Gather up
your Gold, your Guns & Get Gas
Richard
Daughty
...the angriest guy in economics
The Mogambo Guru
Archives
February 22, 2006
-- I don't
remember the sound of wolves howling in the distance, but it
was a darkly inauspicious start to the beginning of the
Bernanke reign of monetary terror and pain, as Total Fed
Credit at the Federal Reserve shot up by $6.7 billion last
week, which is a handy measure of the amount of excess money
and credit that are being created - poof! -out of
thin air by the monstrous Federal Reserve.
But that
pales in comparison to the biggest and most unbelievable
fraud, which is NOT that I pretend that I am a decent,
caring human being, but that the total debt of the United
States is now at $8.248 trillion, which is $8,248 billion,
which is $8,248,000 million, which is enough to make instant
millionaires out of 2.8% of the population of the country!
We owe, as a taxpaying nation, enough money to create
instant millionaires out of almost 1 in 30 people in the
country! My God! My eyes bug out of my head and my stomach
churns, going gorp gorp ga-lorp, at the very thought of such
monetary, financial, economic and social malfeasance, and I
think to myself "Do I have enough frozen pizzas and
ammunition to sustain me during the economic upheaval that
is coming?"
Now you
want to know, "What upheaval?" Well, on the
WorldNewsTrust.org site we read "The Laboratoire européen
d'Anticipation Politique Europe 2020 (LEAP/E2020) now
estimates to over 80% the probability that the week of March
20-26, 2006 will be the beginning of the most significant
political crisis the world has known since the Fall of the
Iron Curtain in 1989, together with an economic and
financial crisis of a scope comparable with that of 1929." I
re-read and re-read and re-read that part about it being
"comparable" to 1929, which is the year that the stock
market crashed and ushered in the Great Depression. But
there is, so these guys say, only an 80% chance of that,
which is the exact odds my wife figured of our marriage
lasting less than a week. They are obviously not interested
in my matrimonial problems, and blithely continue "This last
week of March 2006 will be the turning-point of a number of
critical developments, resulting in an acceleration of all
the factors leading to a major crisis, disregarding any
American or Israeli military intervention against Iran. In
case such an intervention is conducted, the probability of a
major crisis to start rises up to 100%."
Of course,
I could not let it pass without a snide and sneering comment
that the Treasury Department of the United States has now,
illegally, put us $64 billion dollars farther in debt, in
just a couple of weeks, than is authorized by law! As aghast
as that makes me, I can only imagine with horror what
foreign creditors make of this terrifying development, now
that the damned Treasury Department has proved to the world
that laws mean nothing to it, nor to the executive branch,
nor to the legislative branch, who all sit there watching
and doing nothing.
Addison
Wiggin at the DailyReckoning.com site thinks about that for
a minute, and innocently asks "But you have to ask yourself,
how much faith would you put in an I.O.U. from a friend who
has sinking job prospects, soaring credit card bills, a
double mortgage, a chronic gambling problem and - it turns
out - a bad habit of lying about how much money he has in
the first place?" I thought he was talking about The Mogambo
there for a minute, especially about that "sinking job
prospects" thing.
So I
asked, "What do you mean about 'sinking job prospects',
Addison?" He answered, "If you use the real statistics to
calculate unemployment, the way we used to calculate it back
in 1980, the real unemployment rate is a much more
devastating 12.5%." Yow!
The good
news, they say (but they are wrong) is that consumer
spending went up, even if nobody is working, by 2.3% in
January. How to explain it? Well, it could be that consumers
are still spending those gift cards they received for
Christmas, I suppose. Or they may be out spending money
because they are getting raises and bonuses I haven't heard
about, and never hear about, because every time I go in and
ask for a raise, they say "What? Are you still working
here?" and then I scram, hoping to leave well-enough alone.
And it's worked out very well all these years, except for,
you know, the raise thing.
Or it
could be that that consumers are spending by cutting back on
other things. For instance, Tom Dyson, writing for
DailyWealth.com, reports that taxi drivers, by dint of their
conversing with so many passengers in their cabs, have a
good idea of what is really happening. One driver told Mr.
Dyson that he thinks "The economy is bad at the moment." Mr.
Dyson sums up the cabby's assessment as "Business is hard.
No one goes out anymore."
The driver
also has friends in the restaurant business, and "They are
struggling to make ends meet. It used to be easy, but
nobody's spending anymore."
