The Mogambo Guru:Government Providing For The Citizens

[gpond]

- The Fed expanded raw credit again last week, and by a healthy $8.9 billion, and bought outright, continuing that particular filthy fraud, another $1.2 billion of government debt.

The NYSE Members bought another 96 million shares last week, to add to the dumpster-full that they bought the week before, which was 588 million shares.

The most telling statistic was that the Specialists went short 486 million shares, and if there in one thing that I pay close attention to, it is what the Specialists are doing. They are suddenly on the bearish side.

- Ben Gedalecia, one of the few readers of my screaming, infantile blather who is not collecting evidence that will be used to send me someplace both restful and under a doctor's care, not to mention securely under lock and key, thoughtfully sent a quote from an essay by Sean Corrigan, because he figured I would like it.

Well, not only do I like it very much, but I agree with every sentence, every phrase, and every comma. So much so, in fact, that I have started finishing my nightly prayers with the request that I have my hopelessly-deficient IQ raised to the level where I would write powerful stuff like Mr. Corrigan, instead of my usual prayer asking God to please stop the speaker of my car's radio from buzzing.

I herewith provide you with the entire quote, which reads, "America had degenerated into the archetypal Veneer Society, a land where the superficial impression is one of great wealth, but which, underneath that thin, misleading outer layer, is made of cheap, short-lived and inferior quality materials - all bought on created credit - the better to give its insistent consumers, but increasingly uncompetitive producers, a phony feeling of well-being, so they might maintain the necessary belief in the superiority of their ways and so conceal the true depths to which a century of Collectivist thinking has reduced their once-shining Republic of sovereign individuals. Yes, the more we thought about it and the further we extended the metaphor to consider its corporate, governmental, financial and monetary systems, the more it rang true that America has become the Veneer Society - a triumph of outward style over real substance. It must have been what fourth century Rome felt like, too, for those unlucky enough to have experienced it."

Yeah! Man, when I read that I jumped up and started dancing around the room. Here, right here in black and white, is a guy who is totally clued-in! Makes me proud! The multitude of voices in my head, usually a cacophony of demonic screaming, all began chanting in unison, "Sean, Sean, he's our man! If he can't tell it like it is, then nobody can!"

Then, Bill Bonner of Daily Reckoning website writes, "Congress has become like the Roman senate when the empire began to decline - cowardly, irrelevant, and repulsive."

See the odd similarity of references to the Romans by these two intellectual heavyweights? Coincidence? Perhaps. But what exactly what DID happen to the Roman Empire when their Senate started getting, umm, corrupt with their money supply and fiscal policies? And was the central banker of the Roman Empire a guy named Greenspanicus?





- Jim Grant of the eponymous Grant's Interest Rate Observer, writes, "In other words - if we follow correctly - heavy public borrowing, fast-paced debt monetization and high commodity prices are non-inflationary. We had somehow believed the opposite..."

Me, too, Jim. Me, too. And virtually everybody else who has studied real economics for more than ten minutes at a stretch.

And not content to let it go at that, Mr. Grant writes, "Heavy public spending doesn't guarantee a rising inflation rate. Neither does easy money. However, the two in combination make the bond market an even more forbidding place for widows and orphans..."

Well, now that the Raving Lunatic Mutant Anarchist Party is officially defunct, my political affiliation somehow defaulted to being a kind of Republican, and so naturally my first thought as such is to rush to a ridiculous stereotype and say, "Screw the widows and orphans! Let them eat industrial by-products!" My second thought is that I will back down ever so slightly from my bombastic perch and say that maybe, just maybe, Mr. Grant is right when he says that neither heavy public spending nor easy money guarantee a rising inflation rate, but I figure that a 99.99% chance is close enough to a guarantee to suit me.

And if those two do NOT guarantee a rising inflation rate, then they are surely guarantees of SOMETHING that is hugely unwholesome, or else why would there be such an antipathy towards them in the economics literature? These very things are listed among the evils of economics, and yet, now, I am supposed to think that they are something wonderful? And if they are NOT bad news, then how come I don't remember reading passages such as, "The citizens found that their economy was suffering under the stultifying, steady diet of saving, investing, stable and low interest rates, profitable production and affordable consumption, and the degradations of utilizing a currency of constant value. It was only when the government started massive deficit-spending and their central bank started printing up excessive amounts of money that the economic salvation of inflation rescued the populace, and the economy was saved, and everybody lived happily ever after"?

Now, those who really know me, of course, leap to the obvious and point out that I am a brain-damaged nitwit and that I couldn't find a donut at a Krispy Kreme outlet, much less a passage in some book somewhere. But that, however factual, is the easy way out. No, the answer is that Jim and I are both onto one of the Iron Laws of Economics, which should be more aptly named the Baseball Bats of Economics, because once you violate one of them you get whacked on the head with a tremendous force, and from the back, because if it hit you in the face you would have seen it coming and ducked. There will be a huuuUUUUUuuuuge price to pay for violating these Baseball Bats of Economics, and it will be apparent relatively soon, and when you regain consciousness we'll tell you all about it while you ruefully rub that huge hematoma on the back of your noggin while being transported to the poorhouse.

- Things would be soooo cool if the US dollar were to fall so low, making dollar-denominated wages relatively and absurdly low when compared to the rest of the world, so low in fact that starving Chinese slave laborers would complain among themselves, "Wow! Those Americans will work for less than twenty Chinese yuan a week! How can they work so cheap?"

