unmarked black helicopter in town, with throngs of miscellaneous angry citizens bearing flaming torches being held back by straining cordons of uniformed police officers in human barricades. The newscaster is saying in voice-over, with breathless excitement, "Richard Daughty, local hothead and paranoid recluse, who is the tragically inept writer of an idiotic newsletter that is mildly popular among the incarcerated mentally ill, is seen here being led away in handcuffs by handsome and brave law-enforcement personnel. The assembled crowd is now shocked to silence, in sharp contrast to their behavior this morning, when they were angrily chanting some catchy rhymes that apparently called for bringing back "drawing and quartering" as the only form of punishment that would fit the crime, or crimes, of which Mr. Daughty is, or is not, perhaps charged, or maybe just mentioned, by mistake, by some guy, on some website, according to some anecdotal reports. But now the assembled crowd of on-lookers and armed representatives of the system of law and order stand open-mouthed and speechless, as he appears to be - oh, the humanity! - apparently fondling his own buttocks in some bizarre and revolting editorial comment! Cut to a commercial!"
I prefer to think of it as, "Not all poems are written with a pen!"
Now, anybody who knows me is amazed that I can even tie my own shoes without constant supervision, but they are, thankfully too polite to acknowledge their astonishment at the feat. To them, I say "thank you." But continuing on, a quick read of any Mogambo Guru, or anything that I ever wrote for publication, in any place in the universe, either forward or backwards in time and space, including, for the umpteenth time, that ugly and false rumor about that incident with that belly-dancer on that little hell-hole planet in the Rigel star system, which I will again note for the record that I really DID have a Federation of Planets license to carry a concealed neutron-ray blaster, but my dog ate it, so it's not my fault, will quickly convince you that I have never recommended or offered for sale any investment idea or research, any company, or anything of any kind, except for that time I offered to sell myself to Ann-Margret as a love-slave, but I was never really serious. And anyway, her check bounced.
But although I have a great many talents to offer for sale, they only really appeal to people who have court-appointed guardians and those people never seem to have any money, so you can see why I am starving to death here, but I reserve the right to screech hysterically and with seemingly unending pointlessness, and with more than the usual amount of incoherent bombast, that the Federal Reserve is not only a gigantic, colossal fraud and failure, but also directly responsible for the complete economic ruination of the United States and the dollar, and that now your only hope for survival is to buy gold, buy silver, buy commodities, invest in China and Russia, and arm yourself to the teeth, preferably with a tank, that has extra ammo-storage space, great miles-per-gallon fuel efficiency, and responsive handling-ability for those quick runs to the grocery store. Maybe a sound system, too. And a snazzy paint job.
Gary North, another one of those guys who seem to have more than their share of brain-horsepower and can effortlessly illuminate economics, "Fractional reserve banking invariably increases the rate of money creation and therefore the rate of price increases. It always leads to an economic boom, followed by contraction, a run on the banks, and bankruptcy."
So, following this script, let's recap, shall we? First we got fractional banking. Check. Then they increased the rate of money creation. Check. We have had almost continual price increases for, let me check my watch here, eighty years in a row. Check. Then we got a whole series of economic booms and contractions. Check. Now, we are at the end of an unbelievably huge, misshapen boom. Check. Now we are going through the contraction. Check. Now, we are getting to the exciting climax with Steve McQueen in a high-speed car chase through the streets of San Francisco. No, wait. That's the movie "Bullitt." Sorry. I thought Gary said we were getting to the exciting climax where we run BY the bank.
Anyway, in the modern, real world, I am not sure that we will have runs on banks anymore. Those were the good old days, when people ran to get their real money out before the bank collapsed. Nowadays, nobody has real money anymore, as we use fake money. And, being fake money, the Fed can just print up enough fresh, fake money to pay off all depositors in the case of a bank failure, so what would be the point of a bank run? I know you are disappointed, after having seen a bank run in the movie "It's a Wonderful Life," and it looks so exciting, what with all your friends and neighbors crowding into the bank lobby, waving their savings account passbooks in the air and all.
But we still have real bankruptcies, if that is any consolation.
The National Conference of State Legislatures came out with their estimate that the states collectively face deficits in the $80 billion range for fiscal year 2004, which is about double the deficits they face THIS year.
And, almost without a shadow of a doubt, I say that next year the National Conference of State Legislatures will come out with another estimate and say that the states face deficits for 2005 that are higher than that.
Speaking of budget troubles in the states, a guy named Philip Gailey is the Editor of Editorials for the St. Petersburg Times, the far-Leftist, laughable neo-communist rag that ostensibly functions as the newspaper for my home town.
In an editorial in the May 4 issue, he takes the boringly predictable and sophomoric swipes at Republicans as he pontificates about the budget crisis that we, and almost every other state in the nation, are in. He states that we Floridians are somehow unique, because we, well, let me provide the actual quote, "But Florida has one problem most states don't - the political character of its antitax Republican leadership." I know you are waiting breathlessly for him to reveal the depths of depravity of this "Republican leadership." Like you, I was hoping for something spicy, maybe full of sex-scandals and wild orgies involving buxom college cheerleaders, but, alas, no. He sums up "Republican mentality" by saying, "For them, government is the problem, not the solution. That is the organizing principle of their politics" Well, I can't speak for anybody else, but that is exactly the organizing principle of MY politics!