Then
again, it may be (and I think it is) that consumer spending
went up not because consumers are actually buying MORE
stuff, but that the stuff they ARE buying merely costs more,
which it is. Remember, the report says only that consumers
spent more, not that they bought more stuff!
Of course,
being officially diagnosed with Mogambo Fear And Paranoia
Syndrome (MFAPS) means I see inflation and treachery
everywhere. For you non-medical professionals, MFAPS is the
heartbreaking condition where you fear inflation as the
greatest threat to mankind, because it is. Furthermore, you
see enemies everywhere, mostly on the political Left, as
that group of grinning morons actually believe that spending
more money, and having a bigger government, and having more
of the population dependent upon government spending and
government support will (insert drum-roll) solve problems,
which is so absurdly stupid that it is all I can do to
restrain myself from actually tracking Democrat politicians
down, one by one, grabbing them by the neck, and slapping
their silly damned faces until they get some smarts. And in
case anyone asks you, you can tell them yes, I am MORE than
willing to keep slapping, slapping, slapping their stupid
little smarmy faces for as long as it takes, too!
And since
we are talking about inflation, for some bad news on the
inflation front, the Producer Price Index rose 0.3 percent
in January, and I am reminded that the PPI rose 0.6 percent
in December, too. PPI is supposed to measure the prices paid
to those who actually produce something, like factories,
refiners and farmers, who then sell the value-added product
to other intermediaries, one after another, until it gets to
the final consumer, which is me, who has to pay a price high
enough so that a lot of middlemen can make a profit, even as
they, too, battle the dark forces of higher prices and
higher taxes.
The Core
Producer Price Index, which happily excludes food and energy
prices, rose 0.4 percent in January. I gulp and open my eyes
real wide in this cute and comical little way that I have,
which I call the Mogambo Cute And Comical Little Way That I
Have (MCACLWTIH), when I am getting ready to plotz from fear
right here on the spot and probably soil my pants.
Bloomberg
News, apparently thinking that I am real funny, replies with
their own attempt at dry, weird humor, and they write "The
report may raise concern that businesses will pass rising
raw materials costs on to consumers." Hahahaha! What did
they say? Hahahaha! Can you name ANY cost that is NOT passed
along to the freaking consumer? Hahaha! This is too rich!
How in the
hell can a business stay in business UNLESS they can pass
along all the costs? Before I can get a good rant going,
here comes Zapata George Blake, which is a hell of a
terrific name, writing at FinancialSense.com, saying "If
there are no profits, our corporations will cease to exist.
Not all will cease to exist, but those that are engaged in
high employee cost, or in manufacturing of items that are in
direct competition with China, such as automobiles, steel,
aluminum, light bulbs, television sets, etc. If you make it
in a factory, you'll probably be out of business."
Standing
up and striding back the microphone, I was intending to
launch into how this is a good thing for gold, and a bad
thing for stocks, bonds and houses, but before I could say
anything, Mr. Blake endears himself to the crowd by telling
them how to make money on it! He says "The only surefire
investment opportunity," he says " is to have the things
that the Chinese must purchase, things that they don't have:
oil, natural gas, copper, certain grades of coal, all of the
base metals such as zinc, lead, and in particular uranium.
Uranium will be in great demand. The other main class of
items they will need is agricultural." Why agricultural?
Well, he says the Chinese have "7% or the world's
agricultural land, 24% of the world's population."
And
although we are completely unrelated, notice how he, too,
focuses on the exact same macroeconomic things on which I
focus, the chief one being prices, including (and
especially) the price of energy.
"The
rising cost of energy and the falling value of our dollar in
world markets," he goes on to say, will make our energy
costs "soar beyond belief."
"Beyond
belief"? This is the most second-most horrible news that
could befall you. The worse news is learning that I bought
the house next door to you, which would explain the "For
Sale" signs in all the yards on the block.
Byron
King, who does NOT live next door to The Mogambo and is
disinterested in even thinking about it because he says it
makes him "queasy", tells us that the oil problem of falling
supply is not going away. It is getting worse: "Princeton
Geology Professor Ken Deffeyes has come out with a new
statement about the timing of Hubbert's Peak. According to
his calculations, the world passed the geological peak of
its oil production in December of 2005."