If the dollar did collapse to, say, one percent of today's value, then twenty of THOSE Future Dollars would buy, here in America, what twenty cents buys today, right? Then, wouldn't shares of IBM today at 90 today be worth 9,000 in terms of these magical Future Dollars? Think of the capital gains to be taxed the whole way from 90 to 9,000! Wow! And think of all the financial stock market-related problems that could be fixed, and the government deficit problems that could be fixed, and the retirement industry problems that could be fixed, if only you could invest one dollar today and have it turn into 100 dollars in the near future, all ultimately taxable! Whee!

So, lips trembling with mounting excitement, I say to myself, "Let me see, here; I owe a hundred dollars now, so I borrow one dollar. Inflation will rise, interest rates will rise, so my dollar compounds and compounds, and soon I can pay off that whole debt, all by investing one single dollar now and investing it in something guaranteed by the taxpayer, namely Treasury debt! Which the Federal Reserve buys up, and prints money to pay for it! Which goes right back into the banks for fresh lending, which expands the money supply, which exacerbates inflation, which makes interest rates rise even more! Man, this is soooo cool!"

It will work, too. And that is the calamity of it all. Because everything else, considering their prices, will all be higher and in roughly the same degree. That five dollar chicken in every pot will be five-hundred smackeroos.

But wages will have also risen with the general price inflation, so the official story is that this will be a perfect offset, and this whole Bernanke and his Federal Reserve printing press thing will be a huge success in preventing deflation. But - and you mark my words, young Jedi warrior! - wages, at the lower end especially, will continually lag the whole rise in prices, and COLA adjustments for retirees, among others, will also lag. And the fabulous future that Greenspan and Bernanke and all those central bankers see for the grateful "us" will ultimately be paid for, not in dollars, but in lack of purchasing power of those dollars, sort of a negative-dollar concept.

When I am talking in mathematical terms like this Negative Dollar thing, you know immediately that I figure the Nobel Prize committee is watching, and I want to appear pedantic and looking like I have at least the vaguest idea of what I am talking about. So, nervously casting about for something to do with my hands other than endlessly picking microscopic lint off my sleeve or flicking invisible bugs off my face, I pick up a piece of chalk and I write on the blackboard "P, the total Pleasure dollars earned by the inflationary financial system on the left side of the equation will equal," and here I snap the piece of chalk in half, and it falls on the floor, and when I bend over to pick up the broken half I bump my head, and I stumble back into the desk, knocking my briefcase onto the floor, which spills out what appears to be a half-eaten sandwich and an empty box of Girl Scout Thin Mint cookies, embarrassing myself in front of these important strangers, and picking myself up from the floor I can hear you giggling at me, too. Rapidly composing myself and continuing like nothing had happened, I continue writing on the blackboard, "are equal to L, the painful Lack of dollars, on the right side of the equation." I look out of the corner of my eye at the Nobel Prize committee peering in through the window with their powerful telescopes and talking furtively into walkie-talkies. With renewed enthusiasm, I continue merrily along, "If we move both sides of the equation to one side and set the whole thing equal to zero, like this, we get P minus L equals zero, and we immediately see that the yin and the yang equal out. This means that, to equal out, the L, the painful Lack of dollars, here in the original equation, will be," and here I pause for a little dramatic anticipatory suspense, "a negative number". With a flourish, I make a big minus sign, circle it five or six times, and jam that damn piece of chalk right down its little throat.

But as it turned out, the snooping eavesdroppers were NOT members of the Nobel Prize committee after all, since that august body doesn't end its field-research forays by loading machineguns and bullet-proof vests into a waiting unmarked black helicopter. But that doesn't make my concept of Negative Dollars any less, umm, interesting. And it certainly won't make the plight of the poor, the frail, the fixed-income retiree, or the low-wage worker, or any workers for that matter, any less horrific as their paltry incomes continuously fail to keep pace with the rise in prices, and that is exactly what will happen to them as the Federal Reserve commits more and more monetary murder, which is purposeful alliteration, and the Congress gives you a flagrant fiscal - hmmm, what word am I looking for that begins with an "F"? - gets through "adjusting" things fiscal.

- I guess I should apologize for last week's over-the-top tirades, which I now recognize, as part of my new Twelve-Step Program, as symptomatic of something peculiar and unsettling, now that I am all calmed down. And I am calm now. Verrrryyyy caaaaallllllmmmm. This is thanks to modern medical miracles, in this case round-the-clock attention by specialists flown in from faraway places, apparently Zurich, who have heroically ignored debilitating jet-lag to insert a pacemaker of sorts that administers intermittent electro-convulsive shocks to my brain, which really seem to - bzzzzzzzzt! - be helping a lot.

But when I consider the way the future will work out from the perspective of the aforementioned poor, the old, the frail, and the truly needy as a result of the monetary excesses of the Fed, my heart breaks. Then I go right into the Anger Phase. Well, I USED to, anyway. But thanks to - bzzzzt! - electronic medical wizardry and the wonders of modern clinical pharmacology, we happily hold on to the promise of better days ahead.

- One of the most glorious things about living in the modern day and age is that we can now listen to Mozart at anytime day or night, an indescribable delight, and as an aside I heartily recommend that everyone get a CD of Mozart's Third and Fifth Violin Concertos and play them continuously, and, relentlessly belaboring the point of why we are living in a wonderful time, we can also literally day and night read things like an essay on the Mises.com website, entitled, "Best Laid Plans," by Llewellyn H. Rockwell, Jr.

