"i weep for america" - the mogambo guru

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    Fiscal Idiots and Reckless Monetary Hoodlums

    "...I weep for America, as we have fiscal idiots in the White House, known as the Executive Branch, and Congress, which we call the Legislative Branch, which is two-thirds of the three parts of government. And, to make matters worse by a long shot, we have reckless monetary hoodlums in control of the Federal Reserve, which is not a branch of the government, but should be, since it controls all the other branches of government, because the Fed is about the money, and everything is always about the money. My Tip o' the Day to you: whenever you happen to stumble across any dollar bills, start spending them immediately on gold or some other commodity, because pretty soon they are not going to have much purchasing power left in them..."


    The Mogambo Guru

    St Petersburg, Florida - We keep printing up debt by the carload, and everybody keeps keep buying it. For example, the Treasury issued another $10 billion in new national debt, and foreigners whose holdings are at the Fed bought up $14 billion of it. Just like that! In fact, the chart of their sopping up of US debt is turning up and up. In short, sopping up is up.I keep looking at a chart of the growth in federal debt, and it is now increasing at the rate of almost $80 billion per month. Per month! Just how valuable IS a currency that is being inflated at that rate?

    Speaking of debt, Elizabeth Warren, who is identified as a bankruptcy expert at Harvard Law School, says, "It's about people using short-term, high-interest debt to manage the mortgage payment, utilities and food at the same time. It means bankruptcies will continue to rise, home foreclosures will continue to go up. The signs of economic distress are everywhere around us. It breaks my heart and makes me furious." Me, too, Elizabeth! Me, too!

    Dan Ferris, editor of Extreme Value newsletter is less charitable, and sounds almost Mogambo-like when he says that borrowing money at that rate shows that "Americans are facing a crisis and they seem to have decided to handle it by behaving as stupidly as possible." Hahahaha!

    - The European Union has decided that since France and Germany have exceeded the Growth and Stability Pact's budget deficit limit of 3% of GDP for the third year in a row, that there is no point in continuing the farce of pretending to adhere to the Pact. So, no penalties will be levied against anybody, even though they were explicitly called for in the Pact. Now they can all deficit spend to their heart's content with total impunity, which is what the dirtbag politicians wanted the whole time, because if there is one constant in the universe, which I will denote with a big C, or better yet by CITU for "constant in the universe," it is that politicians are lying dirtbags who want to spend gobs of public money with impunity.

    The whole point of the Pact, obviously, was to prevent inflation from rearing up and bonking the people on the head, because that is what happens after persistent deficit-spending and money-creation. But, even though price inflation has already exceeded the upper limits of the targets that they voluntarily set for themselves, for the fourth month in a row, here we are looking at the dismantling of the G&S Pact, to allow deficit spending higher than the already-allowed deficit of 3% of GDP! Which is more profligate than they thought remotely prudent when they wrote the Pact to start with.

    And if they create money and credit to pay for it all, then they are creating the very inflation that the damn Pact was meant to forestall! I say this because of Germany started going down this path after WWI, and you can't turn on the History Channel without seeing the effects it produced, bombs exploding and machineguns rattling and the whole bit.

    So, this is an instance where I momentarily pause in criticizing the chumps in our malignant system of American political buffoonery, and instead turn my considerable bile, and with a look of utter revulsion, to the Continent, to state that the EU bozos are now no better than we Americans or the Japanese, especially now that the heroic Dim Duisenberg has been replaced at the European central bank by that new French socialist, I can't remember his name right now, Trichet or something, but that is not what is important. What IS important is that the connection is that a new French socialist/communist has just been given the reins of the European central bank, and instantly everybody has decided that they don't need no stinking Pact, and they can deficit-spend spend spend! "Must be a coincidence," you say. I, however, snort derisively and say "Ha! It only proves that they are all out to get me!"

    The only question left is why they named it the Growth and Stability Pact in the first place, instead of the more appropriate "A Complete Waste of Time Pact."

    - Joseph T. Salerno, in a Mises.com article, asks, "Does Greenspan Deserve Another Term?" He starts out by answering his own question, "To begin with, my answer to the question posed is a resounding 'No!' There are two reasons for this negative response. First, the Fed's performance has been astoundingly bad throughout Greenspan's tenure as Chairman. And second, and perhaps worse, Greenspan has been a relentless purveyor of economic fallacies designed to obscure and justify this egregious performance." Mogambo Translation (MT): he is an incompetent and a liar.