The difference between these Republicans and the smug righteousness of Mr. Gailey and his far-Leftist buddies is that Republicans have, according to the execrable Mr. Gailey, a "political mentality that jeopardizes the quality of life in Florida's future." We must extrapolate this to reveal that Mr. Gailey and all his fellow-traveler neo-communist/fascist buddies think just the opposite; they think that government is always the solution, that more government means more solutions, and that enhancing quality of life revolves around the government providing more solutions, which boils down to providing more free things to more people. Hahahaha! And if you think I am exaggerating, get a load of the title of Mr. Gailey's ridiculous essay; "Antitax ideology in Tallahassee hobbles Florida's future." This is own chosen title, and he is the Editor of Editorials, for crying out loud, so he can pick any title he wants and send anybody who dares to disagree with him to write endless stories about life as a sewer inspector, and this can only mean that he actually believes, and remember that this is a grown man who is supposedly so erudite and literate that he has a big-shot job at a newspaper, that a pro-tax ideology will prevent hobbling Florida's future! Hahahaha! I'm cracking up here! Economic vitality through constantly-increasing taxation? Man, this is too, too rich! So now we know conclusively that you do NOT have to be erudite or even literate to be a big-shot at a newspaper, because Mr. Gailey obviously did NOT get his job from either of those credentials, or he would have had read at least SOMETHING to give him an inkling of how ridiculous and preposterously stupid he sounds.
He avoided actually getting down to dollars and cents, because it is ugly. The fact is that the Florida government already spends over four thousand bucks per resident, or about $22,000 for a family of four, which is, looking adoringly at the picture of your family there on your desk, namely you, your spouse, and those two darling children of yours. But for Mr. Gailey, it is not enough! It is never enough!
And that twenty-two grand is, if we reduce gross income by the standard third that is taxed away, roughly the ENTIRE after-tax annual income of the average family in Florida! This is preposterous! This is beyond ludicrous! The freaking state spends as much per year per family as the average family MAKES in a whole year! And yet, again, it is not enough! It is never freaking enough!
In short, it is the Republicans who want the citizens to pay less tax and lower prices, and it is Philip Gailey and his low-IQ Leftist ilk that want citizens to pay higher taxes and higher prices. I find it remarkable, using that word instead of the more descriptive "un-freaking-believeable," that only in the bizarro-world of Mr. Gailey and his intellectually-defective friends toeing some preposterous Democrat party-line is it possible to characterize impoverishing the citizens via constantly-increasing taxation and forcing them to pay constantly-higher prices for everything as something government should aspire to.
So to the Republican leadership in Tallahassee, whose shining leader is Johnnie Byrd, I stand and salute, and say you are truly heroes! And if the other states who are also grappling with budgetary woes, also brought on by a decade of outrageous and idiotically-profligate spending and mindless over-expansion of government, would merely emulate them and their fine philosophy, then they, too, will be heroes, and one day soon the sun of bounty and prosperity will shine again on their constituents.
But if Florida and the other states hew to the foul philosophy of Mr Gailey and the other preposterously-silly Leftist losers, then the future will be like today, only worse. Much worse. Much, MUCH worse. And for a long, long time, too. Ugh.
--- Mogambo Sez: I am struck by how Bush's plan for being "bold" differs by only one letter from "gold." One measly letter is the difference between something that will ruin you and one will save you. How poetic.
The Mogambo Guru Lives!
Richard Daughty
May 8, 2003
http://www.321gold.com/editorials/daughty/daughty050803.html
The Mogambo Guru
May 08, 2003
The Daily Reckoning
" ... Money inflation leads to price inflation. Price inflation is historically bad news for anybody experiencing it. And... and this is the part that makes me scream in my sleep and awake in a sweat-soaked panic to empty whole banana-clip magazines of expensive high-powered ammo at anything that moves in the shadows... not only have we HAD monetary inflation for at least six years, not only are we HAVING monetary inflation right freaking now, but we have Alan Greenspan and Ben Bernanke explicitly promising to do even MORE monetary creation! And everybody else is, too! And we are monstrously deficit-spending at the end of a long, long boom where there is zero pent-up demand! Gaaaaaaahhhhhh!.. ."
The jackasses at the Federal Reserve pumped up raw credit in the system by another $6.5 billion dollars last week, continuing that particular filthy fraud. Actually, $6.5 billion is not that bad by recent Fed standards, but still, it is a new record.
I hope you'll pardon me if the typing gets weird right here, as my eyes seem to be glazed over, and several circuits in my tiny little brain have seemingly popped their fuses. Apparently they were wired to the circuits that control bladder and bowel functions, because when I read that the banks soaked up an incredible $56 billion in government debt last week, I might have had a little accident. My hygiene problems aside, this is, as far as I can tell, a new record for a one-week feeding frenzy. Perfect. Just freaking perfect. But, you may be relieved to know, I also plan to lay in a supply of Depends adult diapers for the NEXT time I go snooping around in the banking system.
I mean, bond prices are at record highs, with the result that yields are at record lows, and yet here are these banking losers sniffing around and soaking up scads of debt at these record-low yields and record-high prices, at the exact same time that inflation is heading up and the dollar is heading down! This is beyond absurd! AIU assume that they are merely participating in the on-going Fed program to actively destroy the dollar and the US economy. How special.
