How Things Work In The Real World
Richard Daughty, The Mogambo Guru - The Daily Reckoning
“...Personally, I don't need ascending triangles to know that gold is going up, and will continue to go up, and probably for the rest of my life. It is the predictable result of central bank stupidity. And now that we have Alan Greenspan immortalizing himself as the most stupid, profligate and egregiously inept chairman in Fed history, then gold is guaranteed to go up, and keep going up. And the dollar is guaranteed to go down, and keep going down...”
The Mogambo Guru
- The Fed increased raw credit by $6 billion last week. Not remarkable these days, and I figure you are pretty grumpy that I would waste valuable ink to write about it, although I must assume that you are less upset than my wife, who helpfully points out that the lawn needs mowing a hell of a lot more than anybody needs me to point out the humdrum. So we will let it pass without further comment, except for a few muttered expletive-deleted, highly-caustic comments about the Fed and central banks in general, because that is the childish way that I act. But still, so caustic are my disparaging remarks that, in fact, I got blisters on my lips just from uttering them.Sauntering over to the banks, we look around the lobby and notice the eerie silence. We hear only our own footsteps going clunk clunk clunk, echoing through empty rooms. The tellers are all looking forlornly at empty tills, and we see that depositors took a chunk of money out. The only activity seems to be in the number of jackasses taking out huge mortgages and loading wheelbarrows full of re-fi money into the trunks of their cars.
Now, I don't know where YOU live, and if I really wanted to know I suppose I could ask John Ashcroft because as the head of the new Secret Police State Here In America he knows many secret and shameful things about all of us already, and more and more all the time, but over in this neck of the woods it is Not A Good Sign (NAGS) when the banks can't make loans, or won't make loans, to anybody who wants to finance business activity, assuming that there are some, although for the life of me I can't imagine who in the hell it would be.
And why would I expect banks to be loaning money, anyway? Exactly what is it that corporate finance people are dragging into the bank loan department when they apply for a loan? Their income tax returns, all showing falling sales and rising expenses? Records and ledgers and journals showing the same thing? And you think banks are going to be loaning out big money to a business that seems to be spiraling into bankruptcy? To guys who are already over-expanded, over-indebted, and over-leveraged as it is?
And didn't the bank just get off the phone, talking to a long series of people and businesses about why their loans are now overdue? And against this backdrop of gloom, you think banks are looking to make loans that can't pay off? Hahahaha! Okay, okay, you got me there, you little rascal! Of course banks will make stupid loans! That's the whole history of banking crises! And greed, too, of course. So can I coin the word "stupeed" to mean BOTH stupidity and greed? Sure!
And that is why we got saddled with the Federal Reserve System in the first damn place; so when the next stupeed calamity caused by banking stupeedity hits the fan, the whole system will not freeze up, due to one, or a few banks, going under from the aforementioned stupeedity. Now, this is usually where I take off on a tangent, usually via Hysteriaville, around the beltway through downtown Panicburg, crossing over to Madnesstown and ending up at the hospital being treated for Ruptured Brain Syndrome (RBS). RBS is where the brain is stressed by too much contradiction, as the cognitive dissonance between sound economics and the lack of horrified reaction in the economics profession concerning the actions of government, including the Fed, are so overwhelming.
This Ruptured Brain Syndrome is the new charity I am setting up to treat the only known sufferer of this rare disease, who is, in fact, me, and who is suffering more than mere words can convey. When I contemplate the fate that is inescapable, the fate that was ordained by the actions of the government and the Fed for all these decades, and now being hurried along by their exponential acceleration since the late 90's, then I end up in places I don't want to ever go. But being a new philanthropic charity, I'll need some celebrity endorsements, too, so if any of you know any famous movie stars who will compete on game shows and donate their winnings to my little charity here, have them give me a jingle.
