-- Having consumed enough tranquilizers, mood elevators and anti-depressants that I am barely conscious and involuntarily drooling into my own lap, I can, finally, dispassionately note that Total Fed Credit was up by $3.8 billion last week, and credit in the banks was up a little, too, especially real estate loans. Foreigners also stashed $8.5 billion at the Fed last week, as some of all that gigantic money (that we create and spend, keeping the trade deficit at $800 billion per year and the federal deficit at another $600 billion a year) is recycled back to us. You know: The same old stupid monetary inflation thing.
The bigger news is, of course, on the inflationary front itself, as the JOC-ECRI Industrial Price Index was up 4.7% for the month! Month! And 9.5% over the last year! That is why I am in full lockdown mode in the Famed Mogambo Bunker (FMB).
I weep in sorrow, probably from over-medication, for America and the dollar as I lock the door of the bunker. On top of that horrible inflation news, as bad as it is, the dollar was down, too, on its way to being down a lot. This is (as you can probably gather by the way I am gagging up blood) truly terrible, terrible news. Prices are going up as (and mostly because) the dollar is going down! And with The Mogambo giving you a splitting headache by screaming in your ear about how inflation has doomed us all, it is, truly, the worst of all worlds.
But perhaps there is a lighter side to economic Armageddon! I say this because John Stepek of MoneyWeek.com gave me the biggest laugh of the week when he wrote "With the inflation threat much greater now, it will be far harder for the US to justify cutting interest rates to see off recession, without foreign holders of US dollars concluding that the country is just trying to inflate its way out of its debts." Hahaha! Does this mean that there is somebody, somewhere on the face of this planet, who does NOT know that the United States is trying to inflate out of its debts by destroying its own currency? Hahahaha! This is too rich! Hahaha! Who are these idiots? Hahahaha!
-- I have been getting a lot of panicky mail lately because I am such a gold bug, and there are (unbelievably) some people who will listen to an idiot like me, and do what I say, and these pathetic, gullible people have been accumulating gold and silver, per my persistent, insane screeching for them to do so immediately or face the Wrath Of Economic Mother Nature (WOEMN). Now they've made a few bucks, and they want to keep it.
But now their latest concern is that they have read some recent articles about how the coming recession / depression / end-of-the-world will be accompanied by deflation in prices, including- gasp! -gold.
And these gold bug people don't care about the incredible suffering, misery, wars, crime and police-state, fascist repression that will rip the country apart as increasingly desperate people and increasingly desperate governments do increasingly desperate things because of inflation. Nah! All they want to know how their gold will do! Ahhh! I am so proud!
Why am I proud? It is a given that the majority of people must suffer greatly from inflation. If they did not have to suffer, then there would not be any problem with inflation! And so, even though most people must suffer being totally miserable and utterly destroyed financially, there is nothing I can do about it, except to constantly recommend that they demand that the Supreme Court finally uphold the Constitutional requirement that money be only of silver and gold. That will solve the problem of price inflation by making monetary inflation impossible.
Failing that, then I have absolutely no sympathy, but contempt, for the idiotic people who must suffer, and therefore it is all the more delicious that some of the more Mogambo-Attuned (M-A) amongst us can make some money on their utter, utter stupidity, simply by buying gold.
But this is not about suffering or Supreme Court treachery, but about some people saying that gold will go down in price. For example, Chris Laird, who is the Editor in Chief of PrudentSquirrel.com, penned the essay that got a lot of people all lathered up, which carried the title "Expectation of US Recession a Hand Over Gold Market." He writes "The fact is, if economic activity- in the world's largest economy by far- collapses, as I suspect it will beginning in 2007, gold will find that inflation vanishes, industrial production drops precipitously, and all those expensive commodities now are going to tank starting in 2007."