Not only is this one of the finest examples of the Austrian contention of the folly of all government planning, but, like listening to Mozart, I never tire of reading. It is, again like Mozart, beautifully constructed and sprinkled with gems, such as "The great error of all central planners is to assume that there will be no unanticipated consequences associated with their policies." This explains why government plans always go awry. And why do they go awry, you quizzically ask in that charming way you have? Mr. Rockwell provides the answer with the succinctness of Occam's Razor, "What we have here is a classic error: the belief that government policy and its effects can be modeled in the same way as the physical sciences." In the physical sciences, see, you turn up the stove and the tea kettle gets hot. Likewise, government thinks that if you turn up the monetary and fiscal burners, the economy will heat up, too. The whole now-discredited, well, not really, but it should be, "levers and dials" approach to economics.

He quotes Ludwig von Mises, who refers to government plans as "experiments", and I will quote his quote, and going him one further will actually re-write the whole thing in typical Mogambo style, turning profound theoretical economics into a weird mishmash that completely distorts the original meaning of the author, burnished by my bizarre literary style that is the source of more defamation lawsuits against me than I care to remember, thusly, "Mises said that in the field of purposive human action and social relations no damned experiments CAN be made and no damned experiments have EVER been made. And what is more, government will continue to run one freaking monumentally disastrous fiscal and monetary experiment after another, hammering us and hammering us past the point where we are bloodied and broken, continuing relentlessly until the day we all rise up to our feet in angry, armed revolt, march on Washington singing bitter songs of anger and betrayal, and drag every one of those central-planning monsters out in to the street and...bzzzt."

Well, suddenly oddly becalmed, I am going to leave it right there, and get back to quoting Mr. Rockwell, "To the extent that models deal with real conditions, all data used in the model are derived from history. The future is something else entirely. Conditions change. Variables and change cannot be isolated from other variables and changes." See how classy he makes one of my points, usually posited with my usual hissy-fit petulance, sound? I, thanks to what appears to be just an unhappy genetically-mutant deficiency of viable brain cells, must resort to infantile inanities such as my infamous, "All things are connected to all things, and all constants are variables." The corollary of which is, of course, that if any one thing changes, all things change.

But that is why Mr. Rockwell is a big honcho at the Mises Institute and is highly respected, and I am but a lowly scribbler who has been shunned by a world he didn't make, has no real talent of any kind, and so spends his days pointlessly writing about economics, instead of writing pornographic short stories which is initially more interesting but after a while you get so jaded that you start developing strange, new erotic themes that travel down dark, forbidden alleyways that I'm certainly not going to tell YOU about because they made my psychiatrist scream and cross himself repeatedly, which surprised me because I didn't know he was Catholic and to tell you the truth didn't think that I could POSSIBLY even say anything anymore that could make him react like that, you know, after all this time and all. But I keep reading and writing, holed up in my dank little closet, since doing so appears to be performing purposeful work but really only involves sitting on my big, fat butt instead of living in mortal dread of being asked to do any heavy lifting of some kind.

For me, the cherry on the top of this delicious economics sundae was when Mr. Rockwell wrote. F.A. Hayek described the voluntary society as one of continual learning. "We might describe government planning as one in which ignorance persists no matter what."

Well, to be fair to the zillions of government workers, we DID hire them to do that very thing, you know, planning and experimenting and coming up with new and novel ways to solve perceived ills, all of which involve more regulation and/or taxes, so it is not surprising that they do it.

And so I think that the whole solution is to, of course, keep listening to the delights of Mozart, take our pills every day, remain calm, and buy gold, knowing that in the near future government planning will wreak its usual damage, and we lunatic gold bugs will be so freaking wealthy that we will have a continual STREAM of pathetically-desperate people banging on the door looking for work, and we can hire them as ruthless mercenaries to viciously take to the streets in angry, armed rebellion! Marching on Washington with flaming torches! And grab every one of those weenie government central planners and drag them screaming out into the street and...bzzzzt.

In summary, I suggest that you go to the Mises.com website and click on this essay. I certainly don't do it justice, and I have probably completely missed the whole point, like I always do, of his brilliant monograph. And garbled the rest beyond recognition. But in case these new purple pills are working like the pharmaceutical salesman promised, and on the off-chance that I correctly understood the content, and I hasten to point out that not once in the entire article did I discover a single coded-message from the malevolent planet Venus, which everyone agrees is a BIG improvement, then it is well worth the trip to read it in the original. Bzzzt.

- Eric Fry at the Daily Reckoning website, proving once again that he is as witty as he is gifted, writes, "As the coalition forces advance toward Baghdad klick-by-klick, the stock market advances uptick-by-uptick." A clever turn of phrase, eh? And how to explain this bizarrely bullish market action? I don't. I don't have to. Unless I want to. Which I don't. Right now, that is. But I'll probably be on a high-horse about it in a few minutes, because you know how I get.

He goes on to write, "The fact that stock prices would fall in order to correct a prior excess is not improbable at all...It is a certainty. Wasn't the bubble itself an improbability of epic proportion?" Well, even the very thought of contradicting Eric Fry is one of those things that usually tips me off that something is still seriously wrong with me, but it isn't an improbability, in the way that I look at it. And before that intern assigned to keep an eye on me gets here with that syringe of powerful sedatives, let me quickly say that the stock market is just ONE of the bubbles, and that most of human history is one bubble of one kind or another, usually financial or religious. Today there are huge bubbles in personal consumption, there are gigantic bubbles in debt, there are unbelievably big bubbles in real estate, there are monstrous bubbles in public and private corruption, there are humongous bubbles in growth of government and government laws and regulations, there are back-breaking bubbles in taxes, there are enormous bubbles in the police-state and in people being locked up in prison, there are even large bubbles in the new weird and disturbing reality-television shows, and there are Everest-sized bubbles in... hey! Ouch! What the...oooh, ahhhhhhhh!

