By Richard Daughty, on March 10th, 2010
People think that Addison Wiggin is just another talented, intelligent, pretty face who secretly thrills to hear people say things like, “You’re a lot better looking than The Mogambo! And younger and smarter, too!” but he is much, much more than that.
His story starts off that “The FDIC is even more broke than it was three months ago” to which most people rudely say, “Welcome to the club! Waddya think, we got some kind of picnic at the beach going on out here in the real world while you pretty-face hotshots talk about who is smarter and about some idiot named Mogambo who must be an idiot because otherwise he would not have such a stupid name!”
Mr. Wiggin goes on undaunted, perhaps buoyed by the knowledge that no matter what happens, he’ll still be better looking than The Mogambo. And smarter, too. And younger.
Maybe that’s why he did not seem to be registering horror at the news of the bankruptcy of the FDIC, and, as if to underscore my suspicions, you can almost hear the confidence in his voice as he explains, “The fund the FDIC uses to ‘insure’ your bank account went $20.9 billion in the red during the fourth quarter of 2009. That’s more than twice the deficit reported when the fund first entered negative territory in the previous quarter.”
Naturally, if these were the old days when the money supply was more-or-less constant, this would cause panic: “Our bank deposits are uninsured! Yikes! The Mogambo said we’d be wiped out and here it is, and he said to buy gold, silver and oil, and we didn’t, and now look at us! Oh, woe!”
But nowadays? Relax! We have a fiat currency that the Federal Reserve can, literally, create at will, at a stroke, all the money necessary to make sure that every Last Freaking Dollar (LFD) dollar in your account is fully protected against actual nominal loss; you had an electronic or paper buck, you will still have and electronic or paper buck!
Unfortunately (and you can tell there is a “catch” by the way the soundtrack suddenly turns gloomy and there seems to be the sound of somebody, in the distance, throwing up into a toilet) this huge, sustained increase in the money supply guarantees – guarantees! – that you will lose buying power in every one of your precious dollars, so you are kind of screwed, either way, when you stop and think about it, by Federal Reserve policies.
My Sensitive Mogambo Nose (SMN) detects (sniff, sniff, sniff!) detects panic. So, desperate for money, I look to prey on the superstitious, and suggest that maybe you should just send all of your “tainted” money to me so that my hoodlum friends and I can have a big ol’ party, where we will raise our glasses in a long series of toasts to you, to your health, and to your good luck because – hey! – attracting the attention of deities, paranormal powers, transcendental influences and cosmic forces could, conceivably, work!
Mr. Wiggin is not enthusiastic about my latest rip-off scam, which I suggest only because I am out of ideas and I am desperate for money. He suggests a perfectly legal and good way to get some money, which is, “As long as banks can continue to borrow from the Fed at 0.25% and park it in 10-year Treasuries for nearly 3.7% (and leverage it up, of course), we don’t see this changing”!
He’s right, of course, but before you rush out to start a bank and get your piece of this Federal Reserve stupidity, perhaps you should consider something along the lines of buying gold, silver and oil in some kind of wild, paranoid, knee-jerk reflex as a small, small part of a whole constellation of symptoms known collectively as Screaming Fear Of Outrage (SFOO) of the inflation that will be caused by such massive increases in the money supply, now additionally caused by the needs of the FDIC, but he goes on that it will get worse than that, as, “On top of that, the FDIC’s list of ‘problem banks’ grew during the fourth quarter from 552 to 702” he says! Yikes!
A long, haunting howl of dismay escapes my lips, perhaps not unlike the sound of ravenous, starving wolves howling, “oooOOOOOOooooooooh!” as they close in on your bloody trail as you crawl along, dressed in rags, wounded, bleeding, in the snow, at night, in the mountains, in a snow storm, with freezing sleet, and you realize that you can’t buy them off with your paper fiat money, but with a flash of True Mogambo Enlightenment (TME) that has come tragically too late, you realize that with the heft of a kilogram of gold in your hand, you can beat the living hell out of anything that comes near you that is metaphorically wolf-like in economic nature, or, with literal wolves, something spewing out .45 caliber bullets in a semi-auto fashion, putting us one more leg-up (as if we needed it!) on wolves of the literal kind, with politicians being of the metaphorical kind of ravenous wolves, thus mixing up literal with figurative, back and forth, up and down until you are in a panic, all confused and bewildered, wondering what’s real and what’s not, and your first instinct is to just start blasting, blasting, blasting until your trigger finger is bloody and cramped, and you manage to clear out a “Mogambo Dead Zone Of Safety (MDZOS)” all around you.
And you probably would have, too, if you had not remembered that you bought a lot of gold, silver and oil just to take care of situations like this! And it’s working perfectly! Ahhh!
But this thing about the “FDIC’s list of ‘problem banks’ grew during the fourth quarter from 552 to 702” is, as I notice with alarm, not only a number that is a huge (almost) 50% higher in just one quarter, a statistic which sets my Sensitive Mogambo Senses (SMS) tingling, as with two data points, a desperate-yet-handsome man like myself can quickly, and easily, discern some kind of Trend Of The Ugly Kind (TOTUK), to which I am particularly alert ever since I noticed that the entire freaking course of human history in the world, a world you call Earth, is the sad, stupid story of one stupid country after another borrowing money and getting into debt that they can’t repay, which is always resolved with inflation in prices, a bankruptcy of assets, and a ruinous war with somebody as we attempt to shift the cost of victim-hood from ourselves to foreigners so that there is, indeed, a free lunch for us.
