Saturday, February 9, 2008

Mogambo Debates Value

Candy Vs. Currency: A Debate on Value

By: Richard Daughty

Let's not forget that the banks are causing inflation in consumer prices with their irresponsible inflation in the money supply, because acting stupid, greedy, corrupt and unconcerned about the misery they cause is the bedrock essence of banking, which is why the Founding Fathers argued against a national bank, and all the previous ones ended very, very badly, despite the dollar being held to the gold standard! Hahaha!
And now people think a fiat currency will fare better? Hahahaha! If so, then I have some Bad, Bad News (BBN) for you; things are so bad that foreign central banks have to put staggering load of U.S. government and agency debt after staggering load of U.S. government and agency debt into their accounts at the Fed. How staggering? Sit down and hold onto your hats because it was $24 billion last week! In one week! Foreign central banks gobbled up another $24 billion in government debt, taking their total haul to $2.095 trillion, every dime of which we will have to pay both in money and inflation.
Usually about this time, people decide that they have heard enough from my Loud Mogambo Mouth (LMM), and they yearn for a speaker who is not so loud or stupid. This time, I am ready for them, and present Alan Abelson in his "Up & Down Wall Street" column in Barron's magazine, saying the same thing when he writes, "the past folly and fecklessness of the banks have come back to haunt them - and the rest of us - with a vengeance."
And for those of you who thought that Unrestrained Mogambo Vengeance (UMV) was cruel and heartless when people let their dogs crap on my lawn, you ain't seen nothing yet when the "past folly and fecklessness" comes to haunt us with a "vengeance."
And for the ultimate in revenge, the inflation in consumer prices caused by the execrable Federal Reserve creating so much excess money and credit that Hershey, "the world's largest candy maker", has to raise its prices on a third of its chocolate candy by 13% because of the soaring prices of energy, milk and cocoa. And they are going to raise prices by 3% over Hershey's entire U.S. product line!
And to make it all much, much worse, this is their SECOND rise in prices in the last freaking year!
And it may be part of why Ed Steer of GATA sent this headline from "The World is Running Out of Food". The article reports that, "Prices of everything from milk and corn to beef and coffee are at record highs. Wheat stores are the lowest they have been since 1980. Add to that the effects of climate change, shifting production around the world, and you have what the United Nations' World Food Programme is calling 'the perfect storm for the world's hungry'".
The article goes on to say that, "In the past few months, food riots have occurred around the world, from Morocco to Senegal and Yemen", and that "In Europe, the EU has suspended the usual 10 per cent set-aside for 2008. Normally farmers would be paid not to farm 10 per cent of their land as a way of controlling supply and maintaining prices. This year, they must cultivate all of their land."
As a guy who fervently believes in the Austrian Business Cycle Theory as Ludwig von Mises postulated and as is dedicated to expounding and teaching, then naturally I am sure, sure as hell, that we are freaking doomed to die of inflation because we let the idiots in charge have a fiat currency and unregulated fractional-reserve ratios in the banking system to develop a hugely expensive, always-expanding system of governments and government spending, until we have now long, long, LONG passed the point where the government is the majority of spending, and therefore government spending IS the economy.
And the Fed and the Congress will always opt for more money and more inflation, for as long as they can, until the dollar collapses to nothingness, as fiat currencies always do, as Mises predicted, and as the entire corpus of monetary history for the last 4,000 years proves, over and over and over again, without a single exception.
Smiling smugly to myself at this telling point, I cross my arms as a body-language way of saying both, "Since there is no question about it, I dare you to contradict me!" and to non-verbally say, "My hand is actually on the gun that I have in this shoulder holster!", which really seems to cut down on the controversies around here lately, which suits me fine.
So, since we are royally screwed from an onslaught of inflation in consumer prices, the only interesting part left to do is to discern the subtle, telltale signs as they occur, as a mere moment's respite from the grubby work of constantly accumulating gold and silver to capitalize on the economy's plight, as it is certainly true that, "It is an ill wind that doesn't blow somebody some good", and for a welcome change that person is going to be ME getting some of that good blown on him!
This perhaps explains why I am so interested in the Federal Reserve's G19 Consumer Credit report, the latest release of which said that, "Consumer credit increased at an annual rate of 7-1/2 percent in November. Revolving credit increased at an annual rate of 11-1/4 percent and non-revolving credit increased at an annual rate of 5 percent." Going farther into debt by either 7-1/2% or 11%! Yow! This is insane! At this rate, you'll double your debt inside of 7 years!
Of course, I see this new debt as evidence that generalized prices are rising so quickly that people need to borrow more money even to maintain a lifestyle that is "cut back"! And that, in turn, is because the Federal Reserve is continuing its policy of cranking out more money and credit to temporarily offset the terrible effect of cranking out too much money and credit, which is that prices have risen! Hahaha! We're freaking doomed!
And yet you wonder things like, "Hey, Big Doofus Mogambo (BDM)! Did you know that your zipper is down and everyone is laughing at you?", and I say, "No", and then they ask other things like, "Why are you always saying 'We're freaking doomed' all the time until we are sick of hearing it? Why don't you just shut up about it?"
Of course, I think to myself that if they had heard me ranting about this monetary outrage over the long-term, then they must surely have heard that the reason I am so pessimistic is that the Austrian school of economics says it must end that way, because it always does end that way, as history shows! I mean, how simple can it be?
Anyway, the actual numbers are pretty frightening, as total revolving and non-revolving consumer debt went from $2,489.9 billion to $2,505.4 billion in November.
This all seems surreal when Reuters reports the bad news that Americans are falling further behind on their consumer loan payments, their mortgage payments and their car payments, too. They are, however, keeping up with paying the minimum payment required on their credit card debt! Hahaha!
And at least we are driving to the poorhouse in style, as for new car loans at auto finance companies, the latest interest rate they were charging was a tiny 4.2%, and the average amount financed was a whopping $29,419 (which was 95% of the value of the car, which meant that the average car now sells for over $30,000! No inflation? Hahahaha!).
Anyway, even this was better than last month, as it was down from that previous record of $30,738 (which was also 95% of the value of the car).
The average maturity of the loan, in months, was 63.1, also slightly down from last month's record of 63.7 months. The average new car loan is now over five years!
Interestingly, the amount financed for a new car in 2002 (essentially five years ago), was only $24,747, which was still 94% of the value of the car, for 56.8 months. This means that financed cars got 24% more expensive in five lousy years! No inflation? Hahahaha! We're freaking doomed!

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