- Michael Paolucci, a reader who made the stupid mistake of sending me an e-mail, which means that I know his Internet address, which means that I know where he lives, which means that neither he nor any of his family will ever again have a restful night's sleep knowing that I am out here somewhere, made the timeless comment, "Tax cuts should not be made because there exists a lack of demand at one snapshot in time, but because it is constitutionally the best policy towards control of people's money."

Later, in the court hearing where he and his snotty lawyer were desperately trying to get the judge to issue a stack of restraining orders that prevented me, among other things, from penetrating a hundred-mile radius of his house or even mentioning his name, he also said, "Alan Greenspan and the whole Federal Reserve system should be banished from existence, for in the long-run it is we, the common people, who will pay the ultimate price for its crazy monetary policies." Now, you know, and I know, that this sounds exactly like something I would say, and have said many, many times, but never with the grace and elegance of Mr. Paolucci here.

Well, that comment caused pandemonium in the court when the members of his family, and a surprisingly large crowd of very angry people who, for some reason, mouthed obscenities at me whenever I looked in their direction, jumped to their feet and declared that I was putting words into the mouth of this worthy man with some bizarre trick of ventriloquism, and the judge almost ruled in their favor until we re-read the transcript and everybody noticed that there were no references to flame throwers or exploding ordnance of any kind, which is so unlike me. But it all ended happily when Mr. Paolucci admitted that he had, yes, said those words of his own free will, and then the court bailiffs let me up off the floor and gave me what they SAID was a Heimlich maneuver, but I don't remember choking on anything and was not even eating anything at the time, and to tell you the truth I didn't even know that repeatedly kicking somebody in the stomach was even PART of that Heimlich thing!

But the day will come when the Federal Reserve WILL be abolished, Michael old budderoo, as it has already guaranteed that wonderful outcome with its bizarre over-production of credit and money, thus providing the underwriting wherewithal of every intellectually bankrupt scheme government central planners can come up with, and thus doubly insuring the destruction of the dollar and the United States of America, like they have done to every other moron nation in history that stupidly attempted it. And just to make sure that you don't think that this is another ventriloquism act, I also say that we ought to go after them all with flame throwers and, umm, grenade launchers. Big ones.

- The Iraq thing is always in the news, and you may be forgiven for not being up-to-date about all the other problems that were festering. To save you from having to read about them, I will succinctly encapsulate the latest tidings; they are all the same or worse. Not one problem has gotten better or gone away. Argentina. Spain. Brazil. Japan. Europe. Afghanistan. Chile. Mexico. Venezuela. The Philippines. You name it.

And they won't get any better, either, and they will get worse and worse, and thus you instantly realize why I used the word "festering" in the opening sentence. The documentary evidence is that every single country on the face of the planet, even countries that I never even heard of, is expanding its putative money supplies at some eye-popping multiple of the growth in putative GDP. And I use the word "putative" to denote that, while the published numbers are the Official Government Data, OGD, which, when you try to pronounce it, sounds like you are gagging on something and is thus so deliciously apropos somehow and in so many ways, I have so little faith in the integrity of any government, or any government statistic, or any government announcement, or any government anything, that I am sure that if the current horrific published-numbers are official, even after teams of dedicated bureaucrats have massaged all the truth out of them so as to protect the delicate sensibilities of us drooling and moronic citizens out here who are apt to panic at any moment over the least little thing, then the REAL story must be so shocking that I would simultaneously be dialing 911 and pooping in my underwear, which would give those emergency room doctors one MORE damn reason why my gurney should always be placed outside in the parking lot near the dumpster, and how that is perfectly normal Emergency Room procedure, and they will be with me in a few minutes, but they never are, and they send an undocumented illegal-alien janitor out to check on me every half-hour or so, and I can hear him go back inside and tell those snickering medical "professionals" that I'm still alive. Well, actually, he says, "Him not dead yet", which I am hoping doesn't signify what I think it means.

Now that we have looked with horror - "yikes" - on our faces at the money supply growth that is pandemic in the world, let's move on to the inflation part, which is what is ultimately impacted by excessive money supply growth. For that, I use the latest issue of The Economist magazine, which is laying on my desk here as a reminder that I have not finished going through it looking for pictures of pretty girls in bathing suits or in advertisements for ladies undergarments, and go to the back pages and look at those tables. I will summarize thusly: year over year, putative (there's that word again!) inflation in almost all countries, like 95% of all the countries that even HAVE consumer prices, is up.

Interestingly enough, although I cannot pick up a newspaper or listen to a radio or watch a TV without somebody telling me that deflation is raging out of control, and how the Fed has GOT to do something, or the Congress has GOT to do something, or SOMEBODY has to do something - and fast! - about some terrifying collapse in prices that is threatening to destroy us all, the new statistic for inflation here in the USA is up - gulp! - to a sizzling 3%! As befits my Teutonic heritage, I side with the Germans when they say that 3% inflation is the cut-off between "worrisomely high" and "unacceptable."

I use the metric "sizzling 3%" because in the Mogambo Scale, the new industry standard for measuring inflation, or it WOULD be the industry standard if the industry would adopt my snazzy measurement suggestion or even return one of my damn phone calls, 3% is "sizzling." 7% inflation is "boiling." 10% inflation is "scalding," 20% inflation is "aflame," and any inflation figure higher than that is "Forensic experts using powerful supercomputers cannot determine if the few remaining cinders were animal, vegetable or mineral in origin."

Now, we get to use a little of that algebra that you struggled with in high school and figured that you would never again, not in a thousand years, ever have a use for algebra.