Mr. Wiggin is not impressed with my penetrating analysis, which is in line with what everyone else agrees is pretty stupid and not worth reading or even admitting that they had even read, even in part, but I notice that he immediately takes up on my idea of “trend” that just I mentioned, and – surprise! – he finds, “Hmmm, let’s see. The number grew 27% in just one quarter. At this pace, every bank in the country will be on the problem list by the fourth quarter of 2012.”
An involuntary “Yikes!” escapes my lips. That’s a trend!
I, as are most normal people who understand how this “economics thing” works, am horrified by all of this, and the only saving graces were that I had gold, I had silver, I had oil, and I had enough firepower – within reach! – to provide calming relief to an otherwise paranoid, screaming, hysterical man, such as myself, pumping adrenaline from every pore in his primal outrage at the sheer terror that is being created by the Federal Reserve.
For some reason, I can actually feel your scorn, as you deride what you think is just another paranoid gold-bug gun nut Loonie-Tunes weirdo since the Federal Reserve can just create all the money and credit that the FDIC needs, so why don’t I, as I asked my kids, just shut up?
With that, I thought it was all over, until he went on, “Another tidbit from the FDIC’s report: Bank lending last year dropped at the biggest clip since 1942”, which was the year after we entered World War II, which seems important, but was a long time ago, and we don’t get to watch watching terrific war footage with things blowing up and – blam blam blam blam! – guns are firing! Things are on fire! It’s all exciting as hell!
Instead, we will note, much more soberly, that this is today we are talking about, not some ancient yesterday, and Americans are not the “good guys” bravely freeing Europe by destroying it all so that our industrial advantages are completely spared, but are, instead, the biggest bunch of feel-good, hyper-leftist morons that the world has ever seen where, despite a national emphasis on education, ample historical evidence, and the Constitution of the United States requiring that money be only of gold and silver, the citizens have allowed a pure fiat money and every kind of slimy flimflammery that such unbridled money supply would allow, which was, as you would guess, anything you could imagine.
The bad news is actually beyond that of mere bank lending being down, since nobody (except governments) wants to borrow money, since nobody has the money to buy anything anybody makes, so why invest money to make something that nobody will buy. The worse news is that bank lending is how money is created.
Money is, by definition, being destroyed, so that there is less money around with which to pay debts.
You know, without me telling you, that all this ain’t good! And these are the times when you are glad that you are safely invested in gold, silver and oil, and the only thing you have to worry about is, for instance, the usual stuff of keeping an eye out for party-killing suspicious strangers who may know your wife or boss, checking for suspicious pods growing near where you sleep, and protecting yourself against vampires, werewolves, and other blood-suckers, which leads us back to politicians deficit-spending, which leads us back to the Federal Reserve creating more money, which leads us back to buying gold, silver and oil in fearful response, which leads me back to, “Whee! This investing stuff is easy!”
Using Gold to Fend of the FDIC and Its “Problem Banks” originally appeared in the Daily Reckoning.
By Ajay Shah, on March 10th, 2010
SEBI is pushing on the frontiers of enforcement in India. This is the order on Bank of Rajasthan.
I was surprised to see how small the market reaction was (this image is from Yahoo Finance):
What am I not understanding?
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By Claus Vistesen, on March 9th, 2010
Well, it might appear that my smug headline in the post below may not have been so appropriate after all. At least I find the news from the FT today that Eurozone members, headed by France and Germany, are considering to set up an internal IMF type fund very significant.
(from the FT)
Germany and France are planning to launch a sweeping new initiative to reinforce economic co-operation and surveillance within the eurozone, including the establishment of a European Monetary Fund, according to senior government officials.
Their intention is to set up the rules and tools to prevent any recurrence of instability in the eurozone stemming from the indebtedness of a single member state, such as Greece. The first details of the plan, including support for an EMF modelled on the International Monetary Fund, were revealed at the weekend by Wolfgang Schäuble, the German finance minister.
“I am in favour of stronger co-ordination of economic policies in the EU and in the eurozone,” Mr Schäuble told newspaper Welt am Sonntag.
If France and Germany can agree on such proposals – long urged by Paris – they are likely to set the basis for the most radical overhaul of the rules underpinning the euro since the currency was launched in 1999. The German thinking emerged as George Papandreou, the Greek prime minister, flew to Paris to seek the support of Nicolas Sarkozy, French president, for his government’s drastic austerity programme.
“We must support Greece, because they are making an effort,” Mr Sarkozy said before the meeting. “If we created the euro, we cannot let a country fall that is in the eurozone. Otherwise there was no point in creating the euro.”
His words appeared to underline the greater readiness in France than in Germany to provide some sort of financial support or guarantee for the Greek economy. Angela Merkel, the German chancellor, insisted that no such support had been sought or discussed when she met Mr Papandreou on Friday.
Both France and Germany agree Greece should not turn to the IMF for support, so the idea of an EMF has clear attractions for Paris, though it could hardly be set up in time to help Greece. Mr Schäuble said: “We are not planning a competitor . . . to the IMF, but we do need an institution for the internal equilibrium of the eurozone that would have at its disposal both the experience of the IMF, and comparable intervention mechanisms.”
According to German thinking, the plan could include tough penalties for eurozone members that fail to curb deficit spending or run up excessive government debt. Ideas include cutting off countries that fail to curb deficit spending from EU cohesion funds, temporarily removing their right to vote in EU ministerial meetings and suspension from the eurozone.
Those may prove very difficult for France to swallow, given its own record of greater fiscal laxity than Germany.
Needless to say, this would draw the wrath from Euro skeptics and those, in general, opposed to tighter cooperation among Eurozone member countries. However, as Munchau argues splendid in another FT piece today; a monetary union needs a tight political and fiscal supranational framework to really make it work. Now, we must choose which solution we prefer.