But this
is not about energy and how higher energy costs are going to
make prices rise, but about inflation, which is the measure
of prices that have ALREADY risen. And in that regard, the
Labor Department said that U.S. import prices climbed 1.3
percent in January!! Note the rare use of the double
exclamation point, which, if you use your Official Mogambo
Decoder Ring (OMDR), means for you to
gather up
your gold and your guns and get the car gassed and ready to
go.
They say
that the cost of imported petroleum shot up 6.4 percent,
which is plenty bad enough, but (and you had better sit down
for this) EXPORT prices also rose 0.7 percent! This export
stuff is the stuff we are, and correct me if I am wrong
here, exporting! This is the stuff that is supposed to be
going down in price, thanks to a weaker dollar! Yet 0.7
inflation in one month, times 12 months a year, comes out to
8.4% inflation a year!
Well,
about this time Bloomberg sees all the attention I am
getting by reporting the horrifying inflation statistics,
and they grab the microphone out of my hand and say that we
ain't seen nuthin' yet, as "Costs of intermediate goods,
those used in earlier stages of production, rose 1.2 percent
last month and are up 9.3 percent in the 12 months ended in
January." Gaaahhh! I'm screaming in fear! My heart is
pounding through my chest and I feel woozy.
Then
Bloomberg turns and sees me lying there, prostrate on the
floor, ostensibly killed by the shock of the terrible
inflation news. Poor, poor Mogambo! Then they decide to test
me and see if I am really dead so they get the celebration
started for real. So they soothingly say "Prices of raw
materials, or so-called crude goods, fell 0.5 percent." At
that, the lifeless body of the Mogambo stirred, the flicker
of life kept alive by the desperate hope that maybe, just
maybe, I've got this thing all wrong! Maybe everybody is
right; I really DON'T have any idea what in the hell I am
talking about! After all, "Prices of raw materials, or
so-called crude goods, fell 0.5 percent." Maybe we are NOT
doomed!
Encouraged, I struggle back from the brink of death and
despair. As I slowly regain consciousness, I can hear my
wife screaming and fighting with the paramedics "Pull the
plug! He wants to die with dignity!" which only increased my
desire to live, since dead men can't exact revenge. But then
I forgot all about her, and gave up hope when Bloomberg
admitted that the prices of raw materials "were up 23.6
percent in the last 12 months."
Even Eric
Fry at the DailyReckoning.com admits that the stupid Mogambo
was actually right about something for once. Well, he did
not actually say those exact words, but you can get the
drift of it when he says that Jim Rogers "correctly notes
that 'costs are going through the roof' for many commodity
producers, thereby reducing the profits they would be
earning from the soaring prices of their products."
See? See?
See what I mean about profits going down if you don't pass
along your costs to the final consumer? Less profits! But
I'll bet that his CEO and a couple of muscle-bound goons
from security aren't going to go tramping down to Jim
Rogers' office and chase him down the hall, zapping HIM in
the butt with Tazer stun guns and yelling at him "And don't
come back, you stupid Mogambo idiot!"
Mr. Fry
ignores them zapping me and my crying like a little baby,
and casually goes on to report that "As anticipated, steel
makers, copper miners, gold miners, fertilizer producers,
chemical companies and many other types of commodity-based
companies are all suffering from a toxic combination of high
energy prices and mounting labor costs. Therefore, profit
growth at many resource companies is, in fact, grinding to a
halt."
And it is
not just domestic producers that are going to make less
profit. And if there is one thing that I am sure of, it is
that foreign producers may be known for a lot of things, but
being forgiving about making less profit is not one of them,
as I gather from once working for a company that was bought
out by a Asian firm, and they were always in my office,
poking me with their chopsticks and saying "More profit!
More profit, Mogambo-pig!" But, to be fair, I get the same
treatment from any America producer so stupid as to hire me,
too. In short, profit is ALL that producers think about.
And if you
what to see the kind of thing that you can expect from
soaring inflation, Todd L. forwarded a news clip from
Indianapolis that reports "High prices being offered for
scrap metals have driven thieves to steal manhole covers
from city streets and aluminum siding from homes. Now, the
thieves have turned to stripping copper tubing from outdoor
condensers on home air conditioners."
-- Foreign
holdings of U.S debt deposited at the Federal Reserve zoomed
up by another $12.644 billion last week. This is strangely
at odds with the news that Net Foreign Purchase of
Securities fell to $56.6 billion in December, from $91.6
billion in November of last year. This is a drop of $35
billion, or, in percentage terms, 38%.
