Unconventional methods? Buster, I can give them to you in spades!

"... 'Hey!' I say. 'The Fed, without your permission, takes your valuable dollars away and hands you cheaper ones, so it is the same damn thing! And this Greenspan guy you think is some (and here is where I use a real nasal, whining, sarcastic tone of voice) hotshot hero, (back to normal voice) but you are throwing Chinese Ninja Death Stars at me, even though we are doing the same damn, dangity blang, jam blagged ding-dong thing! I'm not stealing your food! I'm giving you money for your groceries! So gimme a break! I'm just using standard unconventional methods!'..."

September 23, 2003 - - Well, the FOMC met and decided to leave interest rates at these once-in-a-lifetime lows. And all you hear is how this is supposed to be such hot stuff. Money is cheaply available for investing and hiring and purchasing and all of that wonderful economics-stuff. And when I say cheap, I mean CHEAP! Short rates are actually less than the rate of inflation, giving you real rates that are actually negative! Wow!

But offering money at rates that are less than the rate of inflation actually translates into an offer for a free lunch. But, and as the savvy dude or dudette that you are, you smile knowingly to yourself, because you realize that there is no such thing as a free lunch. In this case, the people paying for the lunch of luscious low interest rates are the people who are being forced to loan money at these rates. That is, loan money at rates that are less than inflation, forcing them to lose buying power for the privilege of loaning strange people their money!

And there will be a price to pay, of course, as there is always a price to pay. Because, as you have heard over and over and over, and in fact you just heard it again from me in the preceding sentence, there is no such thing as a free lunch. Even though the Fed makes it look like there is.

And the people who are being forced to loan out their money at these historic lows are going to get their money back one day, you can bet on that. They are already making plans about how they are going to get that money back. Perhaps something (cue ominous music) unconventional.

The term "unconventional" apparently comes from Ben Bernanke, who is now an appointed, fully-fledged Federal Reserve weenie, against my advice. Although, to be fair, my literal advice was to get everybody to gather together and go down to the Fed and use pointed sticks to run everybody out of there, and make them disperse into the woods, and then burn the building, and everything in it, to the ground, and then scatter the ashes.

But Bernanke says that he will be happy to achieve monetary policy objectives by unconventional means, and nobody gets all shook up, except me. So I figure that we bedeviled savers out here ought to emulate Bernanke and his Fed, and commit "unconventional" acts of our own. We have got to get our money back here! We are suffering deflation in our discretionary spending account! We demand the same rights as the Federal Reserve! We demand the right to commit unconventional acts and get away with them!

As for me, I note that food expense is one of those big-ticket items, and I make a management decision to achieve gains in that area. Unwilling to reduce my consumption of Oreo cookies, although my wife spying on me already makes it difficult to sneak a few of those tasty chocolate morsels, I must make gains with other, unconventional methods. One will certainly be to walk around the grocery store until I see a full shopping basket that has a lot of good stuff in it. When the person isn't looking, I shove a few bags of Oreos into it, and then it is a simple matter to follow them home from the grocery store and park down the street a ways.

Then they will have to make many trips carrying the grocery bags into the house, and there will be times when the car, which is still filled with bagged groceries, will be unguarded! Then I will run out take a few bags, and leave a five-dollar bill as payment! Now I realize that five bucks is not enough to pay for three full bags of groceries, but these are unconventional methods! I paid five bucks for the damn groceries, and now the person I bought them from is whining! "Hey!" I say. "The Fed, without your permission, takes your valuable dollars away and hands you cheaper ones, so it is the same damn thing! And this Greenspan guy you think is some (and here is where I use a real nasal, whining, sarcastic tone of voice) hotshot hero, (back to normal voice) but you are throwing Chinese Ninja Death Stars at me, even though we are doing the same damn, dangity blang, jam blagged ding-dong thing! I'm not stealing your food! I'm giving you money for your groceries! So gimme a break! I'm just using standard unconventional methods!"