    To extend this stinging assessment to others who also deserve to be tossed out on their ears and to have grumpy passersby throw rotten vegetables at them, especially the stinky, juicy kind, let me hasten to add damn near everybody in Congress, ex-Ron Paul, most of the entire judiciary, and most all legislators at every level of governance in the country to that list. Plus the entire education establishment, without whose inexcusably poor performance and lame-brained foolishness it would have been impossible to bamboozle an entire nation for so long.

    If Mr. Salerno had developed a mind reading act or had any ESP powers at all, he would instantly know that we could go to Vegas and make a real pile of dough with a mentalist act on stage at the casinos, as he puts his fingertips to his forehead and says, "I sense that there is someone who has a powerful disdain for Greenspan, the Fed, and nearly every yahoo in this country who dares to call himself an economist, and that---yes, it's becoming clearer now -- includes the various Universities For The Low-IQ, who taught these powerful entrenched people the idiocies that currently pass for contemporary economics, and who had the supreme, laughable gall to convey upon these very people a PhD in economics, when it is entirely evident to any grade-school kid of average intelligence who is able to merely get up and go over to the window and look out at the world, that they have no idea what they are talking about, and their policies are failures." And then I would jump up and say, "Yes! Yes! There is! It's me! Your mental powers are awesome!"

    As if the Fates were laughing and agreeing with the Mogambo, the AEA, which is the organization for economists, recently issued a report that concluded "the commission's fear is that graduate programs may be turning out a generation with too many idiot savants skilled in technique but innocent of real economic issues."

    Notice that they used the euphemism "innocent" instead of "woefully ignorant or blissfully stupid, or both."

    Mr. Salerno concludes that Mr. Greenspan's every thought and deed "...added up to little more than empty rhetoric that served as a cover for the Fed's cheap money policy of the Clinton years, which had caused massive and unsustainable malinvestments in the real economy and an inflationary bubble in financial markets. Greenspan and the legion of economists, journalists and business leaders that he has misled with his empty talk believe that the slowdown is a simple matter of sagging spirits and lost faith and that this malaise can be cured by the psychological hocus pocus of reducing short-term interest rates - i.e., turning on the monetary spigot full blast again."

    Yeah! Get 'em! He has looked at Greenspan, as I have looked at him, and we both come to the same conclusion, namely that he has "absolutely no real knowledge of how the economy works." Or, to use the AEA assessment, "innocent of real economic issues."

    And Greenspan is not alone, as he has the pleasure of the company of people like Bernanke, who correctly believes that "deflation is always reversible under a fiat money system" and who infamously said "We conclude then that, under a paper-money system, a determined government can always generate higher spending and hence positive inflation." Well, no kidding, Sherlock!

    But it is supposed to be the job of the Fed to PREVENT inflation! But noooOOoooo! Suddenly, after all these days and weeks and months and years and decades and millennia of people trying desperately to prevent the inflationary rise in prices so that people will not suffer a falling standard of living via debasement of the currency, we have the Greenspan Fed actively pursing such a suicidal agenda, and Bernanke shamelessly proclaiming it!

    Mr. Salerno says essentially the same thing when he says, "(This) is based on correct economic analysis: the Fed indeed does have the power to bring about a collapse in the value of the dollar. What is so frightening is that the Fed Governor, an allegedly moderate free-market macroeconomist who was appointed by a Republican administration and has been rumored to be Greenspan's heir apparent, dares to propose the use of such power."

    Ian Campbell, one of the more interesting and intelligent commentators on the economic scene, says, "The danger, to our mind, is that Greenspan's 'solid advance' is not solid at all. It is all based on flooding the markets with liquidity, forcing down mortgage rates to indecently low levels, cutting rates on savings deposits, encouraging the creation of more and more debt - while friend George racks up the government debt - and encouraging spending based on extracting equity from an asset, housing, whose price is inflating recklessly and which subsequently, like the equity market is likely to fall."

    Mr. Campbell is doubtlessly referring to the fact that Greenspan has said that he has noted "changes in technology and mortgage markets that have dramatically transformed accumulated home equity from a very illiquid asset into one that is now an integral part of households' ongoing balance-sheet management and spending decisions." So, and this is supposed to be good news, we as a nation have figured out another creative way of financing raw consumption, so as to the bring forward more consumption demand, or preference for currently consumed goods instead of the self-denial of saving for future consumption. The Austrian school refers to it as "time preference."