In solving simultaneous equations like this, first we write them down. In the first equation, excessive growth in the money supply, which we will denote with an "M," leads to inflation, for which we will use the letter "J" for some random reason, in period T, at price P and at quantity Q, and right over here on the right we will use the letter X, which is a complete unknown and I have no idea myself what it could possibly be, but everybody knows you can't do proper algebra without an X in there SOMEWHERE.

Now, in our second equation we note that the money supply in time T+1 is excessively higher, denoted by the exponent E, and we want to find out what inflation, J+2, will be in time T+2. And since we do not know what that number is, we immediately know that it is an unknown, and it is only then that we notice, sheepishly, that we need an X to represent the unknown and we foolishly wasted it in the first equation, so we look around to make sure nobody is watching, and we quickly take an X from the first equation and add it to the second equation where we need an X, which, as we know, represents The Unknown. Now that we have everything all written down, nice and neat, we are all ready to go, so we jump to the task of adding and subtracting and multiplying and dividing and substituting like madmen for hours and hours on end, to try and solve for this dang-blang, dangity-blang blang mysterious X here, representing, as we know, something completely unknown, and we finally see, just about the time that the sun was coming up in the morning, that X equals, in time T+2, something MORE than J at time T. Exactly HOW much more inflation I have absolutely no freaking idea. I was incompetent in math going into this stupid exercise, and I emerge from it incompetent AND confused. And tired.

But the entire exercise was not entirely wasted. We did prove that inflation will be demonstrably higher one day soon, for one thing. And the CIA agents that are always rustling around in the bushes outside my house must have informed officials at the Federal Reserve that I was foolishly ignoring the sheer impossibility of EVER solving ANY of these kinds of economic questions, because economics is not equations or lines on graphs, but are the result of knot-headed and naïve people like you and me acting on impulse half the time and lashing out in stark, panicked fear the other half, none of which is the least bit quantifiable, but that I was nevertheless scribbling numbers and complicated equations furiously for hours and hours on end, and so rumor has it that Greenspan himself is on the verge of offering me a job.

But you don't have to be gifted in math to see the handwriting on the wall. And didn't Bob Dylan have a song that contained the phrase "You don't have to be a mathematician-man to know which way the wind blows"?

- Being a paranoid wacko has its charms, one of which makes it easy to believe in the PPT, an acronym for Plunge Protection Team. This is the bunch of co-conspirators that bands together and forces the stock market back up to keep it from crashing when it is in the process of, well, crashing. It is officially known as the President's Working Group on Financial Markets, which includes the Treasury secretary, Federal Reserve chairman, chairman of the Securities and Exchange Commission and chairman of the Commodity Futures Trading Commission, plus a few hangers-on and, I assume, semi-nude dancing girls. I include that last group because if I was one of the members of the PPT and I had that kind of clout and unlimited access to the people's money, the conference room would be so full of semi-nude dancing girls gyrating seductively on the tables that there would be no ROOM for the Treasury Secretary, the Fed chairman or any of the rest of those guys to even get INTO the damn room.

What brings this up is that I was the recipient of a mass e-mail from John Mauldin, an economic-commentator guy and money-manager guy who still has all his marbles, unlike me, and his marbles are all functioning as beads in a powerful abacus in his over-sized brain. But HE Thinks that there is no PPT, and since I am obviously outclassed in the brain-horsepower department, I will sink to the lowest form of argument and counter-intuit what he says with a childish "is not, is not, is not" to every point he makes.

"Supposedly," says Mr. Mauldin, "the PPT manipulates the market by buying S&P 500 and DOW and NASDAQ futures when the market is dropping. Somehow, this supposedly forces the market back up. The problem is that buying futures cannot drive the stock market, which is obvious to real traders."

Now comes my stupid rebuttal, and I say that apparently Mr. Mauldin has apparently never been sitting on any futures positions at expiration time, knowing that you are going to get a huge bundle of stocks delivered to you in a few minutes, and everybody expects you to come up with a huge wad of cash to pay for them. And, also apparently, Mr. Mauldin has never been sitting on any SHORT futures positions at expiration time, knowing that you are going to have to deliver a huge bundle of stocks in a few minutes, and you are expected to come up with a huge wad of cash to buy them and then deliver them. In both cases, you buy-to-cover in a panic of desperation to prevent having to fulfill either contract.

Furthermore, the guy taking the other side of that futures contract, the writer, will be buying and selling of the underlying stocks to hedge HIS new bet, because if he did NOT then he would be "going naked" which merely means an uncovered bet and not, as I found to my profound and embarrassing dismay, that we all doff our clothes and run around au natural in a frenzy of hedonistic abandon. If you HAD ever been in such a position, referring here to being long or short the stock futures and NOT running around naked as jay birds, then you would never dare to utter something as inane as, "buying futures cannot drive the stock market."

And believe me when I say that when a futures contract is written that there HAS to be a buying of the underlying shares by the writer, because it there WERE shares that were not already being used in some scheme to "put money to work" then I would be aghast that there was even one dime in the whole universe that was not already encumbered by being leveraged to the hilt already.

To go on, Mr. Mauldin quotes Art Cashin, of CNBC fame, "The amounts of money required to attempt such a manipulation would be huge. We are talking tens of billions of dollars if there was a true collapse going on. The collective size of the trading community in the world is in the multiple hundreds of billions. It would require the willingness to lose billions of dollars every time you took the plunge, so to speak." Well, as I seemingly never tire of pointing out, the Fed, EVERY WEEK, runs that kind of money, and more. And I am supremely confident that Alan Greenspan and the other members of the PPT would be willing to lose that much, and more, much much more, of taxpayer money to protect the US economy, the stock market and their phony-baloney jobs.