Another of my brilliant unconventional plans is classic Plan A, which is to sneak over to my neighbors house with a long extension cord and tap into his electric power, and then I can run my whole house on free electricity! Of course, I will dutifully go over to him at the beginning of each month and give him, oh, let's say, ummm, ten bucks cash. Now, I realize, and you realize, that my electrical power usage is much, much higher than that, especially considering my latest scientific research attempts to use extremely high voltage magnetic fluxes to turn lead into gold, highly secret scientific experiments that have all been, I am sorry to report, utter failures so far. But, and this is a big plus, I have that sunny optimism that flows naturally from being crazy and stupid, and I have plenty of both of those! So expect good news any day now!

- The G-7 met, and everybody is all huffy about how manipulating their currencies to artificially drive their own currencies lower and the US dollar higher is now a new no-no. And I like the mindless alliteration in that phrase, "now a new no-no," which is kind of funny, and is in fact the only thing that is funny about currency manipulation.

And you will think that way, too, when the Saudis wake up and realize that they are pricing their only asset, oil, waaayyy too low when priced in dollars, which will soon have much less purchasing power, if this G-7 no-more-manipulation thing really gets traction. Of course, if the Saudis can get somebody to buy sand, then they will have oil AND sand to export. But until that time, they are stuck with oil. Which they are selling for dollars, which are currency units that are destined to have much less purchasing power in the future. And a barrel of oil priced in dollars that have 30% less purchasing power brings the new, market-clearing price to, ka-ching, $40 a barrel.

- I always like it when I find people who are in complete agreement with me, since then I do not feel compelled by unseen forces to confront these people at odd hours of the day and night, and scream in their faces, at inhumanly loud volumes, about how they are wrong, wrong, wrong, and stupid stupid stupid, and if they know what is good for them they will completely change their way of thinking to achieve total congruence with what I, the Mighty Mogambo, tell them to think, because I am always right and they are, as I already stressed, wrong, wrong, wrong, and if they do not, then it will prove that they are congenital idiots which I have previously inferred by my use of the repetitious use of "stupid stupid stupid." Slipping into a thick German accent which seems to work wonders for some reason, "Vee haff vays uff dealing mit little geshputzenheimers like you, ja?"

So anyway, both me and the guys at the 321.gold website thought that a line penned by Charley Reese was perfect, shimmering in sparkling brevity and wit, which always makes people says "Hey, Mogambo! How come YOU can't come up with a little brevity and wit?" Anyway, the line was, "All consumption and no production, and we're dead as a nation."

Now, I am not exactly sure what Mr. Reese meant by that, but what I would mean by it, if I had said it, which I didn't, but could have if I was not brevity-challenged and wit-impaired, is that any nation, but you know I am talking specifically about America even though I don't come right out and say so, that is so full of ignorant jackasses that they think you can make an economy out of services and a big government, and not goods, is a nation of brain-dead bozos. And like the fate that befalls any genetically defective organism, Darwinian natural selection will insure that we are killed and devoured.

This simple explanation, elegantly Darwinian while fulfilling the dictates of Occams' Razor with exquisite clarity, tells why there are not any herds of brain-dead bozos left to roam the earth, although anthropologists occasionally dig up a few skeletons and fossils of the rare Brain-Dead Bozo, but which only prove that the genetic lineage of Brain-Dead Bozos is always very, very short. Which explains why there are no dysfunctional economies still in existence. Every member of each population was killed and eaten.

- Gray Davis, the loathsome governor of California, has signed legislation allowing illegal aliens to legally get driver's licenses, so that the Motor Voter law can get them into the polling booths, so that they can vote for him or Bustamante, so that he can keep his job as governor or Bustamante can give him a nice cushy job of, oh, I dunno, the presidency of a university or something.