    We behave like the characters in a Star Trek episode, where all the inhabitants of the planet are imbecilic children, or the proverbial grasshopper in the Aesop's Fables, over-consuming in an orgy of wanton gluttony, and unable to learn anything, either from Mr. Spock giving us the benefit of his cold, Vulcan logic, or children's stories that are meant to painlessly instill in little children a notion about How Things Work In The Real World. And you can hardly go by a church where someone is not sermonizing about the Seven Years of Plenty Followed By The Seven Years of Famine, so it's not like anybody can say, "But we just didn't know!"

    Mr. Salerno, ruminating on what would happen if Greenspan were forcibly removed from office, has a delicious sense of horror, as he deeply intones, "However, his departure from the stage might not be cause for unalloyed joy among proponents of sound money - Ben Bernanke could be lurking in the wings." Insert maniacal laughter, and fade to black.

    - Lew Rockwell had an essay by Ron Paul, who can always be counted on to see clearly, writes, "Big corporations love the Medicare drug plan, because they want to shift the responsibility for providing drug benefits to their retirees onto taxpayers. Dozens of major companies shamelessly advertised in the Washington Times and elsewhere in support of the Medicare bill for this very simple reason. Their pension plans are dangerously underfunded, so naturally they use their lobbying influence to promote a Medicare drug system."

    Well, duh! That is exactly why it WAS passed! If it had not passed, or some other similar legislation passed, then those retirement plans would have gone belly-up, because the whole thing is built upon a big, fat lie. You yourself have been lied to with this big, fat lie if you have ever had a retirement plan done. What the little financial planner did NOT tell you is that inflation does NOT disappear at retirement, although his spiffy little financial plan with the graphs and tables and projections assumes that it does, and that is why he gets to show you that you are going to be literally swimming in money all the way through retirement, and all you have to do is trust him with all the money you have.

    And speaking as a guy who once prepared financial plans, I blush to admit, I know that there are a couple of reasons why it is difficult to prepare a financial plan where inflation never disappears, but one of the bigger ones is that it becomes almost impossible to save that stinking much money, and the client gets so despondent when he realizes that he is going to have to live like a pauper and invest two-thirds of his income that he ends up with a chronic drinking problem rather than buying any services or making an investments and I end up not making a dime off the guy, and then I start drinking heavily, and then the inevitable marital problems start arriving and the screaming and the fighting and bullets whizzing by my head, so you can see why I am not keen on that whole financial plan thing.

    In truth, the reality of it all is that you will literally have to save a current month's income in order to have, at most and if you are lucky that inflation does not really get started in earnest, a month's income in the future. You will not be able to actually compound your investment, as is currently all the rage in conventional thinking, and you will not be able to, for instance, save a month's income now to get two month's income in the future. It looks good on paper, but in real life, it does not, because inflation makes prices rise even after you retire, and it is that those constantly rising prices that continue rising and rising, on and on and on, and that makes it impossible for you to get ahead.

    So, for twenty years of retirement you need to save twenty years of income, and compound it at the rate of inflation just to do that. It's that simple. And next week we will tackle another simple problem, namely the difficulty of getting a camel through the eye of a needle so that rich men can get to heaven.

    - The Financial Times reports that Moody's warned the U.S. to get its finances in order, and it had better be quick about it. So, like all the dirtbag countries at whom we have clucked our tongues all these years, we are the ones being lectured to raise taxes and cut spending or face a credit downgrade. How humiliating.

    Apparently the guys at the Financial Times are not aware how things like this work. If Moody's tries and pull a stunt like downgrading the credit rating of the United States, you will soon see poor old Moody's overwhelmed by SEC and Congressional investigations, poring over all the books and papers, uncovering every petty little thing, making mountains out of molehills, filing criminal complaints against all the executives, and of course the IRS will have poor old Moody's tied up in knots for years as they go snooping around in the company files and the intimate details of all the lives of all the executives of Moody's, extracting confessions, assessing penalties and meting out prison terms. And then all the other rating agencies in the US will get the message, and that will be the last time that the reputation or credit rating of the USA is questioned by anybody.

    - The Commerce Department ruled that televisions from four Chinese firms were being sold in the U.S. at less than 'fair value' and announced provisional anti-dumping duties of 28% - 46% on their sets. "U.S. television makers and unions complained," reports CNN, "that imports from China and Malaysia had mushroomed to 2.65 million sets a year in 2002 from 210,000 two years earlier."

