Tuesday, September 9, 2008

Mogambo Rants.....We Love This Guy

The Assets of Penultimate Fools
"…all the money 'invested' during the boom in stocks, bonds and houses is lost unless more money is created for another crop of 'greater fools' to buy the assets from the 'penultimate fools!' Hahaha! It's insane!"
by The Mogambo Guru
I was standing at the highway interchange, yelling at all the cars that went zooming by me as their drivers ignored my signs, one of which read, "Free cookies!" which I would always explain was a misprint if anyone stopped and inquired, whereupon I explained "Sorry! It should have said, 'Free kittens'! And here's your kitten, chump! Hahaha!"
The other sign, a much BIGGER sign, read, "The end of the stock market, the end of the bond market, the end of the housing market, the end of the cancerous government monstrosity that is now responsible for half of all spending in the USA and the end of you is getting near, dooming you Earthling morons who think that letting the lunatics at the Federal Reserve with their preposterous new economic theories constantly create money and credit, to allow you to create more debt that you have to pay off, will allow you to buy a bigger government from which you think will flow prosperity, which makes me laugh anew in contempt at your abject stupidity, as the entire history of mankind and the Austrian school of economics dictates that that such rampant and irresponsible creation of money will create inflation in consumer prices and destroy you all in an inflationary and deflationary Armageddon!"
I say this because of the adage that "the consumer is 70% of the economy" is brought to mind by the essay "Bear-faced bluff" by Chan Akya at atimes.com, which distills it to, "The consumer is completely strapped out, and without the ability to secure credit from banks - which are constrained both by access to financing and capital losses - there is little chance that any upturn in demand will follow."
And the reason people are penniless is that they already borrowed and spent so much money, so damned much money, so incredibly, unbelievably much money that DrHousingBubble.com says that "there is nearly $14 trillion in household debt in the United States. This trumps our nationwide GDP. The amount of debt is simply staggering. "
And it is not like everybody is going to be making a lot more money to pay for things, as Agora Financial's 5-Minute Forecast reports that "personal income for Americans tumbled in July by its largest measure in three years" as the Commerce Department announced that earnings fell nearly 1% during the month, which the Agora folks interpret as "the biggest drop since Katrina."
They also report that John Williams of shadowstats.com has calculated that the reality is that "Real gross domestic income (GDI) has contracted for two consecutive quarters."
The facts-and-figures behind that startling declaration are that "Technically, GDI, which is the income-side equivalent to the consumption-side gross domestic product (GDP), is now in recession. Traditionally, two consecutive quarterly contractions in GDP have constituted a formal recession."
And in Britain, the news is as bad or worse, as David Stevenson of MoneyMorning.com reports that "total UK personal borrowing had surged to an eye-watering all-time time high of £1.45 trillion, of which just over £1.2 trillion was mortgage debt. In fact, personal debt has now pulled well clear of Britain's GDP of just over £1.4 trillion."
Mr. Akya says that even the Chinese are suffering from their stupid central bank excesses of money and credit, and "It is no secret that Chinese authorities are deeply embarrassed by the poor performance of their stock market this year, with the decline of 54% (51% in US dollar terms) outstripping the losses of even minnow economies like Vietnam (41% down), Pakistan (36% down) and the Philippines (25% down), despite the greater-than-10% growth all year."
Real Junior Mogambo Rangers (JMRs) will note with a knowing smirk that a government's "growth" in GDP is measured in "prices paid", and is thus vitally dependent on ignoring inflation (that is actually much greater than 10% all over the region).
Thus, it is easy to see why the stock markets are down; it's because the economy is actually down, thanks to prices being so high that people can't afford to buy anything! The people spent more (generating a higher GDP), but bought and got less because each item they bought cost more! Hahaha!
Maybe that "bought and got less" thing is why Mr. Akya reports that "A report by an American investment bank's Hong Kong office on August 19 alluded to the possibility of a Chinese stimulus."
Charles Delvalle of Investor's Daily Edge invites us to "ask yourself this: Why would (the Chinese) need an economic stimulus package if their economy were humming along?"
He asks me, "Why?" Because that's the trouble with fiat money and the excesses of money and credit that are thus possible to produce; once you get started with that crap, you can't quit, as inflation in prices just keeps going up and up (necessitating the creation of more money and credit to pay the higher prices), and all the money "invested" during the boom in stocks, bonds and houses is lost unless more money is created for another crop of "greater fools" to buy the assets from the "penultimate fools!" Hahaha! It's insane!
That is, as I never seem to tire of saying, why the Founding Fathers tried to make sure that such stupidity would not happen here by including in the Constitution the requirement that money shall only be of silver and gold, which they did because those metals can't be increased by some moron merely pushing a button at the Federal Reserve at the behest of the government. Like you can with paper and electronic money. Like now.
And that is why the Great Mogambo Loudmouth (GML) tries to make sure it can't happen to you, either, and by the same Constitutionally-required and historically-tested expedient; buy gold and silver!
Whee! This economics stuff is easy!

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