- One of the nagging questions about the recovery that everyone is looking for is, oddly enough, the same nagging question that my wife has. Namely, "Where is the money going to come from?" To her I readily list my personal sources of where this money is going to come from, namely maybe we'll win the lottery or maybe a long-lost relative will leave me some money in his will, or maybe we will find an oil well in the back yard. To hear my wife tell it, it is all crazy talk, and she has some mindless, simplistic idea that there is one easy answer to all questions, one pithy Philosopher's Stone that will solve all the riddles, and that Easy Answer is for me to, you know, go out and get a real job. "Oh, sure, if you want to take the EASY way out. But you don't really want people to say that we are so lazy that we always take the easy way out, do you dear? Really?"

But I will admit, after long stretches of relentless grilling, that these are not truly viable sources of money on which to base our family economy, much less an entire national economic recovery.

According to the reports, I am not the only one asking this question. People are having such a hard time paying their current debt load, that they are going bankrupt in rising, and record-setting, numbers, and that the number of mortgages in arrears is also high and rising. And speaking of arrears, do these new pants make my butt look big? They don't? Thanks!

So where are we proletariat boobs out here going to get the money to buy all the stuff? Huh? Answer me that one freaking question, and I can tell you what the future will bring.

And since we can't seem to come up with anything, we all agree that we will NOT be buying any stuff. And thus we must also agree that this is only natural, since borrowing money for the purpose of current consumption merely moves the Modigliani life-cycle stream of purchases forward to the present. And I cannot use the word "Modigliani" without thinking about ordering pasta with thick, creamy Modigliani sauce, yum, but it now compels me to grab a piece of chalk and start writing on the blackboard, because I feel a fit of diagrams coming on. Yes, yes, it's getting stronger now! I feel diagrams and arrows coming over me!

Stepping to the blackboard, I say in a voice that is far too loud and with my patent-pending irritating nasal whine, "Here we are at the Present, P and we are proceeding through time to" (and I make a great big arrow leading all the way to the other end of the blackboard} "the future, F. And this implies, by mathematical imperative," (and here I write 2, subtract 2, equals zero, to show the mathematical imperative that I had just alluded to) "that there be LESS consumption, C, in the future, F, because you, Y, consumed, C, that future stuff, or FS, today, N. The future, F, being, of course, where this Big Economic Recovery Thing, or BERT, is supposed to take place, or TP. Which is, and I define 'is' to mean exactly what even Clinton knows it means, today, T, or P sub zero, or N, depending on which one I was using before I lost track of where I was, but anyway this is where the past, P sub minus N, and the future, F, meet." By this time the blackboard is filled with N's and P's and T's and all kinds of letters, and scribbled arrows linking them together in some psychedelic, madness-induced web of interconnections. My voice rising in excitement and anticipation, I simultaneously beat and grind that poor little piece of chalk into the very surface of the blackboard with strength born of anger and betrayal, and, my voice rising to a fevered pitch, I continue "And it is here, at the present, which is P, or N, or whatever in the dang-blanged hell you want to call it, THIS, and I mean right freaking HERE, is where all the crap happens! It never happens in the past, P sub T minus 1. Ooohhh noooo! That would be too damn convenient! And your whole world doesn't collapse around your damn ears in the damn future, F, either, ohhh noooo! It always happens right freaking now, RFN, in the present, which we angrily denote with that dagjabbity, blangity blang damn P, P, P, P!" And then I draw a lot of arrows coming in from every angle to converge on the present, P. And then I hastily draw a B-52 bomber flying above it all, and have it dropping bombs on that cursed letter P, too, and make very realistic explosion noises as the bombs explode. Kapow! Boom! And I draw lots of squiggly lines to illustrate bombs exploding and destroying everything. And then I draw a few bolts of lightning striking it, with the appropriate sound effect, and then I just viciously smash the poor little piece of chalk into it over and over, over and over, until the air is filled with a cloud of atomized chalk dust.