By Richard Daughty, on March 9th, 2010
I was recently reminded of the old argument about Say’s Law, and that reminded me that it was Keynes who twisted Say’s theories around to create the ridiculous argument that supply created its own demand, which I say is a load of crap, which pretty much sums up a lot of what Keynes did, probably because he was an egotistical idiot-savant who erroneously thought that he could put economics and human behavior in terms of absolutes that you could turn into equations, a particular, arrogant stupidity that has, nonetheless, fascinated generations of economists since then, all of whom childishly delight in equations and computers, whether it means anything or not, which it doesn’t, which I can actually prove – prove! – with an entire storage area full (the “supply”) of ashtrays made out of dried dog crap, which nobody wanted to buy (the “demand”), proving that supply does NOT create its own demand.
Instead, it is actually true that demand created its own supply, like the “supply” of new “neighbors” at the storage place are demanding (“demand”) that I get that stinking, festering fecal mess out of there or they are going to sue me or something, to which I said “Great! I’ll pay you off with some of these ashtrays, which will make wonderful gifts for your friends and family!”
I bring this up not, as is often rumored, as a last minute appeal to you, the American consumer, to buy a bunch of these dog-poo ashtrays with their “keepsake quality”, and take them off my, literally, stinking hands, but to show you that one of the reasons why the economy is doing badly is that the latest unemployment numbers are Bad News Aplenty (BNA), as people do not buy as much stuff (demand) when they don’t make as much as much money, and the people who make stuff (supply) are then laid off, proving, once again, that supply follows demand.
And, since we are talking about it, people are not buying as much stuff, which I cleverly conclude from the fact that consumer installment debt has been going down since September 2008 as the American consumer is gradually, slowly, ever so slowly, almost glacially, paying down some of their super-sized, staggering $2.5 trillion in consumer installment debt.
How much? Consumers have, in a year and a half, paid down a measly $135 billion! Hahaha!
At this rate, one wonders, at 20% interest on the unpaid balance, how many freaking lifetimes will it take just for consumers to pay off their $2.5 trillion in existing debt, which doesn’t even count the debt they are going to incur in the future, just trying to buy the basics, as the inflation in prices from the insane inflation in the money supply makes things so costly that they get to the choice of debt or starvation, and even then, most people will buy food instead of gold, silver and oil.
Hoping to gently motivate them, and to provide the apparently necessary motivation delivered in a non-threatening, person-centric, positive way, I say, “Hey! You could stand to lose a few pounds there, chubby! Stop eating for a couple of days and use the ‘found’ money to buy yourself some gold, silver and oil, you moron!” but even then, they always act upset, like I said something wrong! See the kind of stupid crap I have to put up with around here all the damned time?
Anyway, their only hope is that everything survives a massive inflation, so that $135 billion dollars is, in terms of buying power, less than a week’s average minimum wage or something like that! Hahaha! Problem solved! Hahahaha!
In case you were curious, I put a lot of it down to the unholy combination of moronic do-gooders trying to save my life and greedy governments trying to drain my blood, as they, all over the place, raised cigarette taxes by several dollars per pack, so that the quarter of adults (54 million) who smoke a theoretical carton a week, have $40, $50, $60 sometimes more than $70 a week less money to spend on everything else, which comes to, at an average of $6 per pack, $3.24 billion per week, or a tidy $168 billion a year in lost spending power!
In short, tobacco addicts stopped buying other things so as to afford one thing that has become so expensive.
If they were smart, smokers would be spending their money on gold, silver and oil, waiting a little while until their prices soar as the government deficit-spends the massive, monstrous amounts of money that the Federal Reserve creates, and THEN taking up smoking when they could easily afford cigarettes at any price, the higher price for insurance, and the needed medical treatments, also at any price!
It’s enough to make you say, “Whee! This investing stuff is easy!”
Consumer Debt and the Supply-Demand Dynamic originally appeared in the Daily Reckoning.
By Richard Daughty, on March 8th, 2010
I am a guy who thinks that such huge explosions in money supplies around the world and the explosions in government deficit-spending around the world will lead to catastrophic explosions in inflation in prices, probably around the world.
I am also a guy who thinks that inflation in prices is the Thing Most Feared (TMF) in the whole world in terms of total sheer misery and suffering, judging by the entire last 4,500 years of history, except for, maybe, the plague.
Naturally, for one so dyspeptic and predisposed to paranoia because the people in charge are apparently overpaid, corrupt morons, I am visibly shaken at the news from Bloomberg that “The consumer-price index increased 0.2 percent for a fifth straight month, led by higher fuel costs, Labor Department figures showed today in Washington.” Yikes!
Inflation never stops! Even in a recession/depression like we have now! It’s terrifying!
Anyway, since insane levels of massive governmental deficit-spending of fiat money created by central banks is a world-wide phenomenon, there will be a massive inflation in consumer prices as a result of all of this unbelievably much new money being poured into the economy via governmental deficit-spending, and already the government is forced to report 2.6% inflation.
This is actually down from last month’s 2.7% inflation, and so immediately I get angry emails from people saying, “Dear Mogambo Stupid Head (MSH), You say that inflation is raging because of all the money that the Federal Reserve is creating, so how do you explain Bloomberg reporting ‘Excluding energy and food, the so-called core index unexpectedly fell 0.1 percent, reflecting a drop in new-car prices, clothing and shelter’? You can’t explain it because you are stupid and you are wrong and everybody hates you! Sincerely, Anonymous Reader.”