Now the only thing left to wonder about is when the foreign holders of US debt start flexing their muscles and say, "No more with that buying-debt thing or we're selling," and then the Fed will cool its extravagance, and will try and stick the banks with a load of debt, which will be falling in price because interest rates are no longer being held forcibly down, and then the banks will start whining about how everybody needs to please please please bail them out, again, of the mess that their own incompetence caused, again. One merely has to glance at the history of banking crises to realize that this exact same damn thing, over and over and over, is what caused banking crises in the first place. Some things DO never change, apparently.
The decline in the Monetary Base statistics that I was lamenting last week has, incredibly, reversed and literally exploded to the upside. I seem to have powers that I did not even know I had! I flex my mighty Mogambo muscles! Now, if I could only get this X-ray vision thing working as well...
At least the morons who run the banks will have a lot of company at the annual Imbeciles' Picnic, as the chumps bid up the stocks of the SP500 to a P/E of almost 34. Thirty-four!
Perhaps the idea, as stupid as it sounds, is that all this monetary and fiscal stimulating will restore a profitable and wonderful future, because laws of economics somehow do not apply to the United States, and all this money will soon be fixing everything that is broken, and that the earnings of the companies will soon rise to such heights that everyone will be employed and rich. Throwing a little cold water on this idea, anecdotal conversations with friends and acquaintances who run retail businesses reveal that they are almost uniformly reporting that sales are down between ten and fifty percent. Yow! And they are quite, quite glum.
Or, maybe, all this bullishness is because it is commonly accepted that Bush will do anything and everything to make sure that the economy is perking along in time for the elections in 2004 so that he can win re-election, and that somehow means that shares will be worth more. We already know that the damnable Fed will do anything and everything stupid as far as it can, and the Congress is deficit-spending like there is no tomorrow, too. So all we needed, according to the bulls, was Bush pushing for what he terms a "bold plan." I have no idea how in the hell the Bush people can come up with something that is bolder, if bold means "committing almost-certain suicide in pursuit of a transitory goal," than what the Fed and the Congress are already doing. I didn't even know that there WAS anything beyond monetary and fiscal insanity! But, perhaps these three things WILL produce a revived economy. Unfortunately, all of these have been tried many times before in history, and they have failed every time in history, with the latest experiment being Japan, where it has failed for fourteen years in a row, so I am not holding my breath.
The latest read on business costs is that the total cost to employ somebody went up 1.3% in the fourth quarter, and a whopping 3.9% y/y. Turning our attention to the cost of mere benefits, they were up 2.2% in the first quarter and a staggering 6.1% from a year earlier.
An interesting quirk, maybe of the statistical kind, was that total wages were up a healthy 2.9% in the last twelve months, but most of the gains were apparently concentrated in the mortgage industry, where wages and salaries surged 5.2%. So, stripping out the higher incomes of those who are participating in the Great Mortgage and Housing Bubble, the wages and salaries of everybody else must have gone, umm, someplace else. Bummer.
And, truth be told, the y/y 2.9% increase in total wages was not enough to offset the y/y increases in consumer prices, which were up 3%. And those wage increases first have to be reduced by about a third by taxes. So, prices increased faster than wages and salaries, even BEFORE taxes. Wonderful. Just freaking wonderful.
To show that we and the Japanese are not the only moronic jackasses in town, there was recently an article in the Financial Times that said that the ECB was considering changing its policy toward inflation, and that, and I quote, "excessively low inflation was bad." The ECB is actually considering, and I know you are going to find this hard to believe because my eyes are spinning in the sockets and making me quite dizzy as a result, adjusting their polices to maintain a MINIMUM of 1% price inflation! Apparently, that is the minimum of "good" inflation. I know what you are thinking; "Who are these idiots? And where in the hell did they get the stupid idea that inflation is good?" I don't know.
Bill Bonner at the Daily Reckoning website writes disparagingly about what he call the "lumpeninvestoriat," which sounds rather Russian, which makes a sort of sense, since the story goes that the first thing that the Communists did when they seized power was to execute all the intellectuals and anybody with an education, so that all that was left was the stupid and the un-educated, and we know how well that turned out for the USSR. But anyway, he writes, "But the lumpeninvestoriat have neither a clue nor a prayer. The happy schmucks don't read the Daily Reckoning and don't seem to be aware of the vulnerability of the dollar, the national savings rate... debt... bankruptcies... jobs disappearing to China... falling profit margins... or any of the other end-of-the-world-type problems we worry about."
Well, this is true, and anecdotal evidence that I have gathered says that the lumpeninvestoriat Mr. Bonner refers to is worried about many, many things, and is happy to leave weighty matters to those who have the smug audacity to claim that they can deal with them. These hapless people are worried about dealing with their pressing personal problems CAUSED by that short list.
And, of course, let's not forget to include foreign investors on our short list of lumpeninvestoriat doofuses. Those people, who almost uniformly speak English with funny accents if they can speak English at all, are loaning and investing gigantic sums of money, at least $503 billion a year if we use the current-account deficit as the benchmark, to a country of us fat, lazy, whining, something-for-nothing, neo-communist weenies, and getting negative returns for their trouble. Maybe they are all Russians, which would certainly explain why they would do such a stupid thing.
Fortunately, the evidence indicates that all foreigners are stupid and all Americans are smart. I mean, this $503 billion per year current account deficit didn't appear overnight, you know. Didn't they notice? At least us domestic lumps, to use a nickname, are taking their losses on a dollar-for-dollar basis. These foreign poop-heads are taking a double-whammy to the noggin when they convert the same losses back into their own currencies for yet another loss, because the dollar is going down. And yet, here they are, day after day, putting more and more money into the dysfunctional mess that the Fed and Congress has made of this country. Morons.
