01/04/11 Tampa, Florida – The lights of the Mogambo Security System (MSS) glowed dimly in the gloom of the bunker as I cowered in the darkness, and there were no sounds except the thumping, thumping, thumping of my terrified heart at The World Outside (TWO), a place I consider to be a vicious, hostile environment containing not only enemies of every sort, both real and imagined, but family members who want to know if I am coming out for dinner, or to tell me that someone is on the phone for me, or that somebody is going to greedily eat the last of my treasured Double-Stuf Oreos, somehow trying to get me outside and into their clutches so that they can take all my money and ask me to sign various forms and documents.
And when I innocently and politely ask, “What is this paper that you want me to sign?” they hastily snatch it back out of my hand and rudely say, “Never mind, then!”
So I sighed in relief, sitting there in the darkness, armed to the teeth and scared out of my mind, that I got through one more day without the world erupting in flames as the prices of consumer goods soar and there is mass rioting everywhere because of the foul treachery of the Federal Reserve creating trillions and trillions of dollars, thus inflating the money supply, which causes inflation in prices, and for the horrifying purpose of buying new government debt so that the Obama administration can deficit-spend almost $2 trillion in the next year, a debt for which comes to an other-worldly $20,000 a year for each of the nation’s 100 million private-sector workers! Each! With interest due, too!
As you may have guessed, my trigger finger spasmed in terror at the monetary and fiscal insanity, but the Uzi I was clutching with a death-grip did not fire, as I had cleverly remembered to put the safety “on” so that I would not have a sudden explosion of accidental gunfire like, you know, those other unfortunate incidents that nobody likes to talk about, except my idiot neighbors, who perpetually taunt me and call me “gun nut,” and “homicidal maniac,” and “creepy weirdo old man who ought to be locked up” ever since.
Naturally, I object to the label “gun nut” because I am NOT a “gun nut,” although I firmly believe that adult citizens should be allowed and encouraged to carry as much awesome lethal firepower as they are able to lift off of the ground and somehow holster under their bulging, ludicrously-oversized overcoats.
And as for “homicidal maniac” I would say, “No. Not yet, at least. Thought about it, though.”
That leaves the charge of “creepy weirdo old man who ought to be locked up,” to which I explain, in my own defense, “So? Screw you!”
I say, “screw you” because most of them are middle class workers, and middle-class workers are only the middlemen in this gigantic wealth-transfer, as their incomes will tend to keep up with prices.
The people who will ultimately “pay” the debt are those whose incomes do not keep up with the roaring inflation that is inevitable from such stupendous money creation.
In short, the whole thing is paid for by inflation in prices, measured by the poverty and misery of the unemployed, the unemployable, and anyone living on a fixed income, like somebody stupid enough to buy an annuity or a long-bond.
And trust me when I say not to waste your time trying to explain to these miserable poor people that while they got poorer, the rich get richer, which makes the government “do something” by increasing aid to these poor people, which means that the government must sell more debt, which means that the Federal Reserve must create more money with which to buy the new debt, which is borrowed by rich guys to buy the government debt, which makes the money supply go up, which makes prices go up, which makes the misery of the poor worse, and in the end the rich get all their money back plus interest, making them richer while the poor got poorer.
This, in actual practice, I am sorry to say, is the monumental idiocy of the modern Democratic Party, for which I now have absolutely no respect whatsoever, and have as little for the loathsome Republican Party, too.
In fact, the only things you can trust are gold and silver, which have always prospered in the last 4,500 years whenever a government pursued such fiscal and/or monetary insanity, which makes it all so easy that you gotta say, “Whee! This investing stuff is easy!”
The Mogambo Guru
for The Daily Reckoning
The Mogambo Guru
Richard Daughty (Mogambo Guru) is general partner and COO for Smith Consultant Group, serving the financial and medical communities, and the writer/publisher of the Mogambo Guru economic newsletter, an avocational exercise to better heap disrespect on those who desperately deserve it. The Mogambo Guru is quoted frequently in Barron's, The Daily Reckoning , and other fine publications. For podcasts featuring the Mogambo, click here.
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You need a suppressor for that Uzi.
Try a Gemtech MosaadII-that’ll cut down on the complaints from the neighbors.
Inflation is getting so out of hand in India that the Indian government has decided to get rid of their 25 paise coins, since minting these coins was getting too expensive due to the increase in the price of steel.
Google or BING the term
“Govt to scrap 25 paise coins”
to read this story yourselves.
Notice this key detail fellow JMRs, steel is getting so expensive that India decided to just stop minting 25 paise coins, steel mind you. Not silver, not gold, not copper, but steel, one of the cheapest metals a coin can be made out of.
Maybe dull witted Americans will finally wake up to inflation when the US Government stops minting all coins 25 cents or lower. Worldwide inflation is going to reach the US sooner than later.
All Hail Mogambo!
I keep an eye out for silver quarters and dimes, but they are very rare. I keep all my other change, especially nickels, which apparently have metal value of 6 cents now.
i put the google on “value of a paise coin”, 777, here’s what patel sez: (cut/paste)
Because of the inflation, the value of money may be gone down but the value of small denomination coins like 50 paise and 25 paise has gone up.
The 25 paise coin which is of now no value in buying anything has become the choice of coin collectors. Indian 25 paise coin is now the asset class and coin investors invest in it for great profits.
see? this investing stuff IS ez!
wheeeee!
HAHAHAHAHAHA!
For the past ten years I’ve been squirreling away pennies that are older than I am, as they are becoming increasingly rare. It seemed like a silly exercise. I don’t have very many.
But it may turn out to be not so silly after all.
Happy New Year Richard!
Health and best wishes!!
I’ve got some time on my hands, so I decided to annoy you a bit.
I see, you found the victims of new reality (new normal, as it puts my hero, Mr. Gross). It is people on fixed income and people who bought annuities and bonds and saving certificate!!! Like POTUS use to say you put car in “D” – and run over a rentier. No wander right wing calling POTUS a socialist, because he is doing what Marx dreamed to do (Marx theory is little more then applied accurate math mixed with name calling – trivial by modern standard). But here my philosophical take on the situation. I modestly called it:
Triple jeopardy.
Take one.
I do not know if you remember, but I mentioned the law of human relationship. Retired generation expected to get in retirement only as much material goods and services as much productive generation will be willing (voluntarily) provide for them (savings and investments might measure who get more and who less, but not changing the whole sum. The disparity between individuals smoothed by established liberal lowest denominator quality of life standard).
It is fascinating how it works. In ancient society, it was piece of food given to frail and elder that perpetuated that law. In modern society it is social security, pensions, Medicare, Medicaid, welfare, and so force. And as much one use to think it is Social Security fund, or someone savings that provide for retirement, it is really not so. It is the working generation supporting the elders with their labor. It is working generation supplying the goods for the stores and tax for the coffers. It is working generation that physically provides services for the sick patients and frail. It is younger generation buying in the Ponzi scheme called stock market, allowing older generation to divest and cash out. In recent past all that was needed for older generation was in abundance, but it is not that way anymore. It will be interesting to see how younger generation will apply the squeeze. The WG slowed down the stock purchases, so stock market stalled. The WG pricing their professional services (doctors, nurses) so it quickly drains available funds.
The WG takes it easy on hard labor, so unskilled help getting more and more expensive – just because workers voluntarily get less productive – by preferring to be fired from lousy paying menial job – instead of stretching to the limits of pain in order to meet the quotas.
The WG voting for the government that choosing tax cuts as a way to go, so they do not have to share their fruits of labor with those who no longer able to work.
All of the above is already going on. My prediction on this front is dire. See, I have inclination seriously consider erosion of modern society as real possibility. So far, for centuries, American society was able to navigate around dangerous problems due to tremendous elasticity. Latest developments may push society beyond limits of elasticity.
New set of rules commonly called Obamacare can do just that. In reality, it is purely financial shenanigan, but rarely analyzed as such (it can actually reduced availability of medical care for the part of population, but this is beside the point). Here the unstated goals of Obamacare. Make healthy people to fork off for health insurance they not likely to use (for one, they healthy, for two, they likely to choose least expensive plans with humongous co-pays, that they likely not have because they just spent all the money paying for insurance). Eliminate tax refund that mostly generated by mortgage interest and property tax. People either buy useless health insurance, or pay penalty, thus negating their tax refund. Providing Medicaid to people who are too busy to apply for it before is a zero sum game – those people are not likely to use it anyway, or they would have gotten it earlier. All this amounts to huge additional financial burden for the WG. What I predict would happen is follows. People would buy houses only if they are on the much stronger financial footing, and will tend to own them for shorter time. Cash purchases will be more common – why bother with mortgage if you cannot deduct interest. People will start more actively look for cash work under the table. Now employers have incentives to meet that drive, as per employee ratio of take home pay to employer expense getting ridiculously low due to health insurance mandate. Even lowest pay employees sport ratio close to 30%, it is falling even more for better paid workers. I’d say 70% of premium it is powerful motivator to uproot the tax system by agreement between two people. For the practical purposes you can have a crew of tree off the books for the price of one on the books. If all this to become conventional wisdom, consequences are easy to imagine.
Take two.
During the Long Depression in 19th century, and other recessionary events, it was discovered by economists and politicians alike that many problems could be alleviated faster, if only someone continued to lend the money. This is the school Ben Bernanke attended, and ideas subscribed by most of modern elite. After all, money is the small price to pay for political and economic stability. It means savers, capitalists have no say in when and with what interest rate to lend money when money is tight (Marx 1 – Adam Smith 0). From experience of past recessions investor’s wisdom, caution and emotions (fear or optimism) are unnecessary obstacles on the way of continuous function of society. QE – 10 anyone? Remember bond vigilantes? There will be no more. Fed, ECB or BOJ will monetize all the debt. Like N. Roubini use to say public sector crowded out private sector from financial markets. What will happen is productive asset price inflation. That will cause diminished relative return. Then slow grows will follow – no profits to re-invest in overpriced assets. (Bill Gross’s new normal).
Take three.
Imagine revolt in Washington, and contrarians come to power. The chief yearning among those will be to close the spigot. And then someone will explain to them the dark secret of FDR and the fountain of youth. After FDR team of advisers discovered the goods economy dead in the mid 1930th, they team up to create something different – the economy based on massive payments of interest by the working generation. Those interest payments carried American economy from post WWII to post – industrial society. Those payments are core of the economy. The 100k house will generate additional more then 100k interest payment when paid in full. Money from nowhere, money from the thin air – no pollution, no overproduction, no market saturation, like it use to be with goods. Close the spigot and this fountain of youth no more. And without this fountain of youth whole world would soon start feel really thirsty…