But getting back to the banks, which is what we were discussing before I veered off on a tangent about my peculiar personal problems and shamelessly plugging an obvious sham of a charity, we note that, looking at the chart of Total Bank Credit since February, it has been about as flat as my average EEG-level of brain activity, which I maintain is a part of Ruptured Brain Syndrome, but everybody else steadfastly avers that it is just my surplus of stupidity made manifest by machines. But if the bank has flat Total Assets, but they own hugely more mortgages and hugely more government securities, then isn't it arithmetically correct that they are making dramatically less loans to businesses?
- The inflationary implications of the Fed's despicable policy of actually causing inflation is not lost on us paranoid gold bugs nor on Richard Russell, he of the Dow Theory Letter. He sees a huge ascending triangle in gold's action, which, for the techies amongst us, is very bullish indeed.
Personally, I don't need ascending triangles to know that gold is going up, and will continue to go up, and probably for the rest of my life. It is the predictable result of central bank stupidity. And now that we have Alan Greenspan immortalizing himself as the most stupid, profligate and egregiously inept chairman in Fed history, then gold is guaranteed to go up, and keep going up. And the dollar is guaranteed to go down, and keep going down.
- Richard Benson of Specialty Finance Group, LLC wrote a real nice piece entitled "The Federal Reserve: Moral Hazard's Best Friend." And in it I can detect the lingering odor of fear, although he is not panic-stricken and paralyzed with fear like me.
He starts right off stating that, "Moral Hazard occurs anytime the system encourages effective fraud or accounting magic that allows those in charge to benefit in the short run, leaving others holding the bag." The rest of the article is defining some of the ways that the Fed can keep anyone from getting stuck with the bag, because losses will be financed. He writes, with more than a modicum of sarcasm, or maybe that is just me reading something into his words that I want to see, about what I can describe is the current thinking of the Fed, "Indeed, everything gets financed. There is no need to ration investments to the best projects and credits. Saving is not necessary because there is credit creation. Since credit can be created without limit, credit underwriting is not necessary."
The result is that "The Fed's New Economic Model allows the economy and asset prices, like stock and housing, to 'break free' and rise without any concept of true value." Well, that is the result, all right. And it works like a charm in the beginning. But you can be sure that every buyer had a concept of value when they bought the stock or house, and predicated on an even better concept of what the next buyer would pay when they sold it to them, and thus ended up with this fabulous profit that has dollar-signs dancing in their glazed eyeballs.
One of the really interesting tidbits was when he wrote "Most people don't realize that the Bureau of Economic Analysis (BEA) includes in Personal Income around $750 billion of non-cash 'Imputed Income' including about $300 billion for supposed bank services that are not charged for, $90 billion for people who own their own homes, and military personnel who received meals and clothes, etc. Imputed Income is upwards of 15% of Personal Income, but reflects no cash payment."
Now we always knew that there was such a thing as imputed income, right? But 15%? Man! I had no idea that it was that big! So, how much IS Personal Income these days? About $9.2 trillion. So fifteen percent of $9.2 trillion is $1.4 trillion?
I was willing to go along with the idea of Imputed Income when I thought that the adjustment was some minor amount. But 15%? No way! Okay, now the deal is off, and I will no longer go along with this obvious fraud, and I will state for the record, and let me be totally frank here, and you might want to take notes, There Is No Such Thing As Imputed Income. It is a government-speak fraud. It is the government stating that there IS such a thing as a free lunch! And not only that, but it amounts to 15% of what your piddly paycheck says you earn!
If you are ever in an idle conversation and it somehow gets around to some point where you want an example of the smug arrogance, overt fraud and outrageous stupidity of government, I suggest that this is the one you use.
Now, just sit back and relax . Close your tired eyes for a moment, and imagine that we are in a beautiful, quiet little town, named (insert your name here) Town. There are only two industries in IYNH Town, the mortgage industry and the sex, drug and rock and roll (SD&RR) industry. If I buy a house, then the mortgage people get to spend my money on SD&RR and I get to spend none, but I get to stand on the porch of my house and watch them whooping it up and having a wonderful time with my money.