Bill also dryly notes that the Japanese stock market has lost 80% from its high in 1989 to last week's low, with lots and lots of monumental gains and losses along the way. Unfortunately, the losses have outweighed the gains. Perhaps that is why the average Japanese citizen has a much smaller portfolio of stocks now than he, or she, used to have.
Let's not lose sight of the fact that every failed attempt at getting things fixed that the Japanese government has done for the last fourteen freaking years in a row is exactly what our own Federal Reserve bozos have advised them to do, and is exactly what the bozos at the Fed are doing to us right this very minute. It failed for the Japanese and it will fail for us, too, only with a hell of a lot more pain and gnashing of teeth.
And I am not alone in that sorry assessment. Mr. Bonner sees the same thing happening to us over the next decade. Recognizing that always losing money is not the sort of thing that remains popular for long, at the end of the decade he figures that, "By then, people will have stopped paying attention to the Dow. Instead, they will probably keep an eye on the Chinese stock market or the price of gold, for they will have concluded years ago that U.S. stocks are not a suitable place to put money."
Even that aside, the statistical comparison between the USA and Japan is flawed because "There is one major difference between the U.S. and Japan. The Japanese never saved less than 10% of their incomes (in the U.S., savings rates fell near zero) and never had to rely on foreigners to finance their economy."
John Myers, a noted big-shot expert on commodities in general and metals in particular, writes, "Net-net, something is stirring in the base metals markets, and that 'something' looks an awful lot like a major rally."
What could possibly cause such a major rally? He explains, "We note that the latest PBOC money supply data revealed a 19.2% year-over-year pace of M2 expansion in China, its sharpest expansion since the 1998 Asian-Russian-Brazilian debt crisis. Adding even more fuel to the fire is the fact that the money supply expansion is being led by an explosion in the supply of currency in circulation (up an exuberant 29%, year-over-year, in January) and is fully supported by concurrently high growth in bank deposits."
In short, China's government is going down the monetary expansion road. The Chinese have the pedal to the metal on rapid industrialization to satisfy a growing domestic demand. Mr. Myers characterizes the explosion as a juggernaut, and notes that it "... is having a discernible impact on the pricing structure for London Metal Exchange (LME) base metals, which reflects a tightening supply-demand dynamic."
I like that phrase; "tightening supply-demand dynamic." It smells of, sniff sniff, money. And here I am going to re-use a sentence I recently penned, both because I am too damn lazy to construct anything new to say and because it was mildly clever, and believe me when I say that there is nobody more surprised than me when I realized that I had finally written something that was not laughably moronic. To A. DeLuca, a delightful and thoughtful reader who was kind enough to send me an e-mail that was not a death threat, a final demand for immediate payment, and did not actually contain the words "restraining order" or "lawsuit," which is a real nice change of pace, I wrote "And if there are two damn things in the whole freaking universe that I am one-hundred percent sure of, one is that money goes where money is being made, and the other is that a lot of money will be made helping money get to where money is being made."
Greenspan, testifying before the alarmingly-clueless dimwits in Congress, said that this country needs inflation so that profit margins can improve. This ridiculous statement demonstrates proof-positive that Alan Greenspan has lost all his marbles. And putting this, umm, person in charge of the Federal Reserve will actually prevent America from ever emerging from the abyss into which the unbelievable stupidities of the Fed have thrown us.
Let me be completely frank; there is never been any economic theory that I have ever heard of that propounds the idea that price inflation is anything other than baaaad news, except for that theory I developed that postulated that gravity waves from the planet Venus impacts currency exchange rates and inflation, but teams of psychiatrists working around the clock were finally able to disabuse me of that stupid idea. On the other hand, the entire history of economic crises is one of government and central-banks causing inflation, and thus destroying one country after another with waves of misery. So the entire corpus of economics literature has been completely free of the preposterous idea that inflation is somehow something one would EVER want to engender. Until now, that is. Now we have Alan Greenspan, America's premier pompous jackass, uttering such a preposterous statement.
To the uninformed nitwit it seems correct that when companies charge more money that they will make more money. Duh. To the informed nitwit, like me, it is axiomatic that paying higher prices for the inputs of materials, capital and labor means you will NOT make more money. What it means is that everything will merely cost more.
And what THAT means is that when it takes your entire paycheck to buy a loaf of bread, then there is not much left to buy anything else. And if you are in the business of manufacturing that anything else, then nobody is going to be buying your output, because customers are using all their money to buy bread, and you will fire the workers, and then those poor bastards will not even be buying bread.
The people who are the final consumers will find that their paychecks always lag the rise in prices, so they must necessarily buy less and less stuff every week. And it is a law of economics that people buying less and less stuff is NOT the road to economic Nirvana.
At this point, the only way that we can possibly be saved is if some miracle happens, with the salubrious result that the final consumers end up with more spending money at the end of the week, and then this now-moneyed collection of consumers goes out and spends the money. And this is, unfortunately, the same "looking for a miracle" that every economy that pursued an inflationary policy has ended up looking for. And not one has ever found it, because there are no miracles.
Marshall Auerback, perusing the ramblings of various Fed people, writes, "In the lexicon of economics, Mr Reinhart is telling us that the Federal Reserve has no idea what happens to the money demand curve when they start promoting an explicit inflationary policy."