    Nobody seemed to notice that this is the exact thing, namely the chance to buy lots of stuff cheaply, that was promised to us as a result of free trade. It is the REASON for having free trade! But now, suddenly, the deal is TOO good for us consumer bozos, I guess because maybe somebody in America is thinking about maybe making televisions here again, and if they are thinking about it, then they realize that they cannot possibly make TV's that cheap using American plants and labor and paying American taxes, and instead of just giving up the whole idea, the government decided that it would be best to punish foreign devils, with their funny accents and their strange cuisines, who CAN produce televisions that cheap, and then when those TV's cost a lot more, then maybe some American guys could, you know, make TV's again and put Americans back to work, and then everything would be, you know, real peachy and everybody would be happy.

    - GDP went up by 8%? Big deal! I laugh at anyone who thinks this is good news. It is not. Eight percent of a ten-trillion dollar GDP is $800 billion dollars. More than that has been borrowed and spent in the last year by the federal government alone. And when you add in all the other debt that has been assumed in the last year, a lousy $800 billion in GDP is nothing!

    And Richard Benson of Specialty Finance Group is one of those guys who is, apparently, not being driven insane by the staggering macroeconomic sins that have been committed over the last, oh, let's say, sixty years or so. Instead of gobbling down handfuls of tranquilizers and laboring under the strain of constantly lugging around caches of weapons and ammo from room to room, ceaselessly checking and re-checking perimeter defenses, and all the while muttering to himself about vast conspiracies, he is able to calmly rattle off a litany of relevant statistics known around these parts as Numbers That Destroyed The Tranquility Of The Mogambo, And Turned Him Into Some Kind Of Trigger-Happy Paranoid Whacko. For instance, the current market price of stocks is $10 trillion, down from the peak of $17 trillion, indicating that you need a 70% gain just to break even. Man, it makes you wonder how in the hell "buy and hold" ever got to be popular!

    He writes that "Credit market borrowings are approaching a pay-off balance of $34 Trillion. With the US Treasury running $500 billion deficits a year and the single family mortgage market still growing at a rate of over $600 billion a year." My eyes are glazing over, and if you look closely you can detect a small trickle of spittle at the corner of my mouth, which seems to be ominously tinged with blood.

    He goes on, "In our economy, the vast majority of financial assets are nothing more than the ownership of someone else's liabilities. The current total market price of financial assets (liabilities) is certainly over $47 Trillion, or four times GDP. The cash flows from our $11.8 Trillion economy will not support payments on this level of liabilities."

    He also opines that since interest rates are surely about as low as they can go, then the price of bonds is also surely about as high as, and maybe this is just me reading things into his words that he never meant to say, they will ever be again for as long as you are alive, or your children, which means that if you are buying bonds, then for the rest of your life you will never again see prices this high, and you will forever curse yourself for having bought them, and your children will soon find out that you squandered their inheritance, and THEY will also live their whole lives in squalor and never see debt prices this high again, and so they will spend the rest of their miserable lives also cursing you, because maybe they could have been spoiled little rich brats who inherited a fortune from you, but nooOOOOoooo, they get a fistful of worthless bonds, which you seemed to have bought at the exact high.

    The Fed is holding down interest rates on short maturities to less than 1%, making it painful to hold cash. Therefore, the impetus to get cash "working" has led to a liquidity-driven rush in stock prices, so that P/E levels are, to use his phrase, up to "1929 levels." And as for what the phrase "1929 levels" means, he explains "This has propelled stock prices to inflate to extraordinary levels given all logical means of measuring value."

    He also states that "The private foreign sector realizes the only reason the dollar hasn't crashed is because the Foreign Central Banks are allowing speculators to take massive dollar short positions, while the dollar is 'eased down' in value." Now, speaking for myself, if the foreign sector realizes this, then who is the big dummy who is taking the other side of the short position that is being taken by these speculators? Who is so dumb is to take the wrong side of a big bet that everybody sees coming? We are going to find out who, and pretty soon, too.

    He also thinks that the dollar will lose another 30% in value, which I say would seem to indicate that gold must also go up by 30% in terms of dollars. The only way that this would NOT happen is if foreigners, whose currencies are appreciating against ours, decide that the price of gold is too high, and everybody decides to sell their gold holdings, driving the price down in their local currencies. Only thus, and I love it when I use the word "thus" for some reason, would gold not go up in price, in dollars, by at least 30%.

    Getting beyond that, I think that a 30% devaluation in the purchasing power of the dollar is entirely achievable, if that is the term that one uses to describe such a catastrophe, and I have a hard time conceiving that all foreigners would suddenly decide against owning gold and instead elect to invest in dollars, especially when considering the economic ramifications of what is happening today.