Well, as nice as it is to hear from my sister like that, it is doubly enjoyable this time because she is so wrong that I rate her as one who “has her own head up her own nasty butt” and I can hardly wait until Thanksgiving when everybody will be around the table and I can remind her of that ugly fact, getting back at her for what she said about me last year, by reminding her that she is so stupid (audience shouts out, “How stupid, Marvelous Manly Mogambo (MMM)?”) that she forgot to read farther into the article to learn that costs are being held down because “Even with higher production and material costs, US companies are reluctant to pass on the expenses to consumers”, which includes Wal-Mart, “the world’s largest retailer”, which “reported fourth-quarter sales that trailed its projection after cutting grocery and electronic prices” which, in a nutshell, explains why I am now screaming, “Inflation is here, you morons! It’s being temporarily absorbed by businesses and their stockholders making less money, and sometimes taking losses!”
That ought to shut her up pretty good, I figure, and if not, then I’ll scream at her until she confesses that she did not consider that the government now uses Hedonic Measurements of inflation, such as how that the turkey she is jamming into her pie-hole used to start getting stale and dried-out after a week or so in the refrigerator. But now, perhaps with the addition of small amounts of preservatives as part of a secret government experiment involving adding tiny little bits of nuclear waste during processing to produce enough radioactivity to kill all organisms that touch it, the leftover turkey will be just as tender and delicious a year from now as it is today!
Maybe even glowing, so you can make a sandwich in the dark!
This increased shelf life of the cooked turkey obviously increases the value of the turkey tremendously, and it also helps to deplete the nation’s nagging problem of its stockpile of dangerous, clumsy and expensive-to-store nuclear waste, producing a double benefit! Double!
Thus, the government calculates that the new, extra benefits of having turkey available for consumption for more days of the year (which is not a problem for my sister since she seems to be eager to eat lots of food, and she’ll probably finish the turkey carcass off pretty quick!), and simultaneously achieving a profound social good of disposing of dangerous radioactive waste, means that the turkey can never go up in price! Only the rising price of the new benefits makes it LOOK like it, because it costs more dollars per pound! Hahaha!
I am sure that she will come back with some of her stupid blah blah blah, but no matter what she says before I interrupt her, I am going to tell her that, even worse, the Labor Department report went on to say that “The CPI is the broadest of the three monthly price gauges from the Labor Department because it includes goods and services”, which was put in there to make you yawn and skip over the part that said that prices “showed 1.4 percent gains in both the cost of imported goods and wholesale prices in January”! Wowser!
As I said, inflation is the only thing that makes sense when considering such unbelievable, incomprehensibly massive increases in government borrowing-and-spending, overshadowed only by the enormous increases of money created by the Federal Reserve, and which makes sense since every doofus is town is yammering about how “inflation is impossible” and how “deflation is the bigger problem” since deflation means that the over-indebted middle class, the over-leveraged rich, the bloated financial services industry and the socialist government would lose, while inflation would affect mostly the poor, which are always the ultimate victim.
My suggestion to the poor? Buy gold, silver and oil immediately, because they will all rise right along with inflation, and probably more. Probably a lot more!
And if you don’t think that “the poor” today, after a half century of one bleeding-heart Congress after another finding ways to give them money and benefits, cannot come up with twenty bucks a month to buy an ounce of silver, then you don’t know squat about “the poor” in America today.
My suggestion to everyone else? Surprise! It’s the same! That makes it easy to remember, as in, “Whee! This investing stuff is easy!”
Inflation: The Economic Factor that Never Stops originally appeared in the Daily Reckoning.
By Eldon Mast, on March 8th, 2010
On Friday the government reported that the unemployment rate in the U.S. held at 9.7% in February and employers cut fewer jobs than anticipated. The stabilization in the labor market continued even as two East Coast blizzards of 2-3 feet each forced closings of some businesses during the period.
Furthermore, the jobless rate, which has not increased since October, held steady even as more people entered the workforce.
The steady unemployment rate owed to a 308,000 increase in household employment following a 541,000 January gain. These increases follow monthly declines of as much as 967,000 during the recession. Moreover, the labor force started to expand, last month by 342,000, after a lesser January increase. Throughout 2009 the labor force contracted slightly. The labor force participation rate also rose.
“The weather effects were enough to transform [the data],” said David Resler, chief economist at Nomura Securities International Inc. “Job growth is happening as we speak.”
Over at Fortune, they continue to expand their list of employers that have at least 150 openings. And the larger firms are now ramping up hiring significantly since the first of the year.
Among companies adding workers is Accenture Plc, the world’s second-largest technology-services provider, which plans to boost payrolls by about 50,000 this year. Accenture says it is on track to have started new employees in as many as 9,000 jobs in the U.S. by the end of August.
“We are seeing a very broad uplift globally” in demand, says John Campagnino, director of worldwide recruiting, in a interview on Wednesday.
Beyond full-time hires, the number of temporary workers increased by 48,000 in February, the fifth straight monthly gain.
Amidst the snow, factory payrolls increased 1,000 in February after rising 20,000 in the prior month. Most economists had called for a drop of 15,000. Manufacturing employment continues as a leading segment in labor growth.
Friday’s report showed that almost 1 million Americans said bad weather prevented them from getting to work during the survey week. About 290,000 people on average say bad weather has prevented them from getting to work, according to figures going back three decades.
Economists at Macroeconomic Advisers LLC project that the weather actually reduced the payroll count by anywhere from 150,000 to 220,000 workers. The drop will probably be reversed this month, they said.