But
foreigners soaking up almost thirteen freaking billions of
dollars in one week helps explain why money supplies around
the world are exploding. And that unholy thing means that
when there is massive inflation in the money supply like
this, then you will soon see inflation in the prices of some
things, then inflation in the prices of a lot of things, and
eventually in all things.
But, for
some perverse reason that future historians will make whole
careers arguing about, the moronic people of America think
all of these price inflations are good! Hahaha! A nation of
morons! I sort of remember a quote by Benjamin Franklin, who
was asked, when they finished work on the Constitution, "And
what kind of government do we have?" and he replied "A
democracy, if you can keep it."
What he
surely meant by that enigmatic phrase was if you let people
decide tax policy, the numerous have-not people will always
vote to give themselves somebody else's money. A democratic,
majority-rule government always elects to provide a "free
lunch" for everybody! Whee! Thus, democracy will ultimately
destroy the economy. That is why the Founding Fathers wrote
into the Constitution that money shall only be of silver and
gold, which is the only thing that would possibly prevent
it.
But this
tirade is NOT about how a nation of Leftist ignoramuses and
big-heart-yet-small-intellect morons destroyed America via
democracy, or how that same dank, dismal democracy guided
the nation's fiscal policy (governmental taxing and
spending), which, in turn, picked the people who ran the
nation's monetary policy (the banking system). And then the
government spent, and spent, and spent, and then the banks
created the money, created the money, created the money to
finance these perpetual budget deficits!* Notice the
exclamation point AND the asterisk. This is a new Mogambo
punctuation innovation (MPI), which I use to indicate that
this is the most stupid economic idea that I, The Mogambo,
have ever heard.
I can hear
you thinking to yourself, "Big deal! That doesn't mean much,
because The Mogambo is really ignorant about most things!
Especially, for example, his appalling lack of social
skills. And he eats like a pig!" To this I can only reply,
"Touché!"
But
now you have fallen into my trap! Suddenly springing the
snare, I call into evidence Defense Exhibit 327, the Bonner
and Wiggin book "Empire
of Debt", which is has not
only been adjudged to be one of the top (I turn to the jury,
stare at them, and repeat the word "top") economics books of
2005 by both the Economist and Barron's magazines and many
other fine publications, but it also demonstrates, beyond a
doubt (again I turn to the jury, stare them down, and repeat
"beyond a doubt!") the ugly fact - FACT! - that there is no
example of the success of this fruitcake idea of "free money
for everybody" anywhere in history! In fact, history is full
of, and I am talking freaking fuuuuuuullllllll of, countries
that HAVE had governments that printed more and more money
for the government to spend. And it ended tragically for ALL
of them! The inflation in the money supply that produced
inflation in prices destroyed them all!
I turn to
the jury, fall to my knees, and raise my arms to them, as if
pleading for them to please, please, please understand the
enormous gravity of the situation, and I finish my brilliant
testimony by saying "I weep for us!" and then fall, slowly,
to the floor, sobbing.
With a
flourish, I spring to my feet, spin around, face the judge
and announce "I have no further questions of this witness!"
And the judge says "YOU'RE the witness, you blockhead!" Then
I say "Then the witness is dismissed, and the case is
dismissed!"
And if
inflation shows up in the price of food, then that is the
time when you suddenly realize, to your horror, that The
Mogambo was right about this monetary insanity thing, and
how it always leads to inflation, and that leads to misery
and degradation of the economy. And that leads to societal
anger and desperation. And that leads to panic when you
realize that you did NOT build a massive defensive fortress
of steel-reinforced concrete and lead shielding in your
backyard, and you suddenly get the idea that maybe you can
come over to MY Mogambo Impregnable Bunker of Fear (MIBOF).
And then you chuckle to yourself when you realize that, by
now, there is nothing but scorched earth for a quarter-mile
radius around my house and you couldn't even get close.
A hand
goes up in the front row. It's that pretty little reporter!
I say "You have a question, my little pretty?" She says,
"Yes, mighty, magnificent Mogambo (MMM)! From whence cometh
the original money that financed all of this expansion of
debt and government spending?" Seeing my opportunity, I tell
her that I will have to discuss that with her personally,
later, in my office, where we can be alone, and she says
she'd rather slash her wrists, which I take as a "No." So I
say to the crowd "Okay, the question was 'Where did all of
the money come from that the government borrowed and spent?'
which is, I might add, a very good question."