    Fortunately, I know that you will proudly stand with me, linking our arms in solidarity, and together we can loudly express our hope that we can continue to count on OPEC and all the other petroleum exporters, who are willing to not raise their price of oil when the price and value of a dollar falls. Then we fall to our knees and say "Thank you! Thank you! Thank you!"

    Because man, oh man! A thirty percent increase in the price of crude oil, which would only exactly offset the fall in the purchasing power of the dollar, puts it at $40 per barrel! So what does that do to the price of, you know, a gallon of gas at the pump, huh?

    And this is inflationary, which is The Thing That Is To Be Feared, according to that loudmouth Mogambo, which is me. Mr. Benson says, "Beef prices are at a 24-year high and insurance, education, health care, property taxes, and many other day to day expenses make the CPI a joke." Furthermore, he exposes the fraud of "owner-equivalent rent," which is keeping the official inflation statistics artificially down. "The CPI assumes every one rents, even though 65% of households actually own their homes. Rising home prices are not in the CPI but the declining cost of renting a home is. (Rents are weak and many people are opting to buy, rather than rent.) Housing is 22% of the CPI." So, more than a fifth of the CPI does not reflect a dime's worth of the gigantic double-digit explosion in housing prices. Fabulous.

    He goes on to say, "The Federal Reserve wants inflation because only the rising prices of goods will help companies service their massive debt loads, and only rapidly rising wages and salaries will allow individuals to service their record debt loads as interest rates rise and inflation kicks in." Abruptly, and this is the jarring part that made the ice cubes tinkle in my glass as my hand involuntarily shook at the startling revelation, and I think I spilled some in this keyboard here, judging by the sizzling and popping and that little shower of sparks, Mr. Benson zeroes in on the necessity of "rapidly rising wages and salaries." Rising prices is one thing, and that is bad enough, and I say this as a guy who is finding that he is paying higher and higher prices for damn near everything. But to have rising prices, at the same time as wages and salaries are NOT rising, is quite another, wouldn't you say? Well, whether or not you say, I say.

    The Economist magazine writes, "Some, such as Peter Garber of Deutsche Bank, see Asia's official purchases of dollars as part of a grand bargain: Asia ploughs its savings into America, and America, in return, remains open to the products of Asia's export industries. But protectionist pressures rising in Congress raise worries that America may fail to keep its side of the bargain." America keep its side of a bargain? Hahahaha! For example, ask any Indian who has ever signed a treaty with the USA, and he will tell you we palefaces speak with forked tongue, and our treaties are a "Heap big pile of buffalo chips."

    - Speaking of gold, and we were not, but we should be, because we should be concentrating all of our thinking on acquiring more and more gold, coming up with more ways to acquire gold, inventing new ways to get more money to buy more gold, the Lipper Mutual Fund Performance Averages show that gold-oriented funds are up 89.33% in the last twelve months y/y, handily trouncing every other category. The second-best category is Latin American stocks, up a paltry 49%, and China-oriented funds, up 45%.

    - I saw the Tom Brokaw moderate the Democrat Candidates Debate, or whatever it is called, and again it was those same nine horrible people saying horrible things, mostly in the vein of how they like the idea of more taxes and bigger government, and spending, spending, spending to provide more free things to everybody, and how we have got to cram the American values of environmentalism, and democracy, and human rights, and worker rights, and higher wages, and government providing free things down the throats of all the peoples and nations of the world, whether they like it or not. Like I said, horrible people saying horrible things. I am surprised that the dollar did not spontaneously erupt in flames, and it embarrasses me that the debate might be seen by people in other countries.

    Of course, this is at the exact same time as the story is coming out that the Republicans in Congress, for their part, were actually making threats against the children of members who did not vote for the monstrous and unbelievably expensive Prescription Drug Benefit! Threats!

    I weep for America, as we have fiscal idiots in the White House, known as the Executive Branch, and Congress, which we call the Legislative Branch, which is two-thirds of the three parts of government, as I finally put that eighth-grade Social Studies textbook learning to good use, once again proving the value of an education. And, to make matters worse by a long shot, we have reckless monetary hoodlums in control of the Federal Reserve, which is not a branch of the government, but should be, since it controls all the other branches of government, because the Fed is about the money, and everything is always about the money. And finally, like some Monte Python sketch or a Saturday Night Live skit, we have nine Democrats who are so bizarre that we, as country, have forfeited any pretense of self-respect.