"But we just showed that Americans borrowed heavily, BH, to bring future more-consumption, FMC, into the present, P, which exported present less-consumption. PLC, into the future, F, which is now the present, P, whereas it was once the future, F, but now it is already the past, N sub T minus one. So what we have, canceling terms, collecting variables, is that current consumption, C, has been exported to the past, JQR, and less consumption, PMV, has been imported from the past, XCB, into the present, zippity doo dah, and that is why the future, FMXJRB, is, is, the, is..."

My voice trails of, and collapse to my knees, head sunk to my chest in weary resignation, and I am exhausted and spent by the valiant effort. Confused and exhausted, I am ready to just assume that the United States will win the lottery.

- Steve Puetz, he of The Steve Puetz Letter, is apparently not as sanguine and upbeat as people say, as he writes, "There are bubble signs for the stock market as well. The signs include wildly excessive stock market valuations and rampant optimism combined with tightening credit conditions. This combination has always been lethal in the past. There is always a delay between the time when credit is tightened and when it finally impacts the stock market and the economy. A sharp drop in financial activity started during June, and the slide has persisted since then. The economic impact is just now becoming visible through rising unemployment claims." Well, big deal, huh? I've been saying the same stuff for al long time, but only he manages to do it with much more class and much less cursing. But there is an upshot! He goes on to say, "The ongoing credit-crunch will become painfully obvious during October. By November, the economy will be mired in crisis." You have been warned.

- Doug Noland, waxing philosophic like he does so easily and elegantly, disagrees with Milton Friedman's sanguine assessment of the economic situation. "Dr. Friedman's calamitous error (which is perfectly consistent with his flawed analysis of the causes of the Great Depression) is to believe that the Fed has 'handled' the situation adeptly and successfully. Dr. Friedman, along with so many others, is analyzing the situation incorrectly. The reality of the situation is that the Fed has not 'handled' anything other than prolonging an increasingly dangerous Bubble.

Then Mr. Noland, or Doug as I like to call him when his back is turned and he can't hear me, seems to be thinking along the lines of Steve Puetz, when he writes "For too many years we've witnessed the unstable U.S. and global financial systems nurture repeated 'miracle' booms and subsequent devastating busts. We watched repeated blow-offs, and their manic existence was measured in quarters and not years. Today, we're just witnessing The Big One." The only thing he does not do is forecast sometime in November as a, or the, Day of Doom.

- Porter Stansberry, editor of the Stansberry Investment Advisory, wrote a very interesting essay entitled "Lying Liars at the Fed. " He quoted Alan Greenspan finally standing up and saying what everyone has known for years and years, "Uncertainty is not just an important feature of the monetary policy landscape; it is the defining characteristic of that landscape... Our problem is not the complexity of our models but the far greater complexity of a world economy whose underlying linkages appear to be in a continual state of flux." Therefore he is saying, according to my interpretation, that it is impossible to develop fancy mathematical models of economic certainties, because the Fed finally admits that there are no economic certainties. And so, Greenspan is admitting that they have acted like chumps, and have been relying on models that require economic certainties, and that is why the Fed has been such a miserable failure.

One of these calamitous errors in judgment is the bedrock premise that the lowering of interest rates always induces investment. This is obviously not so, and you would think that among the legions of jackass economics doofuses that graduate from American universities with their little precious PhD's in their hands, that one of them would comprehend that important feature. But no. They don't. They know the babble, and can chant the buzzwords, but they have no idea what in the hell economics is.

To them, a new corporation that has no debt and is considering acquiring debt to operationalize their business plans has the exact same approach to cheap debt as an old, heavily-indebted company that can already barely make the payments on its crushing debt loads. This is patently absurd. Yet, there is no distinction between the two cases in the Fed's models, and the Fed actually believes that both companies will react exactly the same to a lowering of interest rates.