That is, of course, very interesting. He could be right. I dunno. And my Worthless Mogambo Rebuttal (WMR) represents the laziest kind of economics; I simply note that the entire historical record of economic mankind shows that gold has always done very well, and very well indeed, when the economic idiocy of creating excess money and credit was unleashed. And thus I assume that gold will go up again, when measured in the currency that is being destroyed by over-issuance, only because it always has. Always.
As Bill Bonner of DailyReckoning.com writes, "Let me put it to you straight. How many times have paper currencies - unbacked by gold - become worthless? Answer: every time. And how many times has a gold currency lost its value? Never."
Mr. Bonner went on to say "We like gold because, while we cannot predict the future, eventually and always, paper currencies disappear and gold remains." I was extremely happy to read that he confesses he cannot foretell the future, as this is an opportunity for me to say that although Mr. Bonner is smarter than I am, better educated, better looking, taller, better liked, better better better in every damned thing you can name, and has fewer enemies and neighbors coming over here and offering to knock my block off if I don't shut off the taped Truth About Inflation (TAI) message blaring from the pulpit of the Tabernacle Of The Mogambo (TOTM), but let's see how he likes to stand in MY shade for a change, when I proudly say "I, The Mogambo, am arrogant enough- nay, more than arrogant enough! -to say that I can predict the future! And to prove it, I confidently predict that one day an ounce of gold can be measured in tons of $100 bills, yet gold will, as he says, remain!"
I was expecting a spontaneous round of applause for my stirring speech, but there was only an awkward silence. In desperation, I change tack, and citing from memory, say "The strongest don't always win the battle, and the swiftest don't always win the race, but that is the way to bet!"
Even that falls flat, and I suddenly know what you are thinking. You are saying to yourself "How stupid! Why do I read this stupid Mogambo crap? What is wrong with me that I would completely waste my time like this?" And while I do not know what kind of a twisted deviant you are that compels you to read the trash you do, I do, however, know a guy who has a more official rebuttal. Thus I introduce James Turk, Chairman of GoldMoney.com, who knows a lot about this gold thing, and "in a nutshell," he writes that "In the coming decade, as the dollar suffers one of the great meltdowns in monetary history, gold will reclaim its place at the center of the global financial system, and its value, relative to most of today's national currencies, will soar. The result: Gold coins, gold-mining stocks, and gold-based digital currencies will be vastly better ways to preserve and/or grow wealth than dollar-denominated bonds, stocks, or bank accounts."
He sums up with the nutshell thing, and says "That, in a nutshell, is the story." And indeed he is right, as that is always the story. And not only that, but he is nice enough to tell you how long it will take; at most, 10 years! Start now, and, theoretically, in 10 years you will be rich in dollars!
And we aren't making up for inflation in prices by working, as reflected in the grim news that personal saving, which is defined as "Disposable Personal Income less personal outlays" was negative again, meaning that people are spending more than they make. Thus, they "save", not zero, but literally less than zero! In terms of record-setting behavior, savings "remained in negative territory for the 16th straight month at a negative 0.9 percent for July."
And sure enough, on Yahoo.com we read that spending is still increasing, as "The Commerce Department reported that spending in July rose by a healthy 0.8 percent last month, double the 0.4 percent gain in June."
As far as "healthy" is concerned, I snort in derision, and caustically remark that this reported "healthy spending" is merely measuring "dollars spent", but when things cost more (thanks to inflation), then you will seem to be "healthily" buying more stuff by spending more money, when in actuality you are buying LESS stuff because everything costs more money!
Offsetting this, I suppose, according to the government, was the item "Incomes also were up, rising by 0.5 percent in July, reflecting stronger wage growth." Stronger wage growth? Hahaha!
My amused and mirthful laughter turned to whimpers of fear when they went on to say "A gauge of inflation tied to spending showed that consumer prices, excluding energy and food, have risen by 2.4 percent over the past 12 months, the fastest rate of increase in nearly four years." Yikes!