Then one day, when I pay off my house, I get to start spending the money on SD&RR and the mortgage industry spends none. Hahaha! Now watch ME have a wonderful time, you bastards! Hahahaha! Wheee!
As for the SD&RR industry, they see no change in spending. They only notice the change in WHO is spending the money. Ergo, total income has not changed. Ergo, there is no Imputed Income from home ownership. This is just another example of voodoo economics.
Ditto military personnel who get meals and housing provided. The taxpayer paid for them, so there is no imputed income, and in fact there is only depleted income of the taxpayers. It is a income transfer, yes, but the serviceman got what the taxpayer had taken away. Again, there is no Imputed Income.
Ditto banks who provide me with services that I do not pay for. According the government, this is Imputed Income to me. But, whose freaking money do you think that they are using here? Mine! And, so what you are telling me is that they use MY money, so that THEY can loan it to THEIR friends and accomplices, and they make a PROFIT on between what they pay me for the use of my money and what they charge the borrower? And to keep me from withdrawing my money in disgust at being ripped off, they give me "free checking?" And so, because the bank calls it "free," that the government figures that they are truly giving me something for free, and that it is imputed income to me? Wow!
And, so, if you are in the military service and you have a checking account and you are not paying a mortgage on a house because you now have to live in your car, then do you have an Imputed Income? Or does it HAVE to be an actual house? Man, ain't voodoo economics wild?
And while we are on the subject of No Such Things (NST), here is another one. There is no such thing, or NST to those of us addicted to gratuitous three-letter acronyms in some pathetic attempt to look scientific and obtuse, as a Substitution Effect when computing price inflation. This ridiculous theory is that when chicken beaks and feet go down in price, but pork chops go up, the Rational Economic Family (REF), will eat more chicken and less bacon. Then when you fill up your market basket with groceries, you note the price differential, and decide to substitute chicken parts for pork products, and you do this by buying more chicken and less pork. So, theoretically, the total food bill you get at the checkout counter, where that snotty little cashier has critically examined everything you placed on the little conveyor belt and clucks her tongue in disapproval and shakes her head and shouts out "Hey! Alice! Look what Mister Big Shot Customer wants to buy! Hahahaha!" will not go up as much as it would have gone up if the REF, meaning you, had continued to consume your usual desired poundage (UDP) of chicken parts and UDP of yummy pork products. This "usual desired poundage," which I wrote out instead of using the three-letter acronym UDP because I never can seem to "stay with the program," of chicken and pork products is integral to the definition of Standard of Living (SOL). Namely, people buy what makes them maximally happy, as everyone is always maximizing their standard of living, or SOL. In Buddhist terms, us REF's are always satisfying our desire for pleasure or power, especially the pleasure of chowing down on a big ol' BLT instead of gnawing on gnarly chicken beaks and feet. And any deviation from that SOL goal is, by definition, a lower standard of living.
To be sure, everyone's SOL is different. There are those who prefer living modestly and saving their money and eating pig parts sparingly. There are those whose SOL is to spend every dime and keep the pedal to the metal and eat bacon by the literal pound. There are those who prefer not making any money at all and accepting government handouts of BLT's ready-made. There are those who prefer helping and those who prefer being helped. Some prefer the life of carefree drunken homelessness, or drug addiction, or being in trouble with the law, or being non-conformist, loudmouth rebels, or being even being Democrats, which involves a necessary predisposition towards an absurd, studied ignorance of How Things Work In The Real World.
Well, to be fair, Congress, the Supreme Court, Alan Greenspan and the Fed, are also guilty of a predisposition towards an absurd, studied ignorance of How Things Work In The Real World, too. And, more and more, damn near all Republicans, too, I am profoundly ashamed to admit.
