Must read article from SD-ll
Message 17909655
To:Frank Pembleton who started this subject
From: Frank Pembleton Thursday, Aug 22, 2002 7:06 PM
Respond to of 17726
Gang... I wish I could of wrote this - a terrific write up on our state of affairs.
Enjoy!
Regards,
Frank P.
A Fool and His Money
dailyreckoning.com
The Mogambo Guru
- Well, now we know what Bush's Economic Forum was all about. It's about more government programs and more government action that he figures we need. That's the idea of everybody in government these days. "To a man with a hammer, everything looks like a nail." Thus, one more similarity between the neo-Democrats and the neo-Republicans is revealed; they're all Big Government Economy freaks now.
What with a new Department of Homeland Defense and assorted new government excesses resulting in wildly out-of-control spending, it is perhaps time to pause and reflect on what Mises said about it all. Quoting from Israel Kirzner's book, "Ludwig von Mises," he notes, "There is, Mises argued, a built-in dynamic in a regime of government intervention that inevitably sets in motion a systematic series of changes leading in the direction of complete socialism." He further adds, "In our time, in addition, such danger has extended to more subtle and more powerful forms, in that it is obscured and disguised by the illusion that interference with the market sovereignty of consumers is somehow in the economic interest of the public."
More and bigger government is never in the best interests of the public. This is nothing new. It is a hard lesson, repeatedly learned through thousands of years of government. That is the precise reason why the powers of the government were so severely constrained in drafting the Constitution. And why, starting with that outright communist FDR and the Supreme Court jackasses who went along with the raw grab for power, generations of Congresses and Presidents can be rightfully seen as Constitution-trashing traitors. A loathsome Big Government Economy has been crammed down the throats of the American people, and forced the economy to develop in a bizarre, dysfunctional mess determined by Big Government as being good for America. And it will not get better, since both major political parties are now worthless Marxist trash.
And it was Karl Marx himself who said, "(Democracy) will only survive until it's citizens discover they can vote themselves money from the treasury; then they will bankrupt it."
- And remember when I wondered what Franklin Raines was going to do with Fannie Mae, now that he has soaked up the overwhelming majority of mortgages in the whole country and made Fannie Mae into a foul-smelling behemoth? Well, the latest hotshot idea trotted out by Bush at his Economic Forum is to help black people buy houses that they do not want, or they would have bought them by now. This help, of course, will be in the form of more Marxist re-distribution of wealth via government programs. Wonderful. Just freaking wonderful. Of course, this is undertaken in the vain hope that blacks will vote for Republicans in November. Hahaha! As if that will ever happen!
And it is one more step down the path of socialism; now we are reduced to a collectivist government buying houses for people who don't even want them. And, in a slap to the face of the Civil Rights Act of 1964, actively and purposefully discriminating between who gets this largess based on the color of their skin. Not being black, but rather a victimized white person, I say it is past time to "Let my people go!"
- The FOMC left rates unchanged, but admitted that they have ruined the economy through their own abysmal stupidity. No, wait! What I meant to say is that they noted that conditions are tilted toward economic weakness. Well, now that I re-read those two sentences, they both say the same thing, don't they?
Even though they left interest rates unchanged, they did not mention any change in their policy of debasing the currency and driving the value of our fiat dollar to zero by massive creation of more and more fiat dollars at every tick of the clock, so I guess that is still on track. Some things never change, I guess.
But why are they doing that, anyway? Mises, in his "Theory of Credit and Money" explains it succinctly. "(The Fed knows) an increase in the quantity of money reduces the purchasing power of the monetary unit. But they endeavor to secure inflation nonetheless, because of its effect on the value of money; they want depreciation (of the currency), because they want to favor debtors at the expense of creditors and because they want to encourage exportation and make importation difficult."
There you have it in a nutshell. Your money is being debased to worthlessness on purpose, so that debtors (namely the massively over-indebted USA and everybody in it) have access to cheapened money with which to pay the bills incurred when the currency was worth more. And (there is always an "and"), the debasing of the dollar will theoretically make US exports cheaper (and thus ramp up some sales to foreign buyers), make imports more expensive, and thus positively affect the gaping trade deficit.