Continuing, Mr. Mauldin says, "Since the Fed openly manipulates the money supply every day in transactions that everyone can see, in order for the Fed to hide the activity of the PPT, they would have to take out liquidity by selling treasury notes. Otherwise, the numbers at the end of the day or week would not add up, and someone would notice. You could not keep something of this size secret. Period. The orders would have to be entered somewhere.

My response is, "Says who?" All they have to do is call up the big money people, who they all know intimately and go to each other's birthday parties and whatnot, and tell them, "Hey, dude! Buy stocks right freaking now and get this expletive-deleted market up, or the next time we are having a big hoo-rah sale of Treasury debt involving billions and billions of taxpayer dollars we will not call you up and invite you to the party." The Fed or the Treasury don't have to actually buy or sell anything.

And obviously they don't even have to do that, since the government and it's whore the Fed have made the world into an impenetrable labyrinth of channels, money going here and there and literally everywhere through a thousand programs, accounts, sub-accounts, sub-sub accounts, off-ledger accounting, undocumented special-purpose entities, float, and myriad things I can't even imagine, because money is perfectly fungible and they can easily obfuscate untold zillions of dollars by running it through the IMF, which then goes to the World Bank, to the EU, back to the Fed, over to the Treasury, to Fannie Mae, to the CIA, to a Cayman Islands account, to extra-terrestrials hiding in the Bermuda Triangle, to blah blah blah.

Next, Mr. Mauldin writes, "Some would argue that the PPT does not lose money - that they are so good they buy the stocks and wait until the market goes back up before they sell." Well, for starters, the last time I looked, inflation in salaries alone has made tens of millions into chump change. And who says they have to sell? The Fed cannot lose money because it literally MAKES money out of thin air all day long anyway! What the hell do they care about making money? They are on a Holy Mission to Save America!

Mr. Mauldin finished up by saying, "If you believe in the PPT, it probably would do no good to mention that the rules under which the Fed operates makes it illegal for them to participate in such an operation, since you would assume they would not
follow their own rules." That's right, John, it does no good to mention rules, especially rules that I have never seen read or ever seen, and about which many other writers have already waded into this particular fray and stipulated that there are NO rules preventing the Fed from doing this, and thus have only Mr. Mauldin's assurance about it. And furthermore, panting for breath, I leap to the chance to say that I have never noticed that any government weenies consider rules to be the least bit restrictive on their behavior. And why the hell SHOULD they? The damnable Supreme Court doesn't even consider itself bound by the freaking Constitution, for crying out loud, and can, and does, just about any damn thing it wants, apparently, on a whim.

In summary, given the proclivities of the Fed, lately manifested in manipulating the money supply so as to actually CAUSE inflation, even as Consumer Price Inflation is ALREADY running at 3% and rising, as horrifically bizarre as that sounds and completely contrary to what in the hell the Fed is SUPPOSED to be doing according to their own damned charter, let me say that I have no doubt whatsoever at all that the PPT is real, and that they can, do, and will again and again, do anything they can to "protect" the stock market, the economy, the portfolios of foreign entities that hold so impossibly-much US assets, the portfolios of retirees, and their friends in Congress and on Wall Street who are, probably at this very second, begging Alan Greenspan and the other Fed Governors to please please please keep it up.

And they are not the only ones! Oh, noooooo! As the economy of the US is now so tightly bound to the stock market that every yahoo even tangentially connected to that whole stock and bond thing HAS stocks and bonds, they are vitally interested in making sure that Good Old Number One is looked out for, and you can be sure that if there is anything that they can do to get those markets up they will be happy, HAPPY I tells ya, to do whatever they can, as far as stringing along with any plan goes.

So we have oodles and oodles of people who can, will, do, want to, fear they can't, wish they could, dream they were capable of, and praying to God for a miracle, are all trying to get stocks up, bonds up, house prices up, consumer spending up, hiring up, and taxes up, all in one big fabulous surge.

And if they couldn't, then why in the hell even HAVE a President's Working Group on Financial Markets? Am I supposed to believe that in the event of a market melt-down that the PPT would be merely acting to provide liquidity, expectantly and helpfully standing idly by the wall offering baskets of cheap money to passers-by, so that the market-makers and money centers could borrow money to pay off an avalanche of sellers, and then end up with those insiders owing untold-billions to the Fed, and owning stacks and stacks of worthless stocks that were so overvalued when they were forced to buy them that the very THOUGHT of them regaining those preposterous prices again in the next few thousand years that the very thought makes me laugh so hard that my stomach hurts? Hahahaha! Ouch! Hahahaha! Ouch!

So, trust me when I say, screeching as I do from the lunatic fringe, that there is not one drop of laissez-faire in America anywhere anymore, because there is no place in America that you can perform any activity that is not governed, nor manipulated, for the sake of society as a whole. Except those you can do with consenting adults behind closed doors in your own house, and in more and more states not even THERE! Nothing, nor anyone, is ever left to their own devices anymore, that especially includes stock markets that are going down.

- Those wags over at the Daily Reckoning wonder whither will go the economy. To help get a grip on the problem they ponder some imponderables, and suggest a look at history, such as "When was the last time stocks fell three years in a row? When was the last time manufacturing payrolls dropped for 32 months without a break? When was the last time business profits, as a percentage of GDP, declined for 4 decades? When was the last time the Fed cut rates 12 times consecutively...without producing a serious recovery? When was the last time the world's second - and perhaps third - largest economies were in deflation? And when did the U.S. last run a $500 billion budget deficit...and another $500 billion trade deficit? And when was the last time the U.S. consumer was so completely tapped out by debt - with debt at 200% of GDP - that he could no longer carry the world economy forward?"