He notes that "At the micro level, consumers have not been exhibiting any greater fear of inflation, and very few of them have ever heard of Bernanke or his printing press threat." Well, why should they? Didn't they all graduate from a government school? And isn't one of the Big Messages of government schools the idea that the government knows best, and that the government will take care of you, and that everything will be wonderful once we all vote the straight Democrat-ticket and have our level of esteem raised by that singular act?
The Bloomberg news organization writes that "Federal Reserve Chairman Alan Greenspan said he remains confident that the U.S. economy will expand at a faster pace, provided that corporate executives shed their pessimism and begin to spend more." Well, duh. So, taking my cue from Sir Alan, I exhort American corporations to forget that the consumers have no money to spend! Forget that inflation is already reducing their incomes even more! Forget the crushing burden of under-funded retirement plans that will need to suck up every dime the corporation makes for the next few decades! Forget the vast unused capacity that exists in every business in America! Forget everything you ever learned in getting that stupid MBA and everything you learned in the real world, too, and just go out and spend, spend, spend!
The dollar hit a four-year low. Next year the news will be that the dollar has hit a five-year low. Or more.
Dean Baker, co-director of the Center for Economics and Policy, writes in an article entitled "Greenspan's Unfortunate Return," casts a disapproving eye at how we need to borrow more than $1.5 billion every day from foreigners. "This process cannot continue for long. At some point the country literally will run out of things to sell - in about 20 years at the current rate, if foreigners don't lose interest in the United States long before that. Whenever it happens, the dollar will drop, sending import prices and inflation soaring, and U.S. living standards will plummet."
Please note that Mr. Baker's estimate of how we will literally have mortgaged everything in the country in twenty years is predicated on the idea that the current rate of borrowing does not increase. Hahahaha! Mr. Baker is truly an optimist!
And what do you think is going to happen to bond prices? Well, let me put it this way; people are now locking up their money for up to thirty years or more at rates that are historically at the extremes of the low end. In most cases, almost all government debt is issued at rates that are, after taxes, less than the rate of inflation.
And it is being issued in huge, huge amounts. Amounts so large that experienced bond traders stand in awe, like I stand in awe. Well, actually, I am not standing at all. If you look closely at the photograph identified as Exhibit D, you will no doubt notice that I am the one waaayyy over there in the far, back corner, cowering and whimpering in some bizarre, fetal-like crouch. Although I am obviously convulsed with fear, according to both the court indictment and vilification by the popular press, everyone else is stalwart and brave, heroically girding themselves for the orgy of buying and selling this tsunami of new debt.
But Mr. Baker believes that, in the meantime, things will improve. "Again," he writes, "Greenspan seems happy to let this debt continue to grow, happy to pass this problem on to future generations." I have less optimism, in case you ain't noticed. I figure that future generations will rise up and murder us all in our sleep for what we have done to them.
I interrupt today's important and highly entertaining broadcast to announce that I received a catalog of books, and one of the tomes offered is "Fiat Money Inflation in France," and the little blurb supplied by the publisher says, "Classic account of how deficit spending led to ruinous runaway inflation and tyranny during the French Revolution."
Well, you can imagine how intrigued I was. We, right here in America, have deficit-spending in the neighborhood of "insane." Okay, I will admit that I am not the guy they call on the game show "Who Wants to be a Millionaire?" especially when it comes to questions about the French Revolution. All I remember is guillotines and toothless old women cackling and knitting at the beheadings. In fact, the only things that I ever learned about the French Revolution were from the movies, and that is why I am able to flawlessly imitate Charles Lawton's classic character, Quasimodo. "Esmerelda! Sanctuary! Esmerelda! Sanctuary!"
But getting back to the point for a change, I call your attention to the publisher's remarks about this being "classic," which I interpret as meaning "textbook example, and what will happen to you if you dare get into the habit of deficit-spending."
Another point is the publisher's use of the alliteration of "ruinous runaway" inflation. That is, if I get this patent-thing going according to plan, I will hold the everlasting copyright on alliteration, and everybody who uses such a literary device will owe me, oh, let's say two cents. No, make that a nickel.
Anyway, the point is that there was not just inflation, make that "ruinous runaway inflation," but that there was a lot of tyranny involved, too. Now, I don't know why, but when I read the word "tyranny" I immediately thought of Janet Reno and John Ashcroft, although, to be fair, Mr. Ashcroft is not shooting twelve-year old boys in the back, burning groups of religious fanatics to death, or sending armed and armored government agents to kidnap children at gunpoint in the middle of the night like the blood-thirsty Ms. Reno.
And, and here is where the spooky thing happens, as I was writing the above, Philip Spicer came by, a real nice fella and a big muckety-muck at the Gold Trust of Canada, fortunately at one of those rare moments when my Anti-Trespass and Intruder Intercept System was down for maintenance and reloading, and in the course of a very pleasant conversation spontaneously mentioned that this very book is a good one. Spooky, huh?
Not only that, but he loaned me the most remarkable book. Every page a gem! It is called "A Man of Principle. Essays in honor of Hans F. Sennholz." And if you want a book that brightly illuminates the Austrian School of economics and the incandescent brilliance of Hans Sennholz, then get this book.
