The Mogambo Guru is good value. I'm not suggesting you should take him too seriously but I enjoy his style:
The Daily Reckoning PRESENTS: Two men have just won the
Noble Prize in economics for having proved theories that
the Mogambo Guru has known as truth for years. Will the
winners come forward to share their prize with the Mogambo?
Read on...
WEIRDNESS ABOUNDS
by the Mogambo Guru
The Federal Reserve, tired of waiting for us idiot
Americans to drive down to the bank in our almost-new SUV
to borrow more money to buy new SUVs so that the money
supply can expand, is moving into Buying Outright Mode to
accomplish the same thing. This is, of course, the second
ultimate monetary fraud, the first ultimate monetary fraud
being that you would accept an IOU from the Mogambo ("Money
down the rat hole!").
And when you look at the category known as "U.S. Government
Securities Bought Outright," it is up another $2 billion.
The way it works is that, and you gotta admire the utter
simplicity of it, the banks buy Treasury debt from the
government, and the government spends the money. Then,
later, when they think nobody is looking, the Fed sneaks
around and creates some money out of thin air, and uses
that new money to buy the debt from the banks and then run
that debt through the shredder. And since that gives the
banks their money back, the banks use that new money to go
out and buy up more Treasury debt, so that the government
can spend some more money! It's like a miracle!
The Treasury was likewise emboldened that nobody has raised
so much as a peep that they have exceeded the borrowing
limit as set by Congress, and so they went out and sold
another big stinking pile of American government debt,
taking us to $4.420 trillion in total, which is up
healthily over the statutory maximum of $4.384 trillion.
But let me go over my MasterCard limit by a lousy 10 bucks
and all hell breaks loose around here like I got into a
fistfight with Mrs. Kravitz again or something!
Weird things are abounding. The biggest surprise to me is
that there are a lot of idiots in the world who are not
under court-ordered supervision who are buying bonds at the
exact same time as interest rates are rising! Basic
economic theory, the stuff you learned on the very first
day of Economics 101, says that rising interest rates make
bond prices go down. And if you own bonds, then you lose
money, capital gain-wise. But yet, here these morons are,
bidding up bonds, and thus saddling themselves with lower
yields for extended periods and potential losses!
The big news is that the new winners of the Nobel Prize in
economics, Edward Prescott and Finn Kyland, won the coveted
prize by essentially saying that Alan Greenspan, and the
idiotic course of monetary policy they are rabidly
pursuing, is wrong! I love this stuff! Ergo, they also win
the Mogambo Prize (no money or fame, but I take them on a
ride around the neighborhood, while we play the radio real
loud and honk at pretty girls), in that they, to quote The
Wall Street Journal, say that their theory shows,
"Government policymakers invited long-term trouble" when
they ran around like idiots to address short-run problems
by throwing money and credit around by the profligate
boatload, when, by doing so, they operate at the expense of
ignoring the prudent long term goals of, I assume, low
inflation and stable money supply.
In particular, again quoting the WSJ, "Most central bankers
around the world typically espoused a commitment to contain
inflation, but in practice central bankers would shift
policy to tolerate a little more inflation in the short run
as a trade-off for stronger economic growth and rising
employment." In other words, the Mogambo was right, and
Alan Greenspan and the other horrid little central banking
nitwits are morons! But am I, and my contribution, even
mentioned anywhere? No!
These two guys also deserve some credit for putting, what
is hoped, the last nails in the coffin of the whole stupid
Keynesian economic theory, where the government comes
roaring in and tries to desperately correct its nearly
fatal fiscal and monetary mistakes with the added mistake
of more rampant deficit spending.
But the lesson about inflation is not entirely learned, as
in the same Oct. 12 issue of the WSJ, where we read an
article by a guy named David Henderson, who is a "research
fellow with the Hoover Institution and an economics
professor." Anyway, he wrote an essay entitled "A Nobel
Tiger in the Tail," wherein he characterizes Alan Greenspan
as an "inflation hawk"! I rub my eyes in disbelief, as he
goes on to write "In the last 17 years, U.S. inflation has
averaged only 3%." Only 3%! Only! Three! Percent! My
stomach churns in outrage; my teeth grind themselves into
powder, and my trigger finger spasms reflexively. I regain
control of myself with my usual Mighty Mogambo Real He-Man
Effort (MMRH-ME). Snagging my calculator off the desk and
furiously punching buttons in my fury, hour after hour,
until somebody mercifully takes it away from me and uses it
to figure out that that three percent inflation for three
years is a 9.3% increase in prices.