The pretty
reporter smiles and blushes because she is pleased to be so
complimented, and I figure that maybe she has changed her
mind about, you know, the private office visit! So I look
right at her, I raise one Mogambo eyebrow and provocatively
lick the slobber on my lips, and she shakes her head to
signify "no!" So I bid "farewell" to the foul temptress and
her full, pouting lips, and I continue on as if she hadn't
even been born by saying "The money came from the only place
it CAN come from, you morons! You let the banks create
credit out of thin freaking air, and then they loaned it
out! That's how money becomes money, you idiots!"
-- Of all
the reasons to sell stocks and bonds and houses now, before
prices fall, Phil S. sent the DrKW "Fear and Greed Index",
and it shows that we are heavily into the "greed" side of
the chart, and about far enough to equal the middle of the
year1987, just before the market, as they say, "crashed."
Very interesting!
-- Thanks
to Doug Noland for a quote from Bernanke's first appearance
before Congress since he was appointed Fed chairman, where
he is dismissing the importance of the inverted yield curve,
even though this has ALWAYS signaled a downturn in the
economy. "More importantly, in the past, when the inverted
yield curve presaged a slowdown in the economy, it was
usually in a situation where both long-term and short-term
interest rates were actually quite high in real terms,
suggesting a good bit of drag on the economy." Huh? Where in
the hell did THAT come from?
But he
does not answer my question, and instead he goes on to
reveal the basic tenet of his whole, idiotic theory of
economics, namely that interest rates are the ONLY thing
that matter. Hahaha! What a buffoon! He virtually admits it
when he says "With the real interest rate not creating a
drag on economic activity, I don't anticipate that the term
structure signals an oncoming slowing of the economy."
Hahaha! And this laughable economic stupidity is the
wellspring core belief of the majority of mainstream
universities in America today! Debt doesn't matter! Budget
deficits don't matter! Trade deficits don't matter! Energy
costs don't matter! Housing prices don't matter! The value
of the dollar doesn't matter! Only interest rates matter!
Hahaha!
So you can
rest assured that the Bernanke Fed is going to keep creating
excess money and credit, and he will keep flooding the banks
with it, and the banks will make more and more loans at
cheaper and cheaper rates, creating more and more money as
they completely debase the buying power of the dollar.
And
speaking of debasing your dollars so that they buy less and
less, Gary Tanashian of BiiWii.com enunciates my thinking
perfectly when
he says
"Therefore, the ongoing debasement of the dollar remains my
fundamental reason for being bullish gold. We are in a
secular bull market in resources, commodities and hard
money. We are in a secular bear market in paper currencies,
being led lower by the world's reserve currency, the Federal
Reserve Note."
And let's
not forget silver! As Jon A. Nones at ResourceInvestor.com
writes "According to the analyst, of all metals, silver is
nearest to Hubbert's Peak."
- Aaron
Russo, bless his Hollywood heart, is releasing a new movie
entitled "America: From Freedom to Fascism". The reviewer
says that "Aaron Russo has created a compelling and
troubling documentary that indeed gives the impression that
America has already moved from Freedom to Fascism. Russo is
a bulldog as he prowls halls of government trying to get
someone to just show him the Law that says a working citizen
in the United States owes an Income Tax, or just to
acknowledge prior Supreme Court rulings on the subject."
Later,
there is "Another interview with a former IRS Commissioner
who, now a high-powered D.C. attorney, can't seem to make
the connection between Supreme Court decisions on the
Constitutionality of the Income Tax and how the IRS regards
'voluntary compliance' with a law he's unable to
articulate."
Ugh.
***Mogambo sez:
Keep buying silver, gold and oil. One day you will be very,
very glad you did, or very, very sorry you didn't.
February 21, 2006
Richard Daughty
email:
RichardSmithGroup@verizon.net
 Daughty
Archives
The Daily Reckoning
Richard Daughty is general partner and C.O.O. for Smith
Consultant Group, serving the financial and medical
communities, and the writer/publisher of the Mogambo Guru
economic newsletter, an avocational exercise the better to
heap disrespect on those who desperately deserve it. The
Mogambo Guru is quoted frequently in Barron's,
The Daily Reckoning
and other fine publications. |