Philip, who says that I can call him Philip when there is nobody else around, is the guy who actually suggested the title. As much as I like the guy, he obviously suggested the title before he read it, because if he had read it then he would have known that it was vitally important to get this book into as many hands as possible, and a dull title like that ain't a-gonna do it. The Mogambo Way is to re-title the book, "Austrian Economics and Beautiful Naked Ladies." And of course the publisher would have to stoop to include actual pictures of naked chicks, and as an aside, in case anybody from Grove City College Press knows somebody who knows somebody who knows somebody who knows somebody who read down this far in this run-on sentence and they hear about my terrific idea and are willing to take a gamble on the re-printing with the new title and inserts, I would be happy to volunteer my time to help pick the good photos to include, and am willing to put in many, many hours culling the stacks and, hopefully, more stacks of them.
But getting back to the point, which was something about the French Revolution, the point is that money inflation leads to price inflation. Another salient fact is that price inflation is historically bad news for anybody experiencing it. The third fact, and this is the part that makes me scream in my sleep and awake in a sweat-soaked panic to empty whole banana-clip magazines of expensive high-powered ammo at anything that moves in the shadows, is that not only have we HAD monetary inflation for at least six years, not only are we HAVING monetary inflation right freaking now, but we have Alan Greenspan and Ben Bernanke explicitly promising to do even MORE monetary creation! And everybody else is, too! And we are monstrously deficit-spending at the end of a long, long boom where there is zero pent-up demand! Gaaaaaaahhhhhh!
And this is at the exact same time that consumer price inflation is at 3% and rising! Raw materials are rising at double-digit rates! Employment costs are rising at 6%! Housing prices at double-digit rates! Debt loads rising! And here is the Federal Reserve committing an act that would cause price inflation when there was none! And who the hell knows what will happen by committing monetary creation when inflation is already high and rising? Who knows? Who the hell could possibly know?
Well, just relax, my little darling. I am happy to report that I, personally, know. And when I explain to you my new theory of economics, in yet another pathetic and ultimately-abortive attempt to get a little respect from the Nobel Prize people, you will know too.
First, to understand this fabulous new theory, you have to imagine this large toilet, see. There is a limited supply of water available per day. The government, in the guise of an agent assigned to provide round-the-clock protection by living in your house, can either drink the water, which will cause it to need to use the toilet, or use it to fill the tank of the toilet, with which to flush said toilet. Then each day, the amount of government, ummm, using the facilities goes up because it is always drinking more and more of the available-in-limited-quantities water. The tank thus cannot fill to capacity because the government guzzled the water supply, and thus cannot completely flush the bowl. And the government starts drinking more and more of the available water, using the facilities more and more, and leaving less and less water with which to flush the toilet.
For this next section of the explanation of this exciting theoretical breakthrough, I refer you to a graph showing the rise in the level of, umm, toilet bowl contents, as compared to the dashed line, up here at the top, that indicates maximum capacity of the bowl. Note the narrowing of that gap.
Then, just as the gap disappears, the scene fades to black, and all you hear is the sound of somebody drinking glug glug glug, tinkling streams of water, toilets weakly flushing, and the new, ever-louder sound of water sloshing onto the tile floor, over and over. As the light comes up, the camera comes into focus on your beautiful photogenic face as you walk down the hall, dressed in your snazzy chenille robe and fuzzy slippers, to the bathroom. You turn the doorknob. You go in.
I am happy to announce that I may be on my way to my fifteen minutes of fame, in that the Mogambo Guru, the most worthless and ridiculously-inept economics commentary in publication in the USA and the world, and probably the whole solar system as far as I can tell, is reportedly, but erroneously, being mentioned as appearing in a lawsuit by the SEC against some other guys, who are being looked at for offering investment ideas that hold the promise of outsized returns. Imagine my delight and excitement as I was provided with a link showing the purported indictment, and then imagine my profound disappointment when I discovered that I am not mentioned even once. Not once! Damn. I wanted to be in there so bad! Because then, when I died, my obituary will read with a little more spice and sparkle, as in, "Village idiot dies. Nobody knew him or liked him. Was mentioned in an indictment once." But now, alas, another dream gone.
It's not that I don't have some fabulous ideas to produce spectacular speculating results, because I do. It's just that whenever I pitch them to any investors they are always put off by the Hannibal Lector-esque wire mask I am required to wear, so I have now resorted living in gloom, withdrawing into my shell and hating the world.
And it certainly isn't because I am not a bad apple with an attitude, a tragic-yet-endearing-and-handsome Rebel Without A Cause. I am the Original Bad Dude! For example, when I am driving down the Interstate highway and the speed limit is 70, sometimes I go 75 or even 76 miles an hour! And sometimes I ease through stop signs without coming to a complete stop! Speed limits? Laws? I laugh in scornful disrespect - ha! - at your puny laws! I am above your stinking laws!
I am also hoping that somebody from "60 Minutes" will come by and stick a camera in my face, because I have PLENTY to say about a lot of things, especially about rap music, most of which is tuneless and boringly repetitive as far as I am concerned, and I would love to have the opportunity to run my big, fat mouth about whole constellations of things I know absolutely nothing about, as there is nothing that I love better than the sound of my own voice. In anticipation of their visit, I even cleaned the place up a little by kicking all the old fried-chicken bones and empty pizza boxes under the couch and everything. But so far, again, nothing. Rats.
Ditto the SEC. Not only am I not mentioned in the whole thing, but I was never even called on the damn phone! This is the first I have heard of the whole thing! I'm insulted! They don't call, they don't write, they don't serve me any papers, or at least send over an agent to document my theory about how mysterious aliens from outer space are involved in a government conspiracy somehow. But, so far, another big fat zero.