Mr. Stansberry notes, "Not surprisingly, one of the most enduring relationships in all of economics is the one between the amount of money circulating and inflation. The more money, the more things cost. As Greenspan himself recently cited, since 1959 the unit money supply (M2 to real GDP) has increased at an annual rate of 3.7 percent. Or... in other words... even adjusting for a larger economy, the amount of money in circulation has increased, on average, by 3.8% each year since 1959. Guess how much prices, as measured broadly, have gone up, on average, each year? 3.7%."

Then what about the persistent, obscene ballooning of M2 since Greenspan got frisky in the early 90's? Well, you can take it to the bank that price inflation will rise until it is fully reflected in prices, because it always does. Or, as Mr. Stansberry says, "The long-term relationship between money and inflation is one of the only sure bets in economics."

And one of the other sure bets is that Alan Greenspan, Ben Bernanke et al will be reviled, and forever held as two of the worst examples of irresponsible central bank idiocy in all of history.

- The Daily Reckoning people note, "And the bond market's guess about inflation - as measured by the difference between what investors are willing to pay for 10-year Treasury notes and similar bonds that are indexed to inflation (TIPS) - fell below 2%. Looking 10 years into the future, bond investors do not see inflation as a threat. Or, they are just stupid. We suspect it is a little of both."

To this I, the Mogambo, add yet a third possibility. Profit. The deal is that the Federal Reserve will keep interest rates absurdly low until, and this is where it gets real weird, at least some undefined, extended period of time, as measured in the Earth metric known "months, if not years," from here. Ergo, your cost of funds is low, but your returns are low. Seemingly a very bad deal.

But, and here is the "Big But," which I just invented and was going to call the "Mogambo Big But Theory," but, well, you know how the title sounds, but when you have the most powerful money-machine the world has ever known promising to use it's unstoppable muscle to rig the market so that the buyer of government debt today will realize profits, as interest rates are being, as they were promised by the Fed, pounded down and down and down, then savvy players will play. And if this were a Roadrunner cartoon, then this is where old Wily Coyote runs off the cliff, and as the camera angle goes straight down, we watch Wily Coyote falling and falling, getting smaller and smaller, falling and falling, disappearing toward the distant desert floor, miles below. Eventually, just as the hapless coyote is so far away that he is just a dot that disappears, we witness him hitting the bottom, as evidenced by a puff of smoke created by the impact. Bang!

But, there is a desperation attempt to fight economic gravity, just as the falling coyote flails his arms comically in a ridiculous attempt to literally fly. To no avail. Likewise, the Fed is flailing it's arms in desperation. And, here is where it gets weird; in the cartoon, the coyote sometimes actually DOES suspend the laws of gravity. He, then always, of course drops straight down. Likewise, and I think this is the second time that I have used the word "likewise," does the arm-spinning of the Fed also produce a coyote suspended in mid-air. But, in economics as in cartoons, suspending laws of gravity is only temporary. Then it is down. Down and down, growing smaller and smaller, until you hit the desert floor, far, far below. And then a little puff of smoke and dust thrown up from the meteoric impact.

- Ever since last week when I announced that I was the best investment advisor in the world, there has been no reaction by the media. This I offer as yet more proof, as if I needed any more, of how everybody is out to get me. And in this case, denying me my time in the sun, my fifteen minutes of fame! My shining moment! Paparazzi groveling at my feet, escorting Hollywood starlets to movie openings and award shows, with my wife in the background trying to get a bead on me with a .30-.30 deer rifle. You know, the stuff legends are made of.

Anyway, it didn't work out since everybody is out to get me, as I lament so often that even I, the patient Mogambo, and I mean "patient" in the way of forgiving and unhurried, as opposed to the kind of patient that is sick and needs the attentions of trained medical personnel, even though being prescribed pills of something soothing to whack me out of my skull for awhile sounds pretty good right about now, just so I'll stop thinking about what's going to happen from the economics perspective.

But the plan was to parlay my investment acumen into a little box-office, make the rounds, maybe do the Tonight Show, maybe a guest shot on the Hollywood Squares TV show would be a nice touch, too. And center square, as befits the status of the number one investment advisor, me, on the whole planet!