Remember, you pay prices with AFTER-tax money. Therefore,
with a 28% tax rate, do you really think that over the next
three years that you are going to get an increase in your
before-tax income of 13%? You had better, because this is
the amount of increase that you need to merely keep up with
3% inflation! If you do NOT think you are going to get a
cumulative 13% raise in the next three years, then you will
suffer a fall in your standard of living. NOW do you think
that 3% inflation is "tame"? Do you think 3% inflation is
"low"? Huh? Do you?
I am too paralyzed with rage to continue, and anyway,
passersby are stuffing rags into my mouth to try and muffle
my screaming, and so we will turn to someone who DOES
comprehend economics, and by this I mean, of course, Mark
Rostenko, of the Sovereign Strategist. He says, "The
writing's on the wall, folks." So I look over at the wall,
and sure enough somebody has written, "The Mogambo is a big
fat idiot!" But this is not what he is referring to, as he
immediately proceeds to say he was referring to a
figurative wall, in that, "Long-term interest rates are
falling. Retail sales are slumping. The consumer isn't
making more money and the government is only making up job
numbers. Are we in for another round of recession? Before
you answer, consider that oil shocks = recessions."
Well, Mr. Rostenko's views gets me immediately back to
those two new Nobel Prize winners Prescott and Kyland
(which, now that I think about it, is, by rights, MY prize
and MY money, and not only do I get neither, but they act
like they never heard of me, and then they hang up on me
when I call them up and demand my cut, and then I have to
call them back, and they say, "We no speakee English," and
laugh at me, and then they hang up again), who say that
supply-side shocks, like "a surge in the price of oil,"
could have a big impact on economics, mainly by "causing a
recession or a boom." See how all of this fits so neatly
together?
Regards,
The Mogambo Guru
The Daily Reckoning PRESENTS: Two men have just won the
Noble Prize in economics for having proved theories that
the Mogambo Guru has known as truth for years. Will the
winners come forward to share their prize with the Mogambo?
Read on...
WEIRDNESS ABOUNDS
by the Mogambo Guru
The Federal Reserve, tired of waiting for us idiot
Americans to drive down to the bank in our almost-new SUV
to borrow more money to buy new SUVs so that the money
supply can expand, is moving into Buying Outright Mode to
accomplish the same thing. This is, of course, the second
ultimate monetary fraud, the first ultimate monetary fraud
being that you would accept an IOU from the Mogambo ("Money
down the rat hole!").
And when you look at the category known as "U.S. Government
Securities Bought Outright," it is up another $2 billion.
The way it works is that, and you gotta admire the utter
simplicity of it, the banks buy Treasury debt from the
government, and the government spends the money. Then,
later, when they think nobody is looking, the Fed sneaks
around and creates some money out of thin air, and uses
that new money to buy the debt from the banks and then run
that debt through the shredder. And since that gives the
banks their money back, the banks use that new money to go
out and buy up more Treasury debt, so that the government
can spend some more money! It's like a miracle!
The Treasury was likewise emboldened that nobody has raised
so much as a peep that they have exceeded the borrowing
limit as set by Congress, and so they went out and sold
another big stinking pile of American government debt,
taking us to $4.420 trillion in total, which is up
healthily over the statutory maximum of $4.384 trillion.
But let me go over my MasterCard limit by a lousy 10 bucks
and all hell breaks loose around here like I got into a
fistfight with Mrs. Kravitz again or something!
Weird things are abounding. The biggest surprise to me is
that there are a lot of idiots in the world who are not
under court-ordered supervision who are buying bonds at the
exact same time as interest rates are rising! Basic
economic theory, the stuff you learned on the very first
day of Economics 101, says that rising interest rates make
bond prices go down. And if you own bonds, then you lose
money, capital gain-wise. But yet, here these morons are,
bidding up bonds, and thus saddling themselves with lower
yields for extended periods and potential losses!