I was purposely kept in the dark, until I got an e-mail this morning, wherein this whole thing was revealed to me.
"And exactly when," and here he paused, "was that, Mr. Daughty?" asked the arrogant prosecuting attorney. The gallery was instantly hushed. I cleared my throat, pretended to think about it for a moment, savoring the anticipation, and said, "Friday, May 02, 2003 at, oh, about eight o'clock in the morning." He quickly exclaims, "I object, your Honor. I asked the witness for the date, and was NOT going to ask the time!" to which I would leap to my feet and say "Yes you were, you slimy little weasel of a lawyer!" And then he would hotly deny it, and I would press the point in a louder voice, and then back and forth, back and forth, until I would probably scream a grossly insulting remark to explicitly imply that he had some unwholesome sexual relationship with his own mother, and then the judge would jump in and caution me with that contempt thing again and I would leap to my feet to not only quote Mae West, but impersonate her to a disturbing and disquieting degree of perfection, and say, "Am I showing contempt of court, your Honor? I hope not! I'm doing my best to hide it!"
Anyway, I thought SEC lawsuits were supposed to get a lot of unwarranted attention and maybe get me booked into a guest spot on "Hollywood Squares" or something, but, so far, the whole thing is turning into a big bust as far as I am concerned.
In case, and I realize I am really losing touch here, one of my multiple personalities had taken over my body and actually did something, umm, untoward, I spent part of the morning practicing my "perp walk," parading back and forth in front of the mirror pretending that my hands are handcuffed behind me, trying to find a way to imprint the whole process with my own, you know, unique mark. "Making it mine," as it were. And I soon found that I can grab my own butt with my hands handcuffed behind me as I am being escorted to the waiting squad cars! In my hypothesized vision of the near future, we, using the editorial "we" which means, paradoxically, "you," turn to Channel Nine, and the TV screen is filled with the scene of what appears to be every policeman, federal agent, newscaster, and unmarked black helicopter in town, with throngs of miscellaneous angry citizens bearing flaming torches being held back by straining cordons of uniformed police officers in human barricades. The newscaster is saying in voice-over, with breathless excitement, "Richard Daughty, local hothead and paranoid recluse, who is the tragically inept writer of an idiotic newsletter that is mildly popular among the incarcerated mentally ill, is seen here being led away in handcuffs by handsome and brave law-enforcement personnel. The assembled crowd is now shocked to silence, in sharp contrast to their behavior this morning, when they were angrily chanting some catchy rhymes that apparently called for bringing back "drawing and quartering" as the only form of punishment that would fit the crime, or crimes, of which Mr. Daughty is, or is not, perhaps charged, or maybe just mentioned, by mistake, by some guy, on some website, according to some anecdotal reports. But now the assembled crowd of on-lookers and armed representatives of the system of law and order stand open-mouthed and speechless, as he appears to be - oh, the humanity! - apparently fondling his own buttocks in some bizarre and revolting editorial comment! Cut to a commercial!"
I prefer to think of it as, "Not all poems are written with a pen!"
Now, anybody who knows me is amazed that I can even tie my own shoes without constant supervision, but they are, thankfully too polite to acknowledge their astonishment at the feat. To them, I say "thank you." But continuing on, a quick read of any Mogambo Guru, or anything that I ever wrote for publication, in any place in the universe, either forward or backwards in time and space, including, for the umpteenth time, that ugly and false rumor about that incident with that belly-dancer on that little hell-hole planet in the Rigel star system, which I will again note for the record that I really DID have a Federation of Planets license to carry a concealed neutron-ray blaster, but my dog ate it, so it's not my fault, will quickly convince you that I have never recommended or offered for sale any investment idea or research, any company, or anything of any kind, except for that time I offered to sell myself to Ann-Margret as a love-slave, but I was never really serious. And anyway, her check bounced.
But although I have a great many talents to offer for sale, they only really appeal to people who have court-appointed guardians and those people never seem to have any money, so you can see why I am starving to death here, but I reserve the right to screech hysterically and with seemingly unending pointlessness, and with more than the usual amount of incoherent bombast, that the Federal Reserve is not only a gigantic, colossal fraud and failure, but also directly responsible for the complete economic ruination of the United States and the dollar, and that now your only hope for survival is to buy gold, buy silver, buy commodities, invest in China and Russia, and arm yourself to the teeth, preferably with a tank, that has extra ammo-storage space, great miles-per-gallon fuel efficiency, and responsive handling-ability for those quick runs to the grocery store. Maybe a sound system, too. And a snazzy paint job.
Gary North, another one of those guys who seem to have more than their share of brain-horsepower and can effortlessly illuminate economics, "Fractional reserve banking invariably increases the rate of money creation and therefore the rate of price increases. It always leads to an economic boom, followed by contraction, a run on the banks, and bankruptcy."
So, following this script, let's recap, shall we? First we got fractional banking. Check. Then they increased the rate of money creation. Check. We have had almost continual price increases for, let me check my watch here, eighty years in a row. Check. Then we got a whole series of economic booms and contractions. Check. Now, we are at the end of an unbelievably huge, misshapen boom. Check. Now we are going through the contraction. Check. Now, we are getting to the exciting climax with Steve McQueen in a high-speed car chase through the streets of San Francisco. No, wait. That's the movie "Bullitt." Sorry. I thought Gary said we were getting to the exciting climax where we run BY the bank.