So, and here's what I am thinking, see; my own TV show. Sure! It'd be great! We sit around bad-mouthing everybody who doesn't agree with us! And we have this big electronic scoreboard behind us that continuously updates how much money WE have, since we are all in gold, and how little money everybody else has, since they own everything else.

Well, I assumed these were the sentiments of Reggie Laubmeier, who is a Trust Coordinator and loyal reader, so I assume that a Trust Coordinator means "angry paranoid recluse," writes ,"I am calling my cable company and demanding the Mogambo Network immediately!" Go for it. Reggie!

The upshot is that I suddenly have a lot of time on my hands. Too much time. And as the guy in high school who was voted "Most Likely To Snap One Of These Days," I put this found time to good use, as usual, by growing more fearful and angry, which are the two stages of shock in which I seem to be stuck. Like the hero of some Greek tragedy, I never find relief from torment, like the guy eternally having a buzzard eating my guts out, but without, you know, the guts part.

And here in these two stages I will remain, because the last two stages of shock are "bargaining" and "acceptance." Well, I wryly note that there is nobody to deal with, so that stage is unattainable by me. And the final "acceptance stage" is unacceptable, as I do not accept the sorrowful fate that awaits those who pursue a wrong-headed and asinine economic theory. I looked in the history books and looked up what those ancient people did in this situation, and they bought gold. So I bought gold. And you ought to buy gold. But a long harangue about gold is NOT what we are doing here, even though it would afford me the opportunity to scream interminably and incoherently at the top of my voice until I pass out from the sheer exertion about how you should to be buying gold, and wondering why you are not buying gold, and wondering how long it will be until you DO start buying gold., and how even high net worth people are starting to accumulate gold, and so what in the hell is the matter with YOU that you are not accumulating gold, and blah blah blah.

I used to also find refuge in the first stage of shock, namely "denial," as in "I cannot freaking believe that the government is doing this!" But after awhile you get so jaded that, any more, there is almost nothing I will not believe, especially if it involves a government so corrupt that literally everything it says or does is a big fat lie.

Well, my recurrent nightmare aside, I continue unabashed. Ergo, I continue, the rise in gold and handgun sales. Well, actually, I just made that last statistic up, since I have to idea how the sales of handguns go, since I already have some of my own, and probably will never need to buy another one, or two, or seven more handguns ever again. Well, maybe that bazooka I've had my eye on, simply because I'm still just a kid at heart.

But these days my thoughts turn to less lustrous avenues, and I consider the social and societal ramifications, and I cringe to ponder them. Remember Pandora's Box and how all manner of afflictions escaped? Well, the collapse of a monetary system is sorta like that, only worse. Just as "everything is always about the money," in the future the lack of money will be all about everything, which is a nice juxtaposition of a phrase, and seems like it could mean almost anything, but you get my drift. There won't be any money. And lots of people will need lots of money just to stay alive, and they won't have it, and have no way of getting any, and they are going to get testy.

And the government will, of course, try and Do Something, and they will print more money, as that is their only easy option. Then they will decide to have some emergency tax of some sort, and will respond to the rising chorus of "soak the rich." Then they will decide to go to war against somebody, hoping that will give you something to think about other than the fact that you are broke and miserable and how the bozos you elected to office are directly responsible.

If there were other options available, then surely one country in the whole history of countries would have thought of it. But none ever has, even going back to the Egyptians, and even back before that, for crying out loud, back when all that existed were nomadic bands of primitive humanoids wandering about gathering nuts and berries, scratching their privates like Major League Baseball pitchers, hunting mastodons, and sitting around the campfire singing songs of love-gone-bad in a 16-bar blues format. With lots of percussion instruments. Sort of like Rap music, only not as primitive or nasty.

And why were they were reduced to bartering mastodon meat and stone axes? Their fiat currