MOGAMBO-1/9There is a line of argument which says that because money will be literally disappearing as loans default and new loans are not taken out, inflation in the money supply will fall, which means that prices will fall, and thus this proves that we are going to suffer a deflationary collapse instead of an inflationary collapse, where prices go up and up.
You gotta admit; it seems to be a compelling argument; the money supply will fall as loans go bad, which means consumer prices will fall. And with loans going bad, nobody is going to either make a loan or take one, and so the money supply will not grow.
This presents a real difficulty for me, as it means that when people demand that I defend my thesis that we will, instead, see an inflationary collapse, I can't. The fall in the money supply seems so compelling!
So I nervously hem and haw, desperately looking for some plausible reason, and I can't think of one, and pretty soon I am resorting to personal attacks against the person questioning me ("Did your stupid kids dream up that question, or is that your own stupid question?) and all-in-all I get to feeling like a cornered rat, which usually leads to the Attack Without Mercy (AWM), which is, actually a "surprise attack" even if the enemy knows right where you are, is looking at you, and is actually laying in ambush for you! I get this little-known tactical nugget from General Armstrong Custer himself in the movie "Little Big Man", where he said, in this very "they know we're here!" circumstance, "Nothing is more surprising than the attack without mercy!"
So imagine my great relief to have an ally in Peter Schiff of Euro Pacific Capital, who writes, "Many mistakenly believe that when the U.S. economy falls into recession, reduced domestic demand will lead to falling consumer prices. However, what is often overlooked is the fact that as the dollar loses value, the rising relative values of foreign currencies will increase consumer demand abroad. As fewer foreign-made products are imported and more domestic-made products are exported, the result will be far fewer products available for Americans to consume. So even if the domestic money supply were to contract, the supply of goods for sale would contract even faster. Shrinking supply will be a major factor in pushing consumer prices higher in America."
Hey! I love it when math works in my favor for a change, instead of the bank showing me the math of where I had screwed up my checking account, and the math about how I owe them money for overdrafts and bounced checks. Now it would be the other way around, for a welcome and long overdue change! Now I would get right in THEIR stupid little faces and demand that THEY come up with some cash, you deadbeat losers, and right now, or I'm calling the cops! Oooh! I tingle at the anticipation!
I was enjoying this little tingle and almost missed the whole point, which is that, "The big problem politically is that hyper-inflation may superficially appear to be the lesser evil. If asset prices are allowed to collapse, ownership of those assets will pass to our creditors. If instead we repay our debts with debased currency, we retain ownership of our assets and shift the losses to our creditors."
That's the way it shapes up, and the deciding factor is, so he says, "Since American debtors can vote in U.S. elections and foreign creditors can not, the choice seems obvious. Of course there are some American creditors as well, but since they comprise such a small percentage of the electorate, my guess is that their losses will be seen as acceptable collateral damage."
Exactly so! That is the depth to which the American government has sunk; the "good of the majority" is paramount over the desires of the minority, which is proved when something like the bottom half of taxpayers ranked by income pay no income tax at all, while the top 1% pays more than half of all income taxes, and the fact that almost half of the people in the USA receive money directly, or indirectly, from the federal government each and every month! Hahaha! What a system! The "Good of the Majority" run amok! Ugh.
"An entire third of the grain output of the American farm system will disappear from the world's food supply? On top of the terrifying increases in prices we are already seeing? Yow! We are totally, totally, totally freaking screwed!"
by The Mogambo Guru
Economic seismographs picked up ominous tremors in the world economy, as a January 4, 2008 Bloomberg news item read, "European inflation stayed at the highest in more than six years in December as food and energy costs soared… The inflation rate in the euro area was 3.1 percent", even as the European Central Bank, "last month raised its 2008 inflation forecast to about 2.5 percent from 2 percent." It's worse than previously thought, and anticipated to get worse than this! Yow!
Without the slightest indication of scorn, laughter, bemusement or outright sneering disparagement of any kind despite being richly deserved, Bloomberg went on, "Inflation in the euro region may remain above the 2 percent ceiling for a ninth year in 2008, even as economic growth slows, according to ECB staff forecasts." Hahaha!
Inflation in prices that is above the ceiling for nine years in a row? Nine years? Hahaha! And growing worse! How incompetent can the ECB be, which sounds like ECBB, which makes it even funnier? Hahaha!
These ECB weenies have been a total failure for nine consecutive years in controlling inflation, but let my little cost center office merely break even, instead of showing a profit, and suddenly there are sneering corporate auditors are all over the place, and my boss is licking her lips and saying, "We're taking you down, Mogambo!"