Anyway, in the modern, real world, I am not sure that we will have runs on banks anymore. Those were the good old days, when people ran to get their real money out before the bank collapsed. Nowadays, nobody has real money anymore, as we use fake money. And, being fake money, the Fed can just print up enough fresh, fake money to pay off all depositors in the case of a bank failure, so what would be the point of a bank run? I know you are disappointed, after having seen a bank run in the movie "It's a Wonderful Life," and it looks so exciting, what with all your friends and neighbors crowding into the bank lobby, waving their savings account passbooks in the air and all.
But we still have real bankruptcies, if that is any consolation.
The National Conference of State Legislatures came out with their estimate that the states collectively face deficits in the $80 billion range for fiscal year 2004, which is about double the deficits they face THIS year.
And, almost without a shadow of a doubt, I say that next year the National Conference of State Legislatures will come out with another estimate and say that the states face deficits for 2005 that are higher than that.
Speaking of budget troubles in the states, a guy named Philip Gailey is the Editor of Editorials for the St. Petersburg Times, the far-Leftist, laughable neo-communist rag that ostensibly functions as the newspaper for my home town.
In an editorial in the May 4 issue, he takes the boringly predictable and sophomoric swipes at Republicans as he pontificates about the budget crisis that we, and almost every other state in the nation, are in. He states that we Floridians are somehow unique, because we, well, let me provide the actual quote, "But Florida has one problem most states don't - the political character of its antitax Republican leadership." I know you are waiting breathlessly for him to reveal the depths of depravity of this "Republican leadership." Like you, I was hoping for something spicy, maybe full of sex-scandals and wild orgies involving buxom college cheerleaders, but, alas, no. He sums up "Republican mentality" by saying, "For them, government is the problem, not the solution. That is the organizing principle of their politics" Well, I can't speak for anybody else, but that is exactly the organizing principle of MY politics!
The difference between these Republicans and the smug righteousness of Mr. Gailey and his far-Leftist buddies is that Republicans have, according to the execrable Mr. Gailey, a "political mentality that jeopardizes the quality of life in Florida's future." We must extrapolate this to reveal that Mr. Gailey and all his fellow-traveler neo-communist/fascist buddies think just the opposite; they think that government is always the solution, that more government means more solutions, and that enhancing quality of life revolves around the government providing more solutions, which boils down to providing more free things to more people. Hahahaha! And if you think I am exaggerating, get a load of the title of Mr. Gailey's ridiculous essay; "Antitax ideology in Tallahassee hobbles Florida's future." This is own chosen title, and he is the Editor of Editorials, for crying out loud, so he can pick any title he wants and send anybody who dares to disagree with him to write endless stories about life as a sewer inspector, and this can only mean that he actually believes, and remember that this is a grown man who is supposedly so erudite and literate that he has a big-shot job at a newspaper, that a pro-tax ideology will prevent hobbling Florida's future! Hahahaha! I'm cracking up here! Economic vitality through constantly-increasing taxation? Man, this is too, too rich! So now we know conclusively that you do NOT have to be erudite or even literate to be a big-shot at a newspaper, because Mr. Gailey obviously did NOT get his job from either of those credentials, or he would have had read at least SOMETHING to give him an inkling of how ridiculous and preposterously stupid he sounds.
He avoided actually getting down to dollars and cents, because it is ugly. The fact is that the Florida government already spends over four thousand bucks per resident, or about $22,000 for a family of four, which is, looking adoringly at the picture of your family there on your desk, namely you, your spouse, and those two darling children of yours. But for Mr. Gailey, it is not enough! It is never enough!
And that twenty-two grand is, if we reduce gross income by the standard third that is taxed away, roughly the ENTIRE after-tax annual income of the average family in Florida! This is preposterous! This is beyond ludicrous! The freaking state spends as much per year per family as the average family MAKES in a whole year! And yet, again, it is not enough! It is never freaking enough!
In short, it is the Republicans who want the citizens to pay less tax and lower prices, and it is Philip Gailey and his low-IQ Leftist ilk that want citizens to pay higher taxes and higher prices. I find it remarkable, using that word instead of the more descriptive "un-freaking-believeable," that only in the bizarro-world of Mr. Gailey and his intellectually-defective friends toeing some preposterous Democrat party-line is it possible to characterize impoverishing the citizens via constantly-increasing taxation and forcing them to pay constantly-higher prices for everything as something government should aspire to.
So to the Republican leadership in Tallahassee, whose shining leader is Johnnie Byrd, I stand and salute, and say you are truly heroes! And if the other states who are also grappling with budgetary woes, also brought on by a decade of outrageous and idiotically-profligate spending and mindless over-expansion of government, would merely emulate them and their fine philosophy, then they, too, will be heroes, and one day soon the sun of bounty and prosperity will shine again on their constituents.
But if Florida and the other states hew to the foul philosophy of Mr Gailey and the other preposterously-silly Leftist losers, then the future will be like today, only worse. Much worse. Much, MUCH worse. And for a long, long time, too. Ugh.
--- Mogambo Sez: I am struck by how Bush's plan for being "bold" differs by only one letter from "gold." One measly letter is the difference between something that will ruin you and one will save you. How poetic.
The Mogambo Guru Lives!
Richard Daughty
May 8, 2003
http://www.321gold.com/editorials/daughty/daughty050803.html