Plus, it really helps when you can hold transfer payments (Social Security, Medicare, e.g.) low in the face of rising inflation, too, and for three very good reasons. 1) the real value of the transfer payments becomes less and less, essentially paying claims with depreciated paper money, thus making it cheaper for the government to continue funding the legions of parasites, hangers-on and deadbeats; 2) it produces constituency groups out of the "victims" who begin clamoring for the government to "do something" about those low payments and how it is causing such misery. And if there is one thing that jackass politicians love, it is a large class of people clamoring for the government to "do something" and who might actually elect you to do that thing. It provides powerful "vote for me and I'll help you" campaign-promises rhetoric. See the Karl Marx quote, above; 3) It promotes the current Housing Bubble by providing more buying pressure, even as transparently artificial as it is, and gives impetus to the Housing Bubble, increasing the imputed value of existing homes through artificially-enhanced demand, and thus give homeowners a chance to borrow more equity. And, theoretically, spend the whole new-borrowed wad on more useless gimcracks.
And there, in that same nutshell, is the reason why you should be buying gold. Namely, the damnable government wants to ignite inflation, and they are moving heaven and earth to make sure that inflation happens.
Well, hush my mouth, the CPI came out and sure enough the Fed plan to fan the fires of inflation is working, and the indexes are comfortably above 2%. And rising.
As an aside, President Hoover was no fan of FDR, either. Hoover saw gold as essential to prevent governments from "confiscating the savings of the people by manipulation of inflation and deflation." He also said, "We have gold because we cannot trust governments." No truer words were ever spoken. And he said these things long before the current frightening specter of our massive, intrusive, manipulating, lying, deceitful, vengeful, and thoroughly corrupt governmental system was even a nightmare.
George Bernard Shaw remarked that "You have to choose between trusting the natural stability of gold and the honesty and intelligence of members of the government. And, with due respect for these gentlemen, I advise you, as long as the capitalist system lasts, to vote for gold."
But then, if gold is so damned important, why hasn't it rallied more than it has? Simplicity itself, my dear Watson; ceaseless manipulation. And when is the last time you ever heard of a massive, global manipulation ever working for long?
There has obviously been a concerted effort to denigrate gold. Gold stocks have appreciated over 150% in the last two years. Name any other investment, in the history of investments, that has gone up over 150% in two years and has not been the subject of headline after headline in the media, all touting the rise in prices and trumpeting more of the same, all accompanied by photographs, articles and sidebars about the savvy people who have made so much "get-rich-quick" money in it.
- The long bond continues to rise to preposterous levels. New bond holders are accepting, let me just check the figures and my eyesight again, real yields that are at zero after taxes and inflation. And they are happily tying up that money for thirty years. This demonstrates simple symmetry. For the Nineties it was stocks getting bid to preposterous levels. Now it is bonds getting bid to preposterous levels, joining housing as the New Bubbles, as the moneyed clueless dorks of the world rush from bubble to bubble.
To be completely fair, it is not just moron Americans buying these bonds at stratospheric prices. The whole economic fabric of the globe is tottering about in its death-throes, and simple-minded, uneducated and ignorant people actually believe that money entrusted to the USA is somehow safe, and so they are sending tons of their money here for "safekeeping." Hahaha!
- Bankruptcies across the spectrum are growing in number, some to record-levels, each of them engendering more bankruptcies, as the intertwined mess of leveraged cross-holdings impacts everything. Like a snowball rolling down a hill, it gets bigger and bigger.
- The Leading Economic Indicators were released, and it was grim. Of course, the Pollyanna cheerleaders all wax optimistic, since that is all they ever do, about how everything will be fine in "the next quarter."
- Now that the victims of the 9/11 terrorist attack have launched a lawsuit against every Muslim around the world who has any connection with the terrorists, it would seem that the best course of action for Muslims would be to get every dime out of the US. This ought to add a little more selling pressure to the market.
- July's consumer price inflation came in at a 2% annual rate. This was immediately hailed by the brain-dead pseudo-economists of the nation and government as something wonderful. "Inflation is tame," they bleat in unison. It is not. Any inflation over zero is not tame, and represents a profound indictment of the idiots running the show.
Medical costs rose at the highest rate in nine years. Medical costs are already one of the highest of the big-ticket burdens that the consumer has to bear, so big upticks in medical costs mean a big drop in disposable income. A big drop in disposable income means that sales of all the other items that consumers obviously want and buy will fall. All those now-unsold consumer items will stay on the shelves, adding to the glut of over-production and inventory accumulation.
On the production end, for those companies that are still picking up a large portion of employee's medical insurance, that means higher prices are mandated so as to recoup those higher costs. And oil is bumping up against $30 a barrel. Thus, the inflationary spiral winds around and around.
Add in higher energy costs, higher housing costs, higher taxes and the "tame inflation" that the government chumps are lauding, and you get an entirely different picture than anything that can be considered "tame."