Search me, dudes. Not only do I not know the LAST time for ANY of these, I didn't even know that ever WAS such a time! I mean, I watch a lot of the History Channel and all, and unless it all statistically-impossibly appeared only while I was religiously watching the Simpsons while eating dinner and laughing with that weird hyena-like sound I make, I have seen all sorts of educational things and one would certainly think that I would have seen SOMETHING about it! And I manage to read a few words about economics stuff once in awhile, too, and between those two I have never seen anything where the theme was, "And these imbalances produced the perfect springboard for lasting prosperity and a Golden Age."

On the other hand, and to the contrary, I admit the hint of a gist, of a uneasy feeling, a whiff of in a subtle way, from watching the History Channel, and reading about economics, that they were, alas, NOT the perfect springboard to lasting prosperity. It WAS a springboard of sorts, though, when I stop and think about the little bit of garbled history I know.

Imagine, in your mind's eye, that it is an acrobat's springboard, and that a nightmarish, devouring demon from Hell pounced upon it, to jump high into the air. Your baseball instincts are downloaded into that computer-like brain of yours and you calculate that demon's trajectory as the flight of a high pop-up fly ball coming right to you. The only question is whether the demon is still in a rising trajectory or a falling trajectory, because the only two dependent variables worth considering are 1) time to impact and 2) and force of impact.

- Larry Edelson of Weiss Research figures that the US dollar will lose another 20% in value this year. Let's see how that would impact the price of oil.

It looks like oil has averaged around $20 a barrel for the last five or six years or so, mostly higher here lately. But that price was in OLD dollars. If Mr. Edelson is right, those were the very dollars that would be, with another 20% devaluation on top of the 20% devaluation that we already have, at least 40% devalued.

So, what would be the inflation-adjusted price per barrel of oil, hmmmm? Well, at only $20 per barrel, using Old Dollars that have depreciated by 40%, then it should be selling for about $33 using New Dollars, right? But you can get oil right now, all you want, at prices far below that! Are the people who are selling oil to us at such low real, currency-adjusted rates just a bunch of clueless weenies, or are they doing us a big favor? Or both? Or what? SOMETHING is making these guys sell oil to us at real prices that are too low. Suppose it has something to do with supply and demand? Hmmm?

- Speaking of supply and demand, the employment numbers and the layoff numbers and the unemployment numbers all look bad. And the reason, as I see it, is not as many people have jobs, demonstrating my powerful deductive ability and why I should make the Big Money. And the reason for that is that the companies that employed them have seen a tremendous fall-off in demand, and the company has to cut costs by, finally, cutting employees who are doing no work because there are no sales.

And then we come to the multiplier effect, a subject that is always is big controversy. As my prize student, and the apple of my eye, you think you can trap me when you say, "Professor, we are intrigued and repulsed by your asinine assertion that a multiplier exists, whereas others who are a hell of a lot smarter than you, younger than you, more educated than you, better looking than you, who could buy and sell you on a whim, who are taller than you and who could easily beat the living snot out of you anytime they wanted, are not as arrogant in their certitude, and are not so unflinching sure."

I say, as I carom an eraser off your noggin, "Yes they exist, my brash and insolent young one! Of that I am, and shall remain, certain! Everything exists as a multiplier! And all multipliers are a variable whose value can range from zero on up. So the multiplier is sometimes zero, meaning that there is NO multiplier effect, but it CAN be above zero, meaning that there IS a multiplier effect! Of that I am sure!"

Now, back to the multiplier effect of lost jobs. How much money are the newly-unemployed going to be spending less per month, for instance, down at Larry's Roadside Slophouse of Fine Dining? What's Larry gonna do without people coming in and spending money for, as he puts it, "right tasty grub, mostly"? And consider Marlene, the aging waitress with the heart of gold, who works there! What is SHE going to do? And Marlene was going to use this week's income to put a tattoo on her, well, never you mind, but it was going to be a real nice one, with a heart and flowers and vines and a skull being pierced with a knife, all twining around the name "Spud," a trucker whom she loves so dearly, but he ran off with the busboy. So the story goes. But now that tattoo guy, who was going to use that money from Marlene to buy those new handlebars for the Harley...

And the multiplier can even get back to reinforce the original upset! I lay off some guys to save money, probably because I am desperately slashing prices to the bone to try and drum up a few sales. You see me lay them off and start to worry that you may have too much labor, too, now that sales are down. So you lay off a few. Then your competitors see you lay them off, so he thinks about his bloated payroll and how sales are down, and he lays off a few. I see him lay off staff, and now I am thinking about my own payroll expense again. We are all spiraling down to the warped perceptual universe that is part of anorexia; every time we look into the mirror we see fat and flab, even though others may see us a walking skeletons.

And this is why spirals of bubbles tend to be so persistent, and so resistant to change, both on the way up and on the way down. Everything is connected to everything, and the multipliers along all those connections are variables.

- For this week's episode of the laughable Leftist editorials - oooh! I like that! "The Laughable Leftists! Hahaha!" - of the St. Petersburg Times, we turn to this week's highly-instructive review comes from an editorial entitled "The happy ideologues" which appeared April 6, 2003.

As befits an essay on economics, it has to do with the budget crisis that our state government, like most state governments nowadays, is suffering.