But, getting back to the No Such Thing (NST) of a Substitution Effect, which was the subject of this tiresome tirade, in this wonderful new method of calculus, inflation has been "adjusted." Prices went up, but since you are an REF, you bought less of the stuff that costs more, and more of the stuff that costs less. The family has spent the same amount of money, true, but they are indeed poorer! They are poorer by dint of having had their standard of living lowered, and are now eating the thin gruel of chicken beaks and feet instead of rashers of crisp and delicious bacon, and maybe a waffle.
You exclaim, "Horror of horrors! People are poorer, and are not getting enough pork products in their diets! What can we do?" I say, "Well, you could increase their SOL back up to where it was. In that way, at least they would not suffer a falling SOL."
So, obviously, now you want to know how much would it cost to get their standard of living, SOL, back up. Just by coincidence, I have the exact answer at my fingertips! By exactly as much as it would take to purchase their usual desired poundage, UDP, of less chicken and more pork products. So the offset is one-for-one. They paid the same amount of money, and they got less SOL. So, we are left with the inescapable conclusion that there is NO Substitution Effect, because the very fact of substituting a cheaper alternative for our number-one choice means we got less satisfaction units, or utils, per dollar. The total increase in the inflationary price of the market basket is, therefore, exactly calculated as the difference between the old price and the new price. Adjusting actual, total price inflation downward to account for it is, well, I was going to say "fraud," but when I stop and think about it, I am not sure that I have EVER heard anything from government that wasn't, or didn't turn out to be, a fraud of some kind.
So, in executive summary, I reject completely the whole concept of a Substitution Effect, and you should too.
Mr. Benson continues, "The Fed announcing they are coming in with printing presses at full tilt may mean they are close to having their model wobble wildly out of control," is one of those remarks that sets me off. I say that when the Fed comes in with printing presses blazing it means that things are ALREADY out of control! Why else would they do that, except in response to an emergency?
And I will go farther than that, and say that because the Fed comes in with easy money and credit, that whatever doofus "emergency" you think they see is just a hint of worse things to come, because the history of governments coming to the rescue guarantees that things will get only worse. And since our problems all stem from supreme fiscal and monetary insanity, the cure of providing more fiscal and monetary insanity will only make the problems worse.
And the proof of this loudmouth assertion is history itself; more fiscal and monetary insanity is the same course that every other country always took! Always! And here we are, doing it again, right now! And that cowardly course of action never worked for any of them! Not one! Never! And we think that now, in 2003, that things are going to be different? Hahahaha! We don't deserve to have any money, because it is against Nature itself, and completely contrary to The Way Things Work In The Real World, to think that juicy, dumb pigeons as retarded as we won't get eaten by predators.
And the only thing that will make the Congress or the Fed stop is when the pain of printing money to keep buying more and more debt, to keep interest rates artificially low, in the face of rapidly rising-price inflation and a declining dollar, gets too horrific to bear. I think the scientific term is the reverse of the "Big Bang."
Oh, everybody likes to talk about what happened AFTER the Big Bang, but nobody likes to talk about what happened leading up to it. I, however, easily tread where no man has gone before! I fearlessly travel the Dark Side of the Force! I am (pause for dramatic effect) Mogambo!
In the usual meaning of the term Big Bang, it means that the universe has collapsed onto itself, and squeezed everything into one tiny, dimensionless dot, and then there was an explosion outward, with glowing bits of burning stuff being hurled willy-nilly into the cosmos, and the sound it makes is a really loud BANG! The primordial matter goes shooting out, cools, gets transformed into planets and people and factories and intangible assets, creating the universe. In the reverse, which I call the "Gnab Gib," because it literally IS the reverse of Big Bang, prices of stuff, say, oh, over-valued assets, disappear FROM around the cosmos into a single point. I mean, what IS the net present value of a factory that is about to condense into the nothingness of singularity where the Gnab Gib and the Big Bang meet? And since the factory will emerge from the other side of singularity after the Big Bang as dispersed blobs of molten goo, sprayed out into the cosmos, and it will not cool for, let me check my calendar here, oh, say, about a million years, then the future value of the factory must be approaching zero. Except for those who "think long term." Then it has a P/E of, oh, 34. You know, right around in there someplace.