The big news is that the new winners of the Nobel Prize in
economics, Edward Prescott and Finn Kyland, won the coveted
prize by essentially saying that Alan Greenspan, and the
idiotic course of monetary policy they are rabidly
pursuing, is wrong! I love this stuff! Ergo, they also win
the Mogambo Prize (no money or fame, but I take them on a
ride around the neighborhood, while we play the radio real
loud and honk at pretty girls), in that they, to quote The
Wall Street Journal, say that their theory shows,
"Government policymakers invited long-term trouble" when
they ran around like idiots to address short-run problems
by throwing money and credit around by the profligate
boatload, when, by doing so, they operate at the expense of
ignoring the prudent long term goals of, I assume, low
inflation and stable money supply.
In particular, again quoting the WSJ, "Most central bankers
around the world typically espoused a commitment to contain
inflation, but in practice central bankers would shift
policy to tolerate a little more inflation in the short run
as a trade-off for stronger economic growth and rising
employment." In other words, the Mogambo was right, and
Alan Greenspan and the other horrid little central banking
nitwits are morons! But am I, and my contribution, even
mentioned anywhere? No!
These two guys also deserve some credit for putting, what
is hoped, the last nails in the coffin of the whole stupid
Keynesian economic theory, where the government comes
roaring in and tries to desperately correct its nearly
fatal fiscal and monetary mistakes with the added mistake
of more rampant deficit spending.
But the lesson about inflation is not entirely learned, as
in the same Oct. 12 issue of the WSJ, where we read an
article by a guy named David Henderson, who is a "research
fellow with the Hoover Institution and an economics
professor." Anyway, he wrote an essay entitled "A Nobel
Tiger in the Tail," wherein he characterizes Alan Greenspan
as an "inflation hawk"! I rub my eyes in disbelief, as he
goes on to write "In the last 17 years, U.S. inflation has
averaged only 3%." Only 3%! Only! Three! Percent! My
stomach churns in outrage; my teeth grind themselves into
powder, and my trigger finger spasms reflexively. I regain
control of myself with my usual Mighty Mogambo Real He-Man
Effort (MMRH-ME). Snagging my calculator off the desk and
furiously punching buttons in my fury, hour after hour,
until somebody mercifully takes it away from me and uses it
to figure out that that three percent inflation for three
years is a 9.3% increase in prices.
Remember, you pay prices with AFTER-tax money. Therefore,
with a 28% tax rate, do you really think that over the next
three years that you are going to get an increase in your
before-tax income of 13%? You had better, because this is
the amount of increase that you need to merely keep up with
3% inflation! If you do NOT think you are going to get a
cumulative 13% raise in the next three years, then you will
suffer a fall in your standard of living. NOW do you think
that 3% inflation is "tame"? Do you think 3% inflation is
"low"? Huh? Do you?
I am too paralyzed with rage to continue, and anyway,
passersby are stuffing rags into my mouth to try and muffle
my screaming, and so we will turn to someone who DOES
comprehend economics, and by this I mean, of course, Mark
Rostenko, of the Sovereign Strategist. He says, "The
writing's on the wall, folks." So I look over at the wall,
and sure enough somebody has written, "The Mogambo is a big
fat idiot!" But this is not what he is referring to, as he
immediately proceeds to say he was referring to a
figurative wall, in that, "Long-term interest rates are
falling. Retail sales are slumping. The consumer isn't
making more money and the government is only making up job
numbers. Are we in for another round of recession? Before
you answer, consider that oil shocks = recessions."
Well, Mr. Rostenko's views gets me immediately back to
those two new Nobel Prize winners Prescott and Kyland
(which, now that I think about it, is, by rights, MY prize
and MY money, and not only do I get neither, but they act
like they never heard of me, and then they hang up on me
when I call them up and demand my cut, and then I have to
call them back, and they say, "We no speakee English," and
laugh at me, and then they hang up again), who say that
supply-side shocks, like "a surge in the price of oil,"
could have a big impact on economics, mainly by "causing a
recession or a boom." See how all of this fits so neatly
together?
Regards,
The Mogambo Guru