First off, we are treated to a long list of organizations who get their funding from the state and which are suicidal to think that they would suffer income cuts like us peasants out here, especially since all their problems would disappear if only the State raised taxes. And if there is one thing that history proves, it is that us peasants love to be taxed! If we didn't, why else would there be so much of it?

The list of concerned people also includes the Florida Association of Country Commissioners who are so incensed at the prospect of the state shifting costs back onto the counties and cities that they have traveled to Tallahassee, en masse, to raise a stink! So, and this is the important part where us real stupid guys out here make our mistake, and I caution you to pay close attention here because I am STILL having a hard time understanding it, even though I have read it over a dozen times and maybe that is why I remain such a particularly clueless peasant instead of qualifying for a real job, but I am sure that YOU, with your thousand-horsepower brain, will understand it instantly, and then you will spend the next several minutes muttering disparagingly about me to those around you, and, where was I? Oh, right. If the state raises taxes from the people who live in the cities and counties and then sends that money BACK to the cities and counties for spending, then that is BETTER, see, than if the city or county ITSELF collects the same amount of taxes and then spending it, but cutting Tallahassee out of the loop. And it is such an important point that these guys get us peasants to buy them a trip to Tallahassee to voice it.

Shaking our heads to try and get that dizzying conundrum out of our minds, we are instantly refreshed to read that that same long list of concerned people has "...witnessed a disturbing fiscal trend. They have seen debt increasing, and a system of taxation that is growing more regressive and more unstable." Well, shut my mouth! Me, too! And it is one of the things that I regularly go hyperbolic about! So we are AGREEING here? I say "Sacre Bleu!" using my most adorable fake French accent.

And, astonished in the sudden congruity of our usually disparate views, we next read, out of the mouth of a guy named supposedly Montanaro, who is touted as a retired economist for the state legislature but I think is a guy they just made up, judging by some of the things he says, that "There's never been a more reckless and fiscally irresponsible policy that has been fiscal policy of the state of Florida." Well, I am floored! I surprisingly agree with that, too! My world is suddenly topsy-turvey! Things are spinning out of control here! Not only has fiscal policy been recklessly irresponsible, but both of these things have been going on for over forty years that I personally know of! Both of these things spent the entire time getting bigger and bigger and weirder and weirder. And now, we are all, Mr. Montanaro, the St. Pete Times, and me, in a glorious triumvirate of sanity and reason, rising as one! We spontaneously break into a chorus of "We Shall Overcome!" How inspiring!

Then comes the shattering of the illusion. The camera cuts to a mirror being broken into a millions pieces with a hammer. It turns out that THEY are talking about the failure of the state to impose new taxes and raise old taxes, whereas I am talking about the gigantic, filthy stinking mess that the St. Pete Times and the long list of yahoos have made with their, and I resort to the exact wording of the Times, "These are people who want to make sure that state government provides for it's (sic) residents." As an aside, note how I have used "sic" to indicate their use of "it's" for the personal possessive, a recent criticism of my grammatical and punctuational ineptitude which still stings. Well it did, until now, and now I get a chance to be on the OTHER side of that criticism, and against guys whose only tool and whose profession is words, unlike me, who only uses words when a grunt or obscene gesture will not suffice. So this is "smug!" Feels good! No wonder there is so much of it in the world!

Where were we? Oh, yeah. And how well has the state been "providing for its citizens?" you ask. And well you should. I will leave it to you to compile the bitter statistics of what is better and what is worse in the society, lo, this half-century of government "providing for the citizens," and then compare it to the cost. John Pugsley, chairman of the Sovereign Society, says, "In the United States, the combined burden of local, state and federal tax immediately confiscates between 30% and 60% of our annual incomes. And that's just the beginning."

I'll bet that you, the inquisitive and good-looking reader, will have NO problems coming up with other costs associated with government making things cost more through taxation of businesses, not to mention regulation of every kind you can imagine, which are costs that businesses have to build into their prices, and so is a kind of tax, too. For example, if it were not for government regulation and taxes, up and down the supply chain, new cars today would cost a tenth, or less, of what they do. EVERYTHING would cost a mere fraction of what they do, as every producer up and down that same supply chain would not add the huge costs of regulation and direct taxes into the prices of every damn thing that is for sale in the whole freaking country. And everybody, by which I mean us peasant-class bozos out here, pay every dime of every tax that businesses have ever paid, ever since the serpent added a sales tax on the apples he sold to Eve in the Garden of Eden, AND every dime of the cost of government regulation when we buy anything and everything. So now we are paying between 30 and 60% of income in taxes, paying high prices for the things we buy, and now we are being asked to pay MORE taxes at the exact same time that our incomes have declined because of the inexorable winding down of the Business Cycle? This is too, too... I stumble for words to express my outrage! Bzzt!

Ahhh. It suddenly becomes clear as glass. A big-government, re-distributionist, communist system that has been assembled piecemeal for a half century is now falling apart and taking everyone down with it. Like those systems always do.

Don't the Germans have a word that means "being bonked on the head while being helped?" Something with the ubiquitous "schlag," which means "hit or blow" on the end? Something like DerHelfenbeiDerGovernmentinKopfengeschlagundSieOuc hGesagenchlag?

Well, whether or not the Germans have such a word, we know that the St Pete Times and the old Soviet Union don't have one either, and they must resort to a phrase. It is "Government providing for the citizens."

Maybe old Joe McCarthy, and the early-50's McCarthy-era hysteria over communist subversives being in our midst, was onto something after all. Ugh.

--- Mogambo Sez: The fall in the price of gold is a present, and all you have to do is walk over there and pick it up. This is so, so sweet!

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[gpond]

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