    My Tip o' the Day to you: whenever you happen to stumble across any dollar bills, start spending them immediately on gold or some other commodity, because pretty soon they are not going to have much purchasing power left in them.

    - "The Gold Price" by Paul van Eeden and published by James Turk on the goldmoney.com website, attempts to calculate how high gold will rise. I love this stuff. I particularly like the ones that show gold going to a zillion dollars an ounce. Unfortunately, this is not one of them, and we will have to be consoled at much lower values.

    Mr. Eeden writes, "The dollar is likely to fall approximately 50% from its current level. That would free the dollar denominated gold price to find its way back towards its true value of $699 an ounce (as of 2002). Given the mounting pressure on the dollar, there is virtually no chance that it will not collapse."

    Remember those currency crises of those foreign nations, and how Clinton and Robert Rubin and Greenspan and the IMF and all those guys, which is everybody, decided to establish the principle of moral hazard, and so they bailed everybody out by sticking the American taxpayers with the bill? You do? I knew it! I could tell by the way you grind your teeth that you remember perfectly!

    Anyway, I know what you are dying to ask me: "Hey! Mogambo! Yo! What did gold do during those trying times?" I am glad you asked that question, because Mr. Eeden, in a stroke of coincidence, provides the answer to that very question, and thus saves me trouble of getting up off of my lazy butt and actually trying to find out, and maybe end up doing actual work for a change, and then I remember I tiring that is, and I lose all interest. Anyway, he writes "The gold price in Japanese yen however, increased by 34% between 1995 and 1996. The next year the gold price jumped more than 40% in both Philippine pesos and Malaysian ringgit, and 67% in Korean won. Indonesia suffered the most during the South East Asian Crisis and the gold price, accordingly, increased more than 400%."

    So, Indonesia suffered the most. I figure that America is about to suffer the most. So, always looking for that "eerie parallel" and I don't know about you, but my eyes are fixated on that "400%" figure.

    - A guy named Ian Cockerill is chief executive of South Africa's Gold Fields Ltd, and Mr. Cockerill thinks that the Federal Reserve is prevented from raising rates for fear of hurting any incipient US economic recovery. He says, "The US government is pumping liquidity into the market via tax cuts and hoping like hell that they don't have to resort to interest rate rises to kill off any hint of inflation."

    Now this fella may be a real hotshot when it comes to running companies and delivering speeches, but when it comes to divining Fed policy, he apparently wouldn't know it if it hit him in the kisser with a dead fish. When even the tortured-into-shape Consumer Price Index is running almost 3% a year and Greenspan is holding short rates to less than 1%, then I leap to my feet with a surprising alacrity and shout that ain't nobody in the Federal Reserve the least bit interested in preventing no stinking inflation by raising no stinking interest rates. There is nobody in the whole Fed system that gives a rat's patootie about inflation, or the devastating effects it has on people, as the Greenspan Fed has engineered a scheme where the banking system screwed over the senior citizens, who are the demographic that is most prone to saving money in banks and in Certificate of Deposits, by paying them one lousy percent interest! And they have to pay tax on that! A third of inflation!

    So don't hand me any crap about how the Fed is "hoping like hell that they don't have to resort to interest rate rises to kill off any hint of inflation."

    Of course, after a few years of this compounding of the effect of losing about 3% a year, and here I am going to take the opportunity to do a little Real Economics, according to the New Economic Paradigm, and calculate something, the people who were thus targeted by the Fed, and note that at the same time that I emphasized the word "targeted" that I simultaneously used the visual-aid of an old guy bisected by crosshairs of a telescopic sight on a .30-.30 deer rifle with flash suppressor and silencer, senior citizens have watched the purchasing power of their supply of bank-money money drop by twelve percent! In numbers, that is 12%! As a fraction, it is about one out of eight dollars! And by the exclamation points you know that I am serious here!

    In terms of misery, the people who had their money in banks have had to coerce the Congress into legislating some relief, namely the new Prescription Drug Benefit, so you see how this whole thing fits together.

    And notice that I have not even mentioned the explosion in bureaucrats and bureaucracy that is contained in the bill, which will eat up any supposed benefits to old-timers. Mark well the Words of Mogambo; in a decade or so from now, when they are looking at how much money this whole Prescription Drug thing has cost, they will find that it would have been cheaper, by a long shot, if they had just declared a Tax Credit for the total cost, and essentially had the taxpayer reimburse 100% of the price of drugs to the seniors, who essentially then got free medicine.

