I soon run out of scornful things to say about perfect strangers because all of them are deserving of contempt for being so stupid that they are not buying gold, silver and oil to protect themselves from the ruinous inflation in prices that the ruinous inflation in the money supply is going to cause.

In fact, ruinous, terrifying inflation is, as I term it in my latest bid to have a Mogambo Created Word Or Phrase (MCWOP) enter the popular lexicon, “One Hundred Percent Guaranteed (OHPG)” to happen, which I fearlessly predict not because I am the All-Powerful Mogambo (APM), although I am, or that OHPG rolls off the tongue to become instantly memorable, because it does not, but because that’s the way it has always, always, always happened in history when some stupid country decided, “Hey! With a fiat currency, infinite expansion via zero bank reserves to pay for increased government deficit-spending, let’s party, dudes!”

I bring this up because I recently helped my nephew write an essay about “What I did over my Christmas/Hanukkah/ Kwanzaa/Festivus holiday.” I actually ended up writing most of it because he kept wanting to write about some stupid pony that he helped nurse back to health, eventually transfusing his own blood into the pony, and then the grateful pony later saved his life, or something just as stupid and boring.

Anyway, after helping him, the essay ended up as, “My uncle and I spent a lot of time in a nice, wholesome bar out near the railroad tracks that is perfect for having kids spend quality time, and every day we drank interesting new things and ate nutritious peanuts out of a bowl while we watched the business channel on TV to see the end of the economic world rolling around, and my terrific uncle, whom I love so much because he is so nice and so handsome and so smart, showed me the weird things that all the people are doing as the monetary party, which is pronounced ‘par-tay’, is winding down since, as I understand it, it got started in 1971 when Nixon severed the dollar/gold link, and especially since 1987 when Alan Greenspan took over the Federal Reserve, and doubly-especially since 1997 when this same moron named Alan Greenspan lost his freaking mind and really started creating excess credit in the banks, and triply especially since 2008 when that raving lunatic bastard, Ben Bernanke, took over at the damned Federal Reserve and really, really, really started to create money by the trillions of dollars, using some of it to actually buy up worthless, dog-crap assets and the rest to buy government bonds so that the commie rats in the White House and Congress could continue to deficit-spend us into bankruptcy, a budget deficit which now approaches 12% of GDP, but which they had to do since they could not stop partying once they got started, or the whole rotten financial structure, made out of cards, erected on a bed of sand, on borrowed money, at huge degrees of leverage, collapses, the currency collapses, finally ending up with bread going up in price so much that nobody can afford to eat, and everybody tragically starves to death in a huge, horrible inflation in prices caused by the incredible inflation in the money supply, except the people who have gold, silver and oil. The end.”

Well, he did not get an “A” on his essay, and I called his teacher to ask why. I figured she was probably just another government goon, maybe getting her twisted jollies by harassing the nephew of The Great Mogambo (TGM), or maybe she is some kind of mutant idiot, or both, as is, I figure, usually the case.

Well, she was pretty feisty, and she was pretty insistent that it was obvious to her that a 3rd-grade kid did not write it, and, to go on, it was equally as obvious to her that I was the one who actually wrote it, and that I am an obnoxious, rude man who calls her on the phone because he is too much of a gutless coward to come down there and face her, whereupon I said to myself, “Wow! She’s good!”

I immediately figured that if she was so smart, she had bought a lot of gold, silver and oil to protect herself against the horrifying certainty of ruinous consumer price inflation as a result of the Federal Reserve creating too, too, too much money and credit so that a runaway spendthrift Congress can deficit-spend upwards of 2% of GDP. But when I asked her, she said, “No.”

Soon she will learn, to her horror, that she should have given the essay an “A” and heeded its advice, but because she did not, I will have my revenge! Whee! This investing stuff is easy!

Economic Warnings from an Elderly 3rd Grader originally appeared in the Daily Reckoning. The Daily Reckoning, offers a uniquely refreshing, perspective on the global economy, investing, gold, stocks and today's markets. Its been called "the most entertaining read of the day."

The “created or saved” job calculation is nonsense, but the very last person one would expect to decry the miscarriages is Michael J. Boskin.

In the early 1990s, Senator Patrick Moynihan from New York warned his fellow legislators about rising social security commitments. Then the worm crawled out of his hole, so to speak. Federal Reserve Chairman Alan Greenspan testified before the Senate and House Budget Committee on January 10, 1995. He told the Committee the inflation rate was probably overestimated by 0.5% to 1.5%.

If Greenspan was correct, this was a godsend. Social security payments are increased each year at an inflation rate calculated by the federal government: the change in the Consumer Price Index (CPI). If the CPI could be increased at a lower rate in the future, benefits would rise more slowly, without Congressional action. This would reduce government spending and delight politicians, who knew of the looming crisis in social security but did not want to imperil their careers by reducing benefits, or, in this case, by cutting the rate at which social security benefits were raised each year.   

The Boskin Commission was duly formed. Michael Boskin was the right man for the job. He had served as chairman of the President’s Council of Economic Advisers (CEA) from 1989 to 1993, a post previously held by such government functionaries as Arthur Burns and Alan Greenspan.

Jumping to the conclusion, the Boskin Commission, as it was known (formally, the “Advisory Commission to Study the Consumer Price Index”) found that inflation was overstated by 1.1%.  Several recommendations were made by the Commission to the Budget Committee. These were instituted with great efficiency by the Bureau of Labor Statistics.

The changes have lopped off far more than 1.1% in most years since 1997. From the time the changes were instituted through 2008, the compounding of an artificially low Consumer Price Index reduced payments to social security recipients by about half (according to John Williams, author of the newsletter Shadow Government Statistics).

How the CPI calculation was changed is not important here. (Chapter 12 of my book Panderer to Power is devoted to the Boskin Commission.) One adjustment may help to understand Boskin’s contribution to the impoverishment of older Americans. “Hedonic adjustments” by government number crunchers substitute imaginary prices for prices actually paid. Hedonic adjustments (purportedly, the “quality improvement” of an item) reduce the CPI. (Hedonic adjustments had been employed before the Boskin Commission, but sparingly. Afterwards, even the prices of textbooks – if they had color graphics – were adjusted for quality.)

Steve Leuthold, founder and chief investment officer of the Leuthold Group, calculated the price of a new car in the U.S. had risen from $6,847 in 1979 to $27,940 in 2004. Using hedonic adjustments, the government calculated the price of a new car had risen from $6,847 in 1979 to $11,708 in 2004.

The Boskin Commission was one scandal that economists actually denounced…

Follow this link to continue reading at Frederick Sheehan’s AuContrarian blog.

Economists Serving their Political Masters originally appeared in the Daily Reckoning. The Daily Reckoning, offers a uniquely refreshing, perspective on the global economy, investing, gold, stocks and today's markets. Its been called "the most entertaining read of the day."