But even if I concede that wage growth was, indeed, "healthy" and "stronger", how does this mitigate any of the damage done by the higher prices to those people who don't have a damned job, or who have, literally, fixed incomes? They get punished by inflation! They suffer from inflation! And then they want to borrow money from me, or make me to pay higher taxes, so I get doubly-punished!
As usual, they don't want to talk about inflation, or maybe they are still illegally discriminating against me because I insist on calling them "lying, thieving, traitorous, government human garbage". But whatever the reason, they don't want to get into that inflation thing, and, instead, they hurriedly go on to say "Disposable incomes, the amount left after paying taxes, rose by 0.7 percent in July but by just 0.3 percent after inflation was taken into account."
My Sensitive Mogambo Glaring Discrepancy Filter (SMGDF) beeps a coded signal, indicating that these guys now say that inflation measured 0.4% for the month! So, the government says that, annualized, inflation is now 4.8%? Wow!
And it is worse than that, as you can gather when you read "Real Inflation" by Stephen J. Church of Piscataqua Research, writing on SafeHaven.com, when he reports "Our research indicates that inflation is approximately 3% to 4% per year higher than the CPI." And they even include a nice chart to show where real, hit-'em-in-the-wallet inflation has been, mostly, higher than 6% ever since the 50's! Yow!
The rest of the paper is some math, the Fisher equation and lots of clever whiz-bangery, which is soon beyond my depth. But it doesn't mean squat to me anyway, as it is just another example of really smart guys doing incomprehensible things. To us, the drooling class of mental defectives just trying to make a fast buck, the terrifying conclusion is enough: If the CPI measures inflation at an incredible 4.8%, but this is 4% too low, then inflation is actually running closer to a devastating 8.8%! In fact, they actually say that "It appears that real inflation has been close to 8% per year during the last few years. Based on our calculations, real inflation only exceeded this level during the 1970s."
The reason why we have so much inflation? They say, and I agree, that "It appears that the Federal Reserve has run an aggressive monetary policy for the last 15 years and a very aggressive monetary policy for the last 7 years." Brother, I heard that!
And all that monetary inflation has shown up as roaring inflation in stock prices, and roaring inflation in bond prices, and roaring inflation in housing prices, and roaring inflation in insurance prices, and roaring, blistering inflation in the size and cost of government, all of which was financed by the Federal Reserve providing the money so that everyone can borrow themselves into an unfathomable black hole of credit-hell and bankruptcy.
And inflation is everywhere, according to Bob Wood of KMA, who reports in his newsletter that three articles in the same newspaper were headlined "Higher electric bills are likely', 'For some, Allstate wants 75% hike' and another was entitled 'Homeowners plead for mercy on taxes'. If that ain't inflation, then what in the hell is it?
And yet all I hear is that inflation is "tame" or "benign" or "low" or "falling" or "targeted"! And bondholders, without a doubt the most stupid class of people on the freaking face of the freaking planet, are still bidding up bonds so high that bonds yield less than 5%! For up to 30 years! Hahahaha! Morons! Hahaha!
-- And it is not just here in America where the government is desperate to conceal true inflation, as we learn from the article "Japan's Fuzzy Math and the German Scare Tactics" by Gary Dorsch, Editor of Global Money Trends Magazine. He asks the immortal question, "How should one react to Tokyo's fuzzy math, after government apparatchniks added 34 items to the Japanese consumer price index, whose prices on balance were falling, and removed 48 goods and services that were becoming more expensive? The fuzzy math produced a stunning two-thirds decline in Japan's core consumer inflation rate to 0.2% in July, from the 0.6% inflation rate reported in June, jolting Japanese interest rates." Hahahaha!
Right in front of everyone's noses, and nobody even raises an eyebrow! And he asks "How should one react?" One way (which is my favorite way) is to get up around midnight, and go stand outside the house of somebody who is Japanese, and loudly chant "The stupid Japanese are going to pay a price for their stupidity, just as we stupid Americans are going to pay a price for it. That's why I say 'We are all freaking doomed!', you Japanese morons!"
Then they will, according to my clever plan, call up their embassy and tell them what I am saying, and they will call the Japanese government, and the Japanese government will slap their foreheads and say "Hey! The stupid Mogambo is right! Now, properly warned, we can stop that silly crap and save our economic butts! Whew! Lucky for us The Mogambo wasn't working for the Americans in World War II, because he would have kicked our Jap butts in about three weeks!" Anyway, that's the way I figure it will work. We'll see.
But the more important question is "What can I do, as I am the average person who has so much time on my hands that I will read the stupid Mogambo Guru newsletter, but who is also somewhat concerned about the coming social unrest, criminality, murder, mayhem, mob rule, inflationary collapse of modern civilization and vegetarian pizza?"
For that kind of advice, you need only to tune your radio dial to Radio Free Mogambo and hear the Mogambo himself say "Buy gold and silver, my darling young Mogambos-in-training! The reason is that there have always been people such as yourselves, at the end of a long fiat-money boom, who look around and exclaim 'Oh, my God! The Mogambo was right! We're freaking doomed!' But be of good cheer, my adoring Mogambo cherubs (AMC)! In searching out contemporary alternatives to protect what pathetic little wealth you have, as have all the others in history who have lived through an inflationary boom financed by excessive creation of money and credit, you will soon attain true golden enlightenment, if you catch my drift, as have all your forebears."
Or, if authentic Mogambo Mumbo Jumbo (MMJ) is not your precise cup of tea, you could listen to Roland Watson, who writes the investment newsletter The New Era Investor, who has less mumbo-jumbo, and instead cites the old reliable supply-and-demand dynamic. "According to USGS data," he writes, "estimated global gold reserves have been on a downtrend while world mine production has failed to exceed its 2001 high despite increasing demand. Like Peak Oil, the big discoveries have been made and companies are now scouring the Earth to find smaller and lower quality ore deposits. The signs are ominous that the days of ever increasing gold reserves and production may be well and truly over."
And speaking of supply and demand, do you want to know why meat has not exploded in price during the Mogambo Pizza Cycle (January through December), when demand typically rises? One reason is because of a short-term excess of supply, as indicated by the KOTV.com article "Drought Conditions Prompts Oklahoma Ranchers To Sell Off Their Cattle."
The article reports "Pastures are dry and hay is hard to get, so many ranchers are selling off their cattle" to avoid paying the increasing expenses, which is another good, very good, very, very good reason to have cattle instead of children, as if any parent needed any more reasons than the jillion or so other reasons that we discovered the hard, hard way. So, the added supply of meat provided by farmers dumping their herds in desperation has been offsetting the added demand of a higher population accompanied by rising levels of income and standards of living, and so the price of meat has not risen.
This will soon change. If it doesn't, then that means that demand for meat has dropped significantly, and I don't seriously think that is going to happen. So if you dabble in futures, then starting to accumulate cattle futures over the next several years may be a good play.
-- The new federal pension bill, the so-called Pension Protection Act, is being passed and signed into law right now because the government wants more people to put more money into the stock market. Otherwise, the people already invested in the stock market will stop showing gains, and stop reporting taxable gains, and start showing actual losses, and deducting those losses on their income tax returns.
The official rationale for this new pension law is that it will encourage more people to "take control of their own retirements", with the tacit admission that Social Security was a boondoggle in the best of days. But regardless of why they say they are doing this, it's really because someone needs your money, and if there is one thing that every Mogambo Scout knows, it is that "It's always about the money, and mostly about how everybody needs yours."
The real impetus behind this new Congressional action is the rude shock that the stock market, the bond market, the housing market and government coffers desperately need some more big money (MBM) rolling in pretty damned soon (PDS), or prices will not go up, bond prices will not go up, and tax revenues will not go up. And then the whole "investing for retirement" scam would be exposed, and the idiocy of the American system of government (which exists merely to increase spending and support more and more of the population and economy) would similarly be exposed, none of which would have happened in the first damned place if the Federal Reserve had not provided the bank financing, which created the debt, which created the money, which inflated the money supply, which worked its way into prices, which will destroy the economy, because that is what (pause for breath) inflation does.