The most recent storm of similar intensity that occurred during a survey week was in January 1996. The data for payrolls that month, which have gone through several revisions since the initial estimate, showed a 19,000 drop in employment in the January period followed by a gain of 434,000 in February.
We continue to look for the US economy to add a significant number of jobs in spring and summer this year with the unemployment rate beginning a steady decline in the monthly readings just ahead.
Many argue that the return to job growth as been “slow.” On the contrary, this has been the most rapid turn from net jobs losses to net jobs gains of any business cycle in the last century. A jobless recovery? Not this time.
By Richard Daughty, on March 5th, 2010
Okay, I will admit that we had a little accidental gunfire around here recently, but nobody was hurt, and all that really happened is that I wasted a lot of very expensive ammunition and scared the hell out of a lot of people, including myself, a commotion which instantly activated my Amazing Mogambo Reflexes (AMR), making me drop the delicious Hostess Cupcake that I was noisily eating and take cover on the floor, falling, as I did, on top of the aforesaid cupcake, smashing it all over myself, and all over the floor, which made it taste terrible after that.
But the surprising gunfire was not my fault, as I had just read that the Federal Reserve is being as dangerously incompetent as ever by continuing to massively increase the money supply (which is so horrible because it causes inflation in prices) so that they can buy up (monetize) at least a part of the massive, monstrous, mega-moolah Treasury debt issuance that will be necessary to fund the unbelievable sum of, as I understand it, $1.9 trillion in government deficit-spending in the upcoming One Freaking Year (OFY) as a result of the massive spending of the terrible, awful, worse-than-I-had-feared, demon-from-hell Obama administration, plus trillions more for the needs of the private sector, and a trillion or so in Congressional “supplemental appropriations” throughout the year as Congress periodically, almost ritually in a Satanic kind of way, “discovers” that their original estimate of their borrowing needs was inadequate, and – surprise! – that these slimy, lying bastards need LOTS and lots more money!
I can see by rereading that paragraph that I was so wrapped up in heaping Massive Mogambo Scorn (MMS) on the arrogant, radical-Left Obama, on every sniveling Democrat in the place, most of the Republicans, and on the despicable, guilty-as-charged, incompetent Federal Reserve that I never actually got around to telling you how much money and credit the Fed created last week, which was the original point I was going to make for some reason other than decrying such irresponsible expansions of the money supply that will guarantee horrific, economy-destroying, dollar-destroying, soul-destroying inflation in prices, but I forgot what I was planning to say about it, to tell you the truth, but with or without it, the increase in Fed Credit last week was another $5.2 billion, which (although terrifying), is less than his usual increase, and at $5.2 billion, is merely twice the usual weekly rate of money and credit creation by the monster Alan Greenspan, former chairman of the Federal Reserve, who – single-handedly! – created all the economic mess of the world by merely creating $10 billion-or-so per month of new Federal Reserve money and credit!
Now, Fed chairman Ben Bernanke, a clueless academic, still stubbornly hews to that same, tired, insipid-yet-stupid neo-Keynesian econometric theory that has now been shown to be not only wrong, wrong, wrong, but also stupidly and catastrophically wrong, which doesn’t say anything at all about the morons, like Ben Bernanke and Alan Blinder, who are themselves mere representative examples of the neo-Keynesian econometric bozos rampant in the world today, all of whom believe in such imbecilities as their precious economic theories in the face of, literally, overwhelming evidence to the contrary! It is absurd on its face! Ya gotta laugh! Hahahaha!
Interestingly, a crucial part of the stupid Keynesian nonsense holds that the government can, by virtue of borrowing the money, replace any perceived lost “consumer demand”, in any economic downturn, by merely borrowing and spending money, even if borrowing and spending money was the cause of the original downturn, and that there are no repercussions that cannot be solved by more borrowing and spending, and that inflation in prices has nothing to do with the money supply but with irrational exuberance! Which doesn’t even make any sense! Hahahah! It doesn’t even freaking make sense!!
Sharp-eyed Junior Mogambo Rangers (JMRs) will recognize the two exclamation points as indicators of something, usually the preceding sentence (as in this case), as being very important, as, now that I notice, it is, in this case, in that it is Beyond Freaking Crazy (BFC)!!!
Horrors! The punctuation using the rare triple exclamation point! You can tell I am on a roll here! I suggest you go to someplace safe in your house where your enemies would have to attempt a painful frontal assault against you, and as you wait, you think to yourself, “Obviously, this is extremely important! As indeed it is, now that I think about it after it has been drawn to my attention, thanks to the Magnificent Mogambo (MM), because you do not get anything except total, unmitigated disaster from inept management by people who cannot be controlled and who are Beyond Freaking Crazy (BFC)!”
I am very proud of you for thinking this, as it shows that it has all become clear: The preponderance of people on this planet, and in our universities, and in our media, and in our governments, and in our central banks are BFC lunatics if they think that borrowing (racking up debt) and spending money will “cure” the bust of the boom produced by borrowing (racking up debt) and spending the money! Hahahaha!
I immediately think of the joke, “Doctor! I’ve been gorging myself, but I never lose any weight!” but it doesn’t seem to fit the conversation, somehow, and it doesn’t really seem to have anything to do with anything I was talking about, which makes me think that maybe my subconscious is telling me that I SHOULD have been talking about it, which doesn’t make any sense, either, because I don’t think anyone needs advice on how to gorge themselves, and in fact, people seem quite disgusted when I do it, although it makes their kids laugh, meaning that the kids like me better than they like their own parents, which is a small victory for me and, although small, is a victory.
So I say to the kids, who just showed how much they love me, “Hey, kids! Tell your parents that they are idiots unless they buy gold, silver and oil right now, because unless they do, they are going to be poor when excessive government deficit-spending and excessive Federal Reserve over-creation of money and credit make prices soar as the buying power of the dollar falls, which means that you will be poor, and you tell them how you don’t want to be poor, and how you have been thinking about, in an idle sort of economic self-defense way, the many, many advantages of being too young to be charged with a capital crime should they fail to acquire the aforesaid gold, silver and oil!”
This is where the parents turned around and gave me this “dirty look”, which I interpreted to mean, “I surrender, under protest, to your magnificent, powerful presentation of the case for gold, silver and oil, enhanced by the paranoid notion that my own children are threatening to kill me in some bizarre extortion racket involving gold, silver and oil that you have planted in my head, which I realize is all for my own good because I now see that only an idiot would not buy gold, silver and oil when the government and the banks are acting so despicably! Thank you, handsome stranger!”
The name’s Mogambo, ma’am. It’s my job.
Borrow and Spend Economics to Pay for Borrowing and Spending originally appeared in the Daily Reckoning.
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By Claus Vistesen, on March 5th, 2010
In a week when the Greek leadership declares it a historic moment for the European Union that the ailing country has agreed to swallow an additional austerity plan which, so far, seems to have calmed markets it would almost be too much to continue picking on the Eurozone. Yet pick I am going to nonetheless even if I should add my support, and scepticism, to the road Greece currently appears destined and determined to travel.
A Greek Plan and a Believing ECB
On the plan itself Macro Man pretty well sums up my reading of the situation too but more concretely, it is difficult to point a finger on the measures themselves. Consequently, George Papandreou’s government approved this week of an additional 4.8 billion euros ($6.6 billion) of deficit cuts which include raising value-added tax to 21 percent from 19 percent, further increasing taxes on tobacco alcohol as well as of course further scything the public sector wage bill. All this is of course exactly what Greece needs to quell international investors of the worry that Greece will ultimately throw in the towel and default. However, at 2% of GDP (according to Bloomberg) it is almost but a drop in the ocean for an economy running a public deficit well in excess of 10% (which is pledged to be reduced from 12.7% to 8.7% of GDP this year).
Moreover, it was interesting to observe the manner in which Mr. Papandreou resoundingly used this week’s additional deficit cuts as a way to articulate over to you then pointing towards coming bilateral talks with Germany and France in which the implicit message was that now that Greece was honing up to its side of the bargain France and Germany should give something the other way. Alas both German chancellor Angela Merkel and her finance minister Wolfgang Schaeuble explicitly pointing out that aside from a friendly tête-à-tête over a bottle of Metaxa future bilateral talks would deal with no such thing as aid commitments. In any case, as Wolfgang Schaeuble noted; the recent measures taken by Greece will probably convince international investors. Let us hope our good Wolfgang is right here and while this in itself may turn out to be a tight call, Germany (and France) have so far dodged the bullet in terms of engaging in direct bilateral aid talks with Greece (let alone Spain).
So far it also seems that EU has dodged the bullet of whether the Greek affair will end up in the arms of IMF which, one assumes, would pave the way for other parts of the Eurozone periphery seeking out the aid of the fund. Moreover, the ECB moved at its monthly conference strongly backing the measures by the Greek government while also noting that it would be inappropriate for Greece to seek help from the IMF.
Yet, all is not well.
As Edward noted earlier this week, recent PMI data from the Eurozone confirms what we already knows in the sense that the recovery is moving very slowly and is essentially non-existing in key economies.
In the first place we have the latest batch of Eurozone PMI data, which suggest that the process of economic recovery is going to be neither so rapid, nor so straight forward, as was initially thought. And even more to the point, exit from the recession is being more characterised for its unevenness than it is for its uniformity. Growth in February was heavily weighted to the manufacturing rather than the services sector, and in manufacturing there was more dynamic in demand from the ex-Eurozone export area, than from internal orders, suggesting that the 6% drop in the Euro is having a positive impact on external competitiveness, while domestic demand remains weak and lacklustre.
Turning to the issue of monetary policy I have to admit that I did not look forward to Thursday’s session of ECB newspeak with the same eager as did Edward, but it was interesting to scrutinize the announcement by the ECB that it intends to continue withdrawing liquidity from the system despite the obvious travails of Greece and Spain. It appears then that the ECB is currently playing by the book believing that EU and Greece may sort out the problems without further aid from either the IMF or extraordinary ECB funding. Yet, as Edward shows with a very telling graph Spanish graphs are completely dependent for ECB financing at the current juncture which raises the question of what happens as we move forward towards the summer. Especially the expiration in July of the 1 year bn 442 € bumper tender could mark a turning point.
Reverse Decoupling in the Eurozone?
(click on picture for better viewing)
The steady build up of problems in the Eurozone and the consistent divergence in bond spreads among Eurozone economies have had a notable effect on the Euro. In a post Lehman world the EUR/USD peaked so far in the autumn of 2009 at around 1.44 to 1.45 with some analysts at the time hailing the return of a EUR/USD poised to move into the 1.50s and perhaps even to break the, so far, “magic” 1.60 sticker. Alas, this was not what happened.
Since the autumn of 2009 the Euro has consequently lost some 6% against the USD and is currently trading in the range of 1.35 to 1.36. This value will hardly scare anyone either side of the neutral fence and actually, in my humble opinion, still signifies a grossly over valued Euro based on economic fundamentals. Yet, the recent slide of the Euro (as tepid as it may be) actually represents a double edged sword. In the first instance it is naturally a direct function of the growing problems in Greece, Spain, Ireland etc and thus a sign of weakness. Yet, its real economic effect is decidedly positive as it helps support Eurozone exports which is now, more than ever, instrumental as a driving force of aggregate Eurozone economic growth. In the jargon of Alpha.Sources market lingo, the Eurozone seems to be passing on old maid to the US which of course itself needs a weaker currency. This of course, as debated before, is exactly the rub in a world where would be exporters are a plenty while importers are not.
In this context, it was with some fascination that I recently read the following Bloomberg headline implying that the Eurozone might be subject to reverse decoupling.
(quote Bloomberg)
Europe’s economy may be coming unstuck from the global recovery as governments to the south of the region struggle to reverse budget deficits and consumers in the north pull back spending.
After the 16-nation euro economy almost stagnated in the fourth quarter, data this week showed the weakness reaching into 2010. Confidence among households and companies worsened unexpectedly, French consumer spending fell and bank loans to the private sector slid for a fifth month. At the same time, Standard & Poor’s said it may soon downgrade Greece again as the country grapples with the region’s largest budget shortfall.
Signs of a flagging recovery risk extending the euro’s slide against the dollar. They are also prompting Citigroup Inc. to advise investors to favor German government bonds and UBS AG to recommend European stocks with links to the faster-growing U.S., such as Daimler AG. As they cut their growth forecasts, economists predict slower interest-rate increases from the European Central Bank, whose governing council meets next week.
Astute readers will notice immediately that it is not the first time that decoupling has been used in a Eurozone context, but this time of course it means something else entirely. The last time was back in the heaty days of 2006 when Bernanke slashed rates and where Japan and Europe were pinned as the economies who were to take over the baton from the US in a new Bretton Woods II(I). I shall not belabour here just how misplaced that was, but merely note how this alternative idea of Eurozone decoupling from global growth might be equally misplaced; at least if using a falling Euro as a premise. I emphasize might here since the irony is that the extent to which the Euro takes a beating on the back of the travails of the problems in the periphery it should actually help the Eurozone lock on to whatever global growth there is in the pipeline in the coming years. The main qualifier here is naturally that the homegrown problems themselves may still lead to an implosion in the form of a sovereign debt crisis as well as the real difficulties in terms of actually sticking to the code of an internal devaluation lies ahead of us, in this respect the following point by Edward is very important I think;
Ironically, market concerns will in all probability now shift to worries that Athens has gone too far in slashing budgets and raising taxes, and that the fiscal measures announced will simply act as a massive brake on economic activity. The risk is that Greece is now in a vicious circle in which fiscal austerity sends the country ever deeper into recession – and Athens has to react even more aggressively to bring down the public sector deficit as a share of GDP.
No easy way out here at all it seems and this more than anything signifies the current position in the Eurozone.
(Slim)Pickings?
Another week, another show of good will by the Greek government and another indication that the ECB means business in terms of withdrawing excess liquidity provisions. In this sense there is not much new under the sun. However, this comes on the backdrop of a growing realization among market participants and analysts that the recovery, despite policy makers’ most ardent efforts, just isn’t coming. In fact, the real preoccupation now is what happens on the backdrop of an increasingly hawkish stance towards what is deemed excessively loose fiscal and monetary positions since if we could not foster a recovery with such impressive stimulus measures, what happens next?
The best thing we can hope for at the current juncture is to muddle through and specifically that we manage to prevent some of the more scarier and all together realistic scenarios from materializing. Here I would like to see a little more team spirit from Germany in terms of supporting Greece in her endeavors even though of course, what Merkel probably really wants is for Greece to move to the IMF and thus one step closer to a break with EMU.
Overall, growth prospects in the Eurozone remain weak and with this also the uncertainty. Greece should take whatever comfort it can in Thursday’s nod of approvement from the ECB as well as take whatever direct support it gets from the EU. On the latter, this week’s message is, not unlike above I hope, that it will be slim pickings indeed.
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By Richard Daughty, on March 4th, 2010
Adrian Douglas of MarketForceAnalysis.com took a look at a summary of the goings-on at the Comex, and says, “the data reveals a very shocking trend. That is that the registered (dealer) inventory is being drawn down at a phenomenal rate. In silver the inventory has dropped by 24% in 6 months while in gold it has dropped an eye-popping 41% in 6 months!”
Already my eyes are glazing over at the sudden overload of information, most of which I know nothing about, but know that I should, and feel uneasy that I don’t, and guilty that I don’t even want to because it involves work and initiative, or, in this case, listening to the equivalent of, “blah blah blah silver and gold are going to go to the moon not only because the Fabulous Mogambo has thus foretold it, and the Austrian school of economics has explained it, but that blah blah blah at the Comex warehouses” and then I end up getting most of it wrong anyway and I look like an idiot.
So, already reeling in confusion, I was thus rendered almost comatose when he relentlessly went on, “The withdrawal to deposit ratio for registered silver is 14:1 and in gold it is 5:1” and which, again, is meaningless to me because I am, as I already admitted, ignorant and lazy, which is a crushing handicap, now that we are talking about it, that should enable you to qualify for a Handicapped Parking sticker for your damned car so that you can get some of those terrific Handicapped-Only parking spots, right up front, wherever you go, but the application for which can be rejected by a snotty clerk, out of hand, on her personal say-so, although she volunteered that my “abrasive, demanding, incoherent and repellent personality is a real handicap, too, but there is no sticker for that, either.”