- Let talk about jobs. The new Initial Jobless Claims went down a little, but it is still over 437,000. To show how jaded we are, a number this size, just a year ago, would have caused traffic jams from coast to coast from the panic it would have caused. But now, yawn. The stock market went up.
- And speaking of the stock market, the P/E on the SP500 is well over 34. At the height of the market mania in March 2000, the P/E was just over 32.
Now, you would think that this interesting little statistic would cause people to scratch their chins and mutter to themselves. But not yet!
I think part of the answer lies in the fact that so many large corporate pension plans are so dramatically under-funded. This means that they will be having to buy stocks to put in the retirement plans, theoretically, as the moving-average smoothing wheeze that the rules allow, and which are inflating the balance sheet, will soon be wearing very thin.
And if the market goes down, then the plans will be even MORE under-funded, and the companies will have to put in even MORE money and buy even MORE stocks and blah blah blah. So there is, theoretically, a built-in demand for stocks.
And, of course I would be remiss if I did not point out that final consumers, namely you and me and everybody we know, are pretty tapped out already. And wages are not keeping up with the rise in prices. Or the rise in taxes. Bummer.
So, I have no idea in hell where all that money, to buy all of that stock and all of those bonds, is supposed to come from.
- I am asking us all to stop criticizing foreign central banks and foreign investors. The reason is that these people are idiots, because only an obvious idiot would continue to accumulate dollars and dollar-denominated assets that are more and more worthless every day. If you criticize them and they hear you, then maybe they will, one day soon, wake up in the middle of the night, sit bolt-upright up in bed, stick an elbow into the wife' ribs, slap themselves on the forehead, and say, "Hey! These guys are right! We ARE freaking idiots!"
- The Fabulous Mogambo Indicator that I reported last week has gotten a lot of attention, and everybody wants to know what it is, especially Bob Wood who is a money manager down here in Florida. I didn't tell him, although I am eternally grateful for him not always bringing up the damn fact that he is both younger and better-looking than me and can outshoot me on any hole on any golf course. But if I won't tell him, then you can be pretty sure that I'm not telling you, either. Sorry.
But, I will tell you how I developed it, and you can do the same thing yourself. And probably better, and faster, too, since I happen to be a real doofus. First, assume that the market is rigged, and that these insiders routinely set themselves up to make a killing. Then just ask yourself, "Where would their footprints show up?" Probably where the leverage is max and derivatives are easy, right? For me, it's in the options and futures markets, dudes. Look at ratios of derivative things. Ratios. Because if it is going here, then it must be coming out of there, and ratios will change.
And I am still on record as saying that this Fabulous Mogambo Indicator is portending that the market will fall dramatically in the next huge leg downward, and pretty damn soon. It has shown up only twice, and in each case it was within two months of a peak, both in 2000.
- Yesterday I happened to walk into the room while my wife was watching a movie entitled, "That Touch of Mink." The scene at the Automat was instructive.
The time was 1953, exactly 50 years ago today. Why is that number of years significant? Because thirty years of working, and twenty years of retirement, comes out to, let me check my calculator here, thirty plus twenty equals, ummm, fifty years. So if Doris Day, our perky heroine of the movie, had started saving for her retirement right then, what would be her fate today?
Part of the answer, of course, is that she would now be an old woman and would not be starring in romantic lead roles in any stinking movies, for one thing. But from a financial viewpoint, let's take a look at what we can learn from prices.
She was having lunch in an Automat. She had a big cucumber salad, a huge chicken pot pie, a roll with butter, a large piece of pie and a big ol' piece of cake. No beverage, but we will just ignore that particular point. My point is that that the bill came to $1.12. How much would that same lunch cost today?