If I repeatedly hit you over the head with a broom handle instead of a sledge-hammer, would you say that you received a beating that was "tame?" You are getting your head whacked black and blue, contusions and blood everywhere, but since it was so "tame" what are you complaining about, you little wimp?
- Robert Novak hinted at what I have been screaming about for years. The Bureau of Economic Analysis, a group of incompetent economic-hacks, appears to have consistently cooked the books to get Clinton re-elected.
The dots that Mr. Novak didn't connect was Greenspan frantically loosening soon into Clinton's second term, and then literally throwing open the doors to the Treasury in 1998, allowing for the lag between policy and performance, to try and get the corrupt, lying Al Gore elected in 2000. Why would he do that?
All one has to do is look at Greenspan's own wife, who is a loud-mouth, know-nothing flaming far-left Marxist liberal, to know where his sentiments are. Now my own wife is a Democrat, to my everlasting dismay, but through the years she has learned, and my pride and joy is that she is now immediately able to recognize the execrable economic idiocies of the leftists and to cast deserved aspersions upon them.
Not so Greenspan's wife. Not once has she uttered so much as a syllable of anything denoting so much as the basics of economy literacy. Now that I mention it, neither has Greenspan. How is this possible? Easy. Greenspan is a leftist fellow-traveler.
I've said it before and I'll say it again. Alan Greenspan is the worst Fed chairman in the history of the Fed. And I will go even farther to note that if an enemy country wanted to destroy the United States, they would simply note that the seeds of destruction are in everything, and all they needed to do was to just get Alan Greenspan installed at the Fed and just let him keep the seeds of destruction watered and fertilized by underwriting every ridiculous mal-investment, every financial stupidity, every over-expansion of the money supply, every set of lying statistics, every depredation of the banks, and every communist/socialist-inspired idea that the moronic Congress ever came up with, all to the end of saddling us with a debt load that will eventually crush us and insure the ruination of the currency and the country. Which he has done in spades, every single day of his disgraceful, despicable tenure.
So I am somewhat surprised that he was given an honorary knighthood. I figured he would more properly be made a Hero of the Worker's Revolution, and given some honorific in the Communist Hall of Fame of Subversives and Saboteurs.
- A guy named Robert J. Samuelson wrote a bizarre, far-leftist piece for Newsweek, itself a far-leftist, Clinton-loving rag. As is popular with brain-dead leftists, he combines fact with fiction, right with left, black with white, hoping you won't notice. He notes that "...what presidents and government can't do is guide the economy along a path of trouble-free prosperity." So far, so good. "The job is too large; the pressures on the economy are too many..." Again, I have no problem there. Who could possibly disagree? But then he goes on, without even pausing for breath, to say "...the government's tools (taxes, spending programs, interest rates, regulations) are too few." Whoa there, Hoss! Where in the hell did you get THAT piece of far-leftist, Big Government idiocy? But see how cleverly it is done? You nod your head, "yes...yes..." and all the while you are conditioning yourself to say "yes" again when this, this, this, I am too outraged to grace it with the term "filthy lying Commie trash" for fear of giving ordinary filthy commie trash a bad name.
He asks in the header to his piece, "Who is most responsible for today's problems: George Bush, Bill Clinton or Alan Greenspan? The correct answer is: 'All of the above' " Well, as the casual reader, I am certainly intrigued by THAT, alright! So we eagerly read on, breathlessly waiting to acquire an education at the feet of this Samuelson guy.
But, then, in the next paragraph, he writes, "...with President George W. Bush, Bill Clinton and Alan Greenspan all accused of causing the economy's troubles. Although none is guilty..." Huh? Hey! He tried it again! How's that saying go? "Fool me once, shame on you. Fool me twice, shame on me." He finally concludes that nobody is to blame and everybody is to blame.
In short, it is some bizarre, unnamed mass hysteria or beams from outer space that caused all our problems, and none of these august persons were able to, even wielding their unimaginable powers, affect it in any way. The moral of the piece is to, I conclude, exonerate the loathsome Bill Clinton and Alan Greenspan. The two guys I hold personally and directly responsible. Bush is included in this blanket exoneration only because they could not think of a possible, marginally-credible way to leave him out if the other two obviously guilty creeps get a pass.
What a load of crap. It wasn't mass hysteria that caused the Fed to monetize that much debt. It wasn't mass hysteria that caused the Fed to lower reserves to insignificance, and thus cause the fractional multiplier to explode the money supply. It wasn't mass hysteria that got the Fed to participate up to it's collective eyeballs in bailing out every swindle, every theft, every mistake, every mis-management on the face of the globe with oceans of newly-minted fiat money, thus debasing the currency. It wasn't mass hysteria that made the Fed relax supervision, demolish firewalls or characterize 3% inflation as "tame."
It wasn't beams from outer space that got Clinton to pass a massive tax hikes, especially on the FICA/Medicare taxes that hit the working class and the poor, and helped make them more unemployable by making them more expensive. It wasn't beams from outer space that got the Clinton administration to encourage Congress to spend, spend, spend us to bankruptcy via hugely more debt and a hugely-more permanent government infrastructure to support. It wasn't beams from outer space that made the whole embarrassment of the Clinton Administration, apparently corrupt in everything they said, thought or did, into the Guiding Light of America, a disgusting personification of the vile lack of morals and abdication of personal responsibility that characterized the whole Nineties.
No, Mr. Samuelson, Messrs. Clinton and Greenspan are guilty. They are guilty of irresponsibility, criminal negligence, wanton disregard for their job duties, a whole constellation of corruptions, insider dealings, intellectual dishonesty, dispensing lies as shallow propaganda, and, and, and, the list goes on and on. If you want to blame the collective "we" for our problems because we followed our leaders at your urging, Mr. Samuelson and your big-heart/small-brain ilk, be my guests, because if you really, really want to grovel in that cesspool, then who am I to stand in your way?
- Robert Prechter, Jr, he of the Elliott Wave fame, theorizes that the stock market follows the social mood, not the other way around. Bill Bonner notes that the average American got into stocks in 1997, his portfolio is down to what he paid for it, his debts have dramatically increased, his savings have gone down, and the cost of living has increased 12% in the last five years. So what is his mood, you figure?
Now Amos Tversky, a psychologist quoted by Mr. Bonner, found that people are far more distressed about losses than the euphoria they get when they make profits.
Now combining these factoids together, we are even more pessimistic, using the "royal we," as if that were possible.
- The IMF got assurances from Brazil that they will pay back their back-breaking mountain of loans. They have never paid back any other loans in the history of the IMF, but THIS time they say they are serious. They say that they will faithfully adhere to the long list of austerity prescriptions demanded by the IMF, even though they have demonstrated time after time after time that they have no intentions, and will never have any intentions, of doing anything that even resembles "austerity" or "common sense," and have ignored every IMF-required requirement ever put to them.
- "In 2001, U.S. national income increased by $179 billion, non-financial credit by $1.1 trillion, and debts of the financial sector by US $916 billion. In other words, debts grew ten times faster than GDP," writes Dr. Mark Faber in an article entitled, "A Colossal Deception." As if that wasn't bad enough, he goes on to say, "It's obvious that the U.S. government, with its lackey the Fed, is desperately trying to keep the system from collapsing by printing money. Whereas GDP increased in 2001 by $179 billion, broad money supply soared by $883 billion. The Fed is also keeping short-term interest rates artificially low by subsidizing the housing market and consumption through government-sponsored enterprises such as Fannie Mae."
He predicts that the huge monetary injections by central banks around the world will produce very sharp, short-term stock market rallies, as more economic mal-adjustments are subsidized. Therefore, he summarizes that, "economic hardship on an unprecedented scale will eventually follow in the Western industrialized countries."
Couldn't have put it better myself. Note the term "unprecedented hardship." This means that 1929-1933 will be soon be seen as a walk in the park compared to the coming horrors, all traceable directly back to Greenspan, Clinton, the Democrats in general, and now the Republicans, that will inflicted on us.
This does not even mention the outrage that is occurring in Treasury Gross Public Debt, which is up an astounding $441 billion in one year. This is the predictable end result of the Miracle of Compounding. At the end of a series of compounding debt, namely borrowing more money to pay the interest on previously borrowed money, the graph eventually has to go vertical.
It is a truly benevolent miracle when it is SAVINGS that are compounding, because your wealth, as shown on the now-vertical graph, is expanding at explosive rates. It is a catastrophe when the compounding is working against you, as the accumulated debt starts going vertical, and the debt explodes to impossible amounts.
Our future is, comparing our situation to Germany in the Twenties, inescapably the Weimar America. How many billions of Reichmarks did it take to buy a loaf of bread then? How many American dollars will it take to buy a loaf of bread tomorrow? Ugh.
Mogambo Sez: "A fool and his money are soon parted," goes the popular refrain. But as long as there are fools who can be parted from their money, the gyrations in the markets will continue. This current rally is the only one that has not yet failed for the last four years. It will.
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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. |