As I fell asleep, eager to again escape reality and responsibility, I began dreaming of some snappy comebacks I could have said to the Handicapped Sticker lady, like, “Well, I assume that there is a Handicapped Sticker for anyone who is mentally handicapped, and I can tell by looking at your stupid Department of Motor Vehicles face that you are not buying gold, silver and oil to protect yourself against the government’s massive deficit-spending and the Federal Reserve’s creation of all the new money and credit that will be necessary to soak it up, which is really stupid of you! Hahahaha!”
I really like it when the dream gets to the stage where some hot young honeys make their appearance, stage left or stage right, it makes no difference to me, but we never got there because apparently the sound of my snoring made Mr. Douglas aware that he is talking “over the head” of the biggest dullard in the crowd, which violates the politically-correct stance on “inclusion” and “diversity” of persons such as me.
So, quickly remedying the situation, he explains that this means that “If this rate of drawdown continues, the registered inventory of silver will be exhausted in 18.8 months and in just 8.5 months for gold!”
And before there is any mistake made by the casual reader, that concluding exclamation point in the previous sentence was his, not mine, although it was totally unnecessary, as I was already freaked out at the implications!
Thus, I was ready to race home and frantically root around in my wife’s purse for some extra money, so that I could buy some more gold and silver, when I was transfixed to the spot when he went on that he estimates, “as much as 50,000 tonnes of gold has been sold that does not exist. That is equivalent to all the gold reserves in the world that are yet to be mined, or put another way, 25 years of gold production.”
I was ready to edit his remarks to put an exclamation point at the end, as it certainly deserves one, but before I could do it, he followed up with, “That is the grand-daddy of all short positions!”, which had an exclamation point, and so I let it go at that, and saved myself a lot of work that will – I guarantee! – show up in the narrative section of my Productivity Report, which is coming due pretty soon, and which is always pretty disagreeable.
But I will get through this new assault by “higher-ups in the executive food chain” with Classic Mogambo Equanimity (CME), as I always do, and I would probably have gone completely Mogambo Freaking Nuts (MFN) a hundred times before this if I hadn’t always remembered, sometimes at the last minute, that I own gold, silver and oil, whereas these gold-less, silver-less and oil-less bozos are questioning my ability (“I think you are too stupid!”), my competence (“You seem to have no idea what you are doing!”) or my sanity (“I think you are insane!”), while never even mentioning my numerous off-setting good qualities, such as my twinkling blue eyes or the fact that none of my employees or former customers have a Restraining Order on me that is still in force.
If you are even half as smart as I think you are, then you get the obvious message, which is to buy gold, silver and oil.
Some of you, on the other hand, also got the more subtle message that a long list of miscellaneous people are all going to be very, very upset and angry at the horrifying inflation in prices that is inescapably coming, due to this massive expansion of the money supply by the Federal Reserve to pay for the unbelievable tons of money Congress is deficit-spending, and you had better take your gold, silver and oil into a bunker of some sort and arm yourself to the teeth because it is going to get Very, Very Ugly (VVU), and you will want the options of buying your way out or shooting your way out.
On the other hand, if you do not buy gold, silver and oil, then, as they say, “the angels will weep for you.”
I, personally, will laugh at you. It will sound sort of like this: “Hahahaha! Moron!”
The Mogambo Guru
for The Daily Reckoning
Gold and Silver Supply: Get Some While You Can originally appeared in the Daily Reckoning.
By Eldon Mast, on March 4th, 2010
Virginia’s Landmark Solar Power Project to be Hosted on University Campus
Eastern Mennonite University (EMU) in Harrisonburg will soon be the site of Virginia’s first commercial-scale solar photovoltaic (PV) installation in the Commonwealth.
The new installation is part of a proposed revision to the campus master plan to allow for approximately 600 kilowatts of solar energy panels to be installed on the campus. The installation is expected to generate about 12 percent of EMU’s total electricity use and save the university an estimated $2 million in avoided electricity costs over the 25-year project.
EMU was one of the three national leaders in efficient energy use out of 90 colleges and universities surveyed by the Association of Higher Education Facilities Officers in 2007. In addition to the new solar initiative, EMU sponsors numerous green programs on campus, including an institutional commitment to sustainability.
Under an innovative financing program that has been used extensively by universities in states like California and Colorado, EMU will effectively “host” the installation, paying only for the electricity generated by the panels installed on the campus through a 25-year power purchase agreement with Secure Futures, LLC, a private solar development company based in Staunton, Va.
“This will represent a signature project for EMU, as it embodies the stewardship values of our institution as well as building on our record as a leading green university,” said EMU President Loren Swartzendruber.
“The signature components of this project include using state-of-the-art solar technology, and, through Secure Futures’ unique financing model, supporting a three-tiered sustainability program including campus, curriculum and community sustainability,” said Ron Piper, vice president for finance at EMU.
Staunton-based Secure Futures, LLC, obtained a grant commitment of $225,000 from the Virginia Department of Mines, Minerals and Energy (DMME) for the project. Tony Smith, CEO of Secure Futures, said “this project will represent a milestone for renewable energy in Virginia insofar as scale and impact. We’re excited to see a first example of a solar project achieving electricity rates comparable to those offered on the electric grid, especially since Virginia has among the lowest electricity rates in the country.”
Ken Jurman, renewable energy manager for the Virginia Department of Mines, Minerals and Energy (DMME), noted that “The EMU solar project as described fits well within the scope and intent of Virginia energy policy to encourage renewable energy resources. I’m very pleased that this initiative is moving ahead – it’s exactly the kind of thing we want to encourage across the Commonwealth to move toward a sustainable energy future.”
Secure Futures designs, develops, finances and maintains turnkey distributed solar solutions in collaboration with tax-exempt entities to reduce their electricity costs and to create environmental and economic benefits for customers and their communities.
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