But ECB incompetence in controlling inflation is all the rage, and in fact, Junior Mogambo Ranger (JMR) Eric. C went to Bavaria and Austria for the holidays, and reports that "the Germanic folk are very, very upset about THEIR high inflation", probably as a result of the fact that "Things cost as much in euros (EUR) as they did in Deutschmarks in the year 2000. That's 10% inflation every year for seven years!"
And inflation in consumer prices is everywhere. For example, the FinancialPost.com had the story titled "Forget Oil, The New Global Crisis Is Food", and then there was Chris Powell of GATA writing that "Thursday's edition of the New York Sun decided to try valuing Manhattan residential real estate in terms of gold and found values to be falling sharply", as you would expect from the Sun's story, "Gold Value of Apartments Sinks."
Mr. Powell said, "Of course GoldMoney's James Turk, editor of the Freemarket Gold & Money Report and consultant to GATA, long has been valuing oil in gold terms to show that oil's rising price is largely a matter of the depreciating dollar. Maybe now some others in the news media are catching on to the monetary debasement game."
But it was the subhead of the FinancialPost.com story that grabbed me by the heart and almost killed me as it said, "BMO strategist Donald Coxe warns credit crunch and soaring oil prices will pale in comparison to looming catastrophe."
If you are like me, then you know two things from your years and years of experience of dealing with Earthlings. One, these people are idiots in groups, and they are all out to get you. Two, you know that the word "catastrophe" is a Bad, Bad Thing (BBT).
And if you did NOT know that people are idiots in groups and/or that the word "catastrophe" is a BBT, then hold onto your seats, because you are about to get the education of your life because, "The impact of tighter food supply is already evident in raw food prices, which have risen 22% in the past year." Yikes! 22%!
The Astute Mogambo Scholar (AMS) who can detect the slightest whiff of panic in any random factoid, instantly notes that I was right; you should have a bullet-proof bunker in your backyard and as much raw firepower as you can carry, because people get angry about food prices that will gradually reduce them to starvation, which is the subject of Chapter Ten in the Big Mogambo Book Of Economic Stuff (BMBOES), which bears the title "The Lesson To Be Learned From The French Revolution And Several More Since Then."
For those of you who are disinclined to read the entire chapter in the BMOES because you are either too distracted by the inclusion of so much gratuitous, raunchy pornography - which has apparently been included for no particular reason other than because I wanted to and because I could deduct it as a business expense - or you are too repulsed by such a filthy piece of trash that you feel soiled even touching the book, let me tell you in a nutshell the gist of it; people get really, really angry when they start going hungry, and then everything really starts going downhill, and then prices start spiking as the currency starts losing so much purchasing power as the government starts creating so much money to try and buy its way out of the problems it has caused, and then, after a while, relatives lose their minds from the hunger and come over here to my house thinking that, you know, surely a guy with as much gold as I am rumored to have must be rich as hell, and surely I can certainly spare little enough money to keep them from literally starving in the cold, rainy streets for one more day, and then I can see them in the crosshairs of the bunker's periscope, gathering and standing out there with the wife and kids, all whining and begging for the same thing! Suckers! Suckers who bought food and clothing when they should have been buying gold!
Well, there is nothing in the Financial Times story about this kind of illegal, mob assault on the Mogambo Bunker Of Doom (MBOD), which only serves as proof of a cover-up at the highest levels, but you get the same sort of hysterical panic as the story goes on, "Wheat prices alone have risen 92% in the past year, and yesterday closed at US$9.45 a bushel on the Chicago Board of Trade." Yikes! 92%!
"At the centre of the imminent food catastrophe," they say, "is corn - the main staple of the ethanol industry. The price of corn has risen about 44% over the past 15 months." Hahaha! The "benefits" of the ethanol boondoggle are sure going to be hard to measure! Better get Alan Greenspan and Michael Boskin working on a way to disguise this, too!
But covering it up may be harder than anyone realizes, as "Mr. Coxe warned U.S. corn exports were in danger of seizing up in about three years if the country continues to subsidize ethanol production."
And how is this possible? Easy! He says, "Biofuels are expected to eat up about a third of America's grain harvest in 2007." A third! An entire third of the grain output of the American farm system will disappear from the world's food supply? On top of the terrifying increases in prices we are already seeing? Yow! We are totally, totally, totally freaking screwed!
And, coincidence or not, it is all made much, much worse when he said, "The amount of U.S. grain currently stored for following seasons was the lowest on record, relative to consumption."
And you thought I was kidding about higher food prices? Hahaha! The joke's on you! |