    But nooOOOOoooo! We gotta have some whole complicated, huge new freaking bureaucracy, with blue-ribbon reports and committees and departments and agents and watchdogs, everybody nicely unionized and pulling down plenty big bucks and bennies, and insurance companies, and for crying out loud don't get me started on the insurance industry-government complex, wherein insurance and investment companies contribute to the election campaign of certain politicians, and the politicians, in turn, pass legislation that will steer business their way, or absolve them of costs and responsibilities, or both.

    And this is how the economic fabric is ripped and torn and is mal-invested, and it becomes this evil Frankenstein that ends up destroying the countries that created such a thing. But they always do, people being such as they are, and it may have something to do with the Kondratieff cycle, that eerily-regular 70 year cycle of economic growth and then decay.

    - Reader Reggie Laubmeier sent me an e-mail that he entitled "scary." It was a link to National Review Online's "A Bull's Eye View" article by Larry Kudlow, who is a raving bull without any reservations whatsoever, and that is actually his job, as far as I can tell. Anyway, Mr. Kudlow thinks that the dollar is the cheapest currency going, and that you ought to be scooping them up. We also have, according to him, "High after-tax investment returns, breathtaking productivity gains, totally awesome profitability, virtually no inflation, historically low interest rates, falling unemployment claims and rebounding manufacturing indexes." He also quotes a "University of Michigan think tank just predicted a 5.4 percent unemployment rate for 2004, a 4.8 percent rate for 2005, and 5.2 million new jobs over the next two years." I will let pass without comment that the Supreme Court recently had to step in and adjust the bizarre thought-processes of the U of M, so please do NOT hold those guys up as having anything worthwhile to say about anything, which I admit is a gratuitous bit of viciousness, but when you are that evil you have to punish them and keep punishing them, as a lesson to others.

    Not content to stop there, Mr. Kudlow goes on to say, "Economic profits are rising about 25 percent, and productivity is ranging around 4 percent." Well, being the Mogambo, I am naturally skeptical about how people define "profits" these days, now that accounting has become "creative," and don't get me started on the laugh-a-minute calculations of productivity. He goes on to say, "We are on the front end of an eight-to-ten-year boom. Low interest rates and rising earnings are still signaling a roaring bull market. Expected profits suggest that the stock market is at least 20 percent undervalued."

    Wow! I slump in my chair, overwhelmed by the awesome display of incandescent optimism! Unfortunately, Mr. Kudlow may be suffering from a disability, and if you look at him carefully I tend to see him struggling to overcome a severe perceptual defect, in that he is incapable of seeing the sheer tonnage of backbreaking debt, in every corner of the economy, that is a record-setting and economy-whacking burden that is not going away, but is indeed getting exponentially worse with each tick of the clock. He especially does not see the monetary inflation that is ruining the dollar, which makes exports more expensive, and, thanks to John Ashcroft and his new powers to do any damn thing he pleases, it is probably possible to sneak around and discover that Mr. Kudlow's high school transcripts show that he was absent that day when they taught that higher prices are bad news for consumers and dam near everybody else, too. Thinking back to those halcyon school days, I don't really remember much except a lot of adults hassling me all the time, but that "higher prices is bad news" was one of those things that everyone had always learned on their own along the way. But, and I bid us to please kindly remember, that it is his job to be a mindlessly bullish cheerleader and all-around Pollyanna, and so that is what he does.

    And if he is right, then I will breathe a big sigh of relief and will happily stand up and say "I, the Mogambo, was wrong!" And I will also say that I am so stupid, in a grandiose way as only the Mogambo can be stupid, that I read the wrong books, and believed the wrong things, and had the wrong friends, and drove the wrong car, and have actually been wrong about everything, at every step, for as long as I have lived, and if you don't believe me then sit down and let me give you just a taste of the long Jeremiad that is the life of the Mogambo.

    But if he is wrong, and I believe he is the wrongest kind of wrong in the whole wrong-and-weary world of Wrong-dom, then the future is going to be much less, ummm, wonderful.

    - Remember Howard Troxler, the little Leftist newspaper columnist for my little hometown newspaper that I viciously attacked last week for no apparent reason by raking him over the proverbial coals because he dared to say something that provoked me, the Mogambo, into a fit a rage? Well, I am happy to announce that he is waxing indignant that, in Florida, the sales tax is applied unevenly! Wow! Imagine that! Government is not being fair to everybody when it comes to extracting the money of the citizens! Favorites are being played! Who woulda thunk it?