One of the sneakier provisions in this new pension bill is "automatic enrollment", by which you will have money wrested from your paycheck and invested in the stock and bonds markets for you. And if you don't like that idea, then you have to take steps to break free of what could be a very deadly embrace.
What steps? For starters, how about if the employee has to jump through a literal hoop of fire, at the regional office, located 200 miles away, only with an appointment, but the phone line is always busy, and when you finally get through to the plan administrator's office to make the appointment, all you hear is a recording of a perky voice saying "Sorry to have missed your call! Your call is important to us! So at the beep, please leave a message! And then go to hell, you traitorous scum who hates his country so much that he will not invest in the future of America by buying overpriced stocks and overpriced bonds!" Click.
Plus, the financial services industry, which accounts for about half of the profits of the entire country, would show losses, too. So who are these people? Doug Noland explains "Combining the powerful Wall Street firms, the global money center securities/insurance/'banks,' and thousands of hedge funds and you've got one almighty juggernaut 'speculator community' that controls $10's of Trillions of U.S. and global assets."
Harking back to Day One of the course in Mogambo Economics 101 (ME101), that is glorious day when we learned The One Basic Mogambo Principle Of Investing (TOBMPOI), which is that "The majority of investors must lose money, so that a minority of investors can gain money." And with the effect of taxes, fees, commissions and expenses, a corollary is that "The amount of money gained by the minority is less than the amount of money lost by the majority."
But, to be fair, it could work out! For instance, if one of the investment alternatives is gold funds, then I'd take it! And, best of all, I wouldn't have to lift a finger to achieve success with all my investment dreams of gold and silver soaring in price, and pretty soon I would be riding around in some snazzy new convertible, and when we go out for a fancy, family dinner, everybody can Super-Size all the fries they want! Yippee!
But if you are restricted to investing in money markets, bonds or common stocks, then I would throw back my head, laugh derisively, and probably break my freaking arm trying to get out of the automatic enrollment as fast as I could. And then, every month, just like they would do, I would take some of my money and invest it, just like they wanted me to! Only I would put the money into gold and silver, and mining shares and oil company shares, following the patented Mogambo Investment System (MIS), which is to "Gradually buy gold and silver whenever a banking system creates excess money and credit so that somebody, or the government, can spend it in an orgy of final consumption." It is the only investing strategy that has proved completely 100% successful over whole millennia.
And so these Congressionally-legislated changes to the pension law are there to boost the market in the short run. But whether or not this will be sufficient to boost the stock market, I don't know. Adrian Van Eck of the Van Eck Hotline on Money and the Economy seems to think so, and calculates that, in one week recently, $54 billion in new money was pumped into the economy. He concludes "There have been other weeks of money growth already and there will be more to come. So get ready for a surprise American boom."
So I dunno about the short-term. If making the prices of assets rise to insane levels of overvaluation can be done with the help of the federal government and the Federal Reserve, then it probably will work, because you can bet that both of those powerful entities will be frantically trying to move heaven and earth to make it work.
But I do know that this hoped-for increase in investment flows will one day prove to be inadequate again, sooner than before, because it must, as that is the nature of exponential curves. Ugh.
****Mogambo sez: I keep being amazed every time the dollar is up for the day, as I cannot imagine why, and I am equally amazed when gold and silver end down for the day, as I cannot imagine why, either.
It is a mysterious gift to you from just one of the many desperate, life-or-death struggles of the market manipulators and their government pimps, the Federal Reserve and all the other central banks of the world.
So load up on gold, silver and oil, as it is guilt-free: How can legally taking money from bad people be wrong? It teaches them a lesson they will never forget! They should thank you!