So, now let's change the scene and have Doris do a little financial planning while eating her lunch, instead of fantasizing about Cary Grant like a love-sick teenager, how much would Doris figure that she would have to save so as to be able to afford that same lunch fifty years hence?
This is not a lead-in to some financial-planning advice or to get you to save your money. It is to show you that you cannot possibly save enough money to enable you to buy more than you save. There is no real compounding of wealth because inflation always, thanks to the Fed, negates investment gains. In short, Doris would have to give up a lunch in order to save up enough money to buy one lousy lunch fifty years later. She would have more money, thanks to compounding, but thanks to the compounding of inflation, she now has to pay more for the food. The days when you could skip lunch, bank the money, and then go back fifty years hence and have enough in the bank to buy a lunch AND a dinner are gone.
This is the curse of inflation. This is the curse that the Federal Reserve is on record as declaring that they WANT to happen, that they are taking steps to INSURE happens, and what you can bet your sweet little butt WILL happen.
So let's apply this little lesson to you. This means that if you want twenty years of retirement, then you have to literally save twenty year's worth of income, and arrange to invest so wisely that you make enough to equal inflation and taxes and fees and charges being levied against you every step of the way.
"Save twenty years of income!" you gasp. "But I am only working forty years, tops, and that would mean that I could only," grabbing a calculator you stab furiously at it, and your hat flies up into the air as you announce "but, but, but that means I would have to devote about three-fourths of my net income to saving and investment!"
To which I reply, "But you ain't seen nothing yet." By this cryptic remark I imply nasty things to come.
As this gruesome reality sinks in, running through your sleep like a runaway freight train, you will wake tomorrow with a better resolve to think before you vote. Because if Congress didn't condone it, there is no way that Alan Greenspan would be in the Federal Reserve System. And without the Federal Reserve we could not have persistent inflation.
- John Snow, Secretary of the Treasury, was talking about what it is that makes a strong dollar. One of the things was that he figures makes a dollar strong is that it is difficult to counterfeit. I know what you are thinking. It threw me for a loop, too.
This philosophy is in keeping with the new Treasury plan to alter the new, improved dollar bills to prevent counterfeiting. How charming and old-fashioned.
In the olden days, counterfeiting dollars could be a problem, because as it was convertible into gold. Then unscrupulous people could walk into a bank and force the Treasury to exchange worthless currency for gold, which would impact on the value of the dollar, because the dollar WAS gold. The government had a vested interest in preventing counterfeiting, because it protected the underlying value of the dollar and the wealth of the nation.
But nowadays, so what? All today's dollar is convertible into is more paper dollars or things that you can buy with paper dollars. If the Treasury really wanted to get consumption roaring, they would want dollars EASIER to counterfeit. Then you and I could run off a mess of twenties on our printers, and run out and buy stuff! Poverty would be erased! Suddenly, businesses would be having trouble keeping things on the shelf, because customers were buying everything in sight! Inflation would soar! Tax revenues would skyrocket! Businesses would hire everybody in sight to try and meet the surging demand for goods and services! Whoopee!
And, since dollars are merely pieces of colored paper and computer blips, which are very cheap, the Treasury would not have to even go to the bother and expense of printing them or even pressing computer buttons! We could shut down the whole Treasury Department, saving billions of dollars a year! Counterfeiters would be happy to foot the whole bill!
And, in the final analysis, there is no difference anymore between real dollars and counterfeit dollars anymore. If either the counterfeiters do it or the government does it, we are still being deluged with somebody printing money.
The problem, of course, is that such an explosion in the money supply and aggregate demand for goods and services would be highly inflationary. But with the Fed and Treasury themselves printing up money by the truckload, and promising to keep inflation bubbling so as to punish people who do not spend their money immediately, the only difference is one of degree.
- Speaking of ridiculous, which we weren't but should be, I just love the part about how the weaker dollar is going to do such wonderful things for domestic exporters. Hahahaha! Let me get this straight; we have a current account and trade deficit to the tune of over $500 billion a year, giving them $500 billion of income. Check. Now those imports are going to cost more, since the dollar is weaker, and, theoretically we will buy less from them. Check. Now, because we are buying less from them, they are going to have less income. Check. Now, and this is the part that I like the best, we leap to the conclusion that they are going to step up their purchases of American exports at the same time as they are making less money from us! Somehow, I'm not sure how, but these foreign devils have figured out that when you make less money, that's the exact moment that you buy more stuff from foreigners! Hahaha!
To be fair, it could actually happen that way. Somewhere out beyond the Twilight Zone it could happen exactly that way. In that fabulous, faraway land beyond time and space, foreign politicians are happy to put local voters and their own relatives out of work so that they can import more stuff from America at the same time as they are exporting less stuff to America.
- Doug Noland, in what may be the under-statement of the year, writes "In short, the Fed this past autumn initiated a guarantee that it would not allow the runaway U.S. Credit boom to wane, let alone go bust. This is heady, historic stuff, with profound ramifications both domestically and globally." He is aghast as I am when he looks askance at "...an audacious Fed accommodating unrelenting U.S. Credit excess and, in the process, sanctioning The Desperate Experiment of Maximum Global Liquidity."
These are truly historic times, as he says, and there is no reason to think that the Fed and the whores in Congress will not continue doing it more and more, no matter how big the pile of evidence, proving their incompetence, grows. They are shameless in their horrific record of unrelenting policy failures, and with a synergy born of arrogance and profound ignorance, I assume that there is no depth to which they will not sink. To quote Doug, "Truly nothing would surprise me anymore."
This is because the idea that the Fed can prevent deflation of overvalued asset prices by financing inflation is absurd. And, like Doug, I have witnessed so much, for so long, that nothing the Fed or Congress or the Supreme Court could do that would surprise me anymore, either. Upset, yes, but surprised, no. Angry, yes, but surprised, no. Bitter and vengeful, yes, but surprised, no. Consumed in the blood-lust of homicidal rage, yes, but surprised, no.
- Speaking of inflation, which my medical record seems to indicate is getting to be some kind of mental illness with me, not even the jackasses at The Economist magazine comprehends it. In the May 17 issue, on page 11 we read the following "Inflation in the developed world is at its lowest in almost half a century." Huh?
Turning to the tables at the end of the same issue, we see that inflation is higher than it was a year ago for damn near every country listed. Skipping over to "The Economist commodity price index" table, we see that the "all items" category shows that prices are up 12.2% in one year! "Food" is up 16.8%! "All industrials" are up 6.2%!
And yet this bozo writer says that inflation is at the lowest in fifty years? My God! What in the hell is that man smoking?
Later in the same asinine article, the author refers to some jackass study by the IMF. Now, anything that the overt communists at the IMF have to say is obviously wrong, as that particular bunch of idiots has been wrong about everything since the day the IMF was invented, and the sum total of their rendering aid has been one of total failure, which is the root cause of long-standing misery and suffering for hundreds of millions of people. But this "IMF study," and I enclose that in quotes to show profound sarcasm and disrespect, is apparently where the Fed jackasses got the stupid idea that inflation was a good thing.
Now, I gotta say that that is exactly like something the IMF would say. A similar statement would be to say that getting cancer is a good thing, because you will be taking so many drugs to fight the cancer that you won't catch a cold, and think how nice it would be to not catch any more colds.
And let me say again, for the zillionth time in a row, that any price inflation that is greater than zero is an economy that is always less than optimal, and the higher that price inflation goes, the worse it will be for everyone.
And if you don't believe me, then just stay alive for another few years, because seeing is believing. Ugh.
--- Mogambo Sez: Get away from stocks, and short them if you have the guts. Buy put options. Short futures. Buy gold. The Fabulous Mogambo Indicator has spoken.
The Mogambo Guru Lives!
Richard Daughty,
for The Daily Reckoning
www.dailyreckoning.com
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.
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