    Reading the column of Mr. Troxler, we learn that the object lesson today is that if the sales tax were applied to everything in a more uniform manner, the state would collect $25 billion a year instead of the paltry $15 billion it gets now. And, and since this is the good part, the government having an extra ten billion dollars a year to spend would be seen as something good.

    Oh, great. Yanking another $10 billion a year out of an economy composed of people variously making and buying and selling things that they want. And then turning around and putting that same $10 billion of money into a government-economy, where we have government hiring people to provide some sweeping cornucopia of services to citizens or other government employees, by the government employees themselves or by their civilian contractors! All the time building large office buildings and government stuff! Then hiring more guys to clean them, and paint them, and maintain them! And floating wave after wave of bonds to finance it all, providing more luscious gobs of money to the middlemen wheelers and dealers who handle all this debt whizzing around the town, the state, the world!

    But, to be fair to Howard and all the people who so desperately want to do good things by promoting a system of taxation, it COULD work! All it takes, and you might want to write this down, because it is the crux of the whole matter, is for all the sellers and buyers who are benefiting now in the Utopia of un-taxed goods and services, to promise, cross their hearts and hope to die, that they will gladly accept a lower standard of living, as represented by the $10 billion drop in their income. And for them to just pay the tax, and not to raise their prices to try and restore their previous, gluttonous standard of living.

    And the executives of the companies, and the boards of directors of those companies, and the shareholders of all the companies all must also promise not to raise prices in the face of increasing taxes to also promise - and I think they would be happy to cross their hearts, too - that they will happily accept lower profits, and not try and raise prices to restore their filthy level of profits.

    And then, and only then, will it be possible to extract 70% more in taxes without any untoward adverse effects. See how easy it is?

    However, failing that, and here I more forcefully direct the attention of Howard and all the other little Leftists who think like Howard, and by that I mean Democrats and communists and socialists, by donning my Mogambo outfit with the snazzy propeller beanie and thundering from the pulpit, "Listen and listen well, my children! The raising of any tax results in higher prices, which hurts the poor a hell of a lot more than the piddly increase in a couple of government benefits could EVER help them." In short, Democrats are the scourge of the poor, although they say they sincerely, desperately want to help to alleviate misery and suffering and the burdens of the poor, but only end up hurting those they love so much, until the very end where the people have to rise up in violent revolution just to finally stop the Democrats from killing them with their damn love!

    - For those who are interested in my run for the White House, and apparently nobody is, the Mogambo For President political movement is still stalled at zero, which was actually predicted by many other people, who all opined that Americans are not ready to elect a President who is a dangerous paranoid recluse, and who may not even be from this planet, as genealogical research seems to reveal that my whole family suddenly appeared in Roswell in 1947 and then got the hell out of town real fast for some reason.

    But my Presidential aspirations have been stymied by zero income, zero interest from voters or media, zero volunteers, zero expenses, and zero effort, all of which make running this whole political campaign business so easy that I hate to give it up. So I will continue to run for President, as it sounds classy and it costs nothing.

    And if you don't vote for me, then you are going to get one of the current roster of candidates. Ugh.

    ---Mogambo Sez: Nobody has ever argued that the government deficit-spending and all the rest of the heroic, last-ditch, pull-out-all-the-stops monetary excesses would not make statistics of economic activity blip upward. The argument is whether or not it will eventually destroy the economy. I say it does. The rise in the price of gold says it does. The decline in the dollar says it does. All of recorded economic history says it does.

    The Fed and the talking heads of America say it won't.

    And it embarrasses me, the Mogambo, to have to be the one who has to say it, because I am a guy who is so stupid (audience shouts out "How stupid, Mogambo!") that restaurants refuse to serve me because my profound stupidity actually makes the food taste funny.

    And now you know why I, too, weep for America, and why the food I eat always tastes, you know, funny.

    The Mogambo Guru Lives!

    Richard Daughty is general partner and C.O.O. for Smith Consultant Group, serving the financial and medical communities, and the writer/publisher of the Mogambo Guru economic newsletter, an avocational exercise the better to heap disrespect on those who desperately deserve it. The Mogambo Guru is quoted frequently in Barron's, The Daily Reckoning, and other fine publications



    ps. Current US bumper stickers -

    #1. He lied. They died.

    #2. Somewhere in Texas there is a village that's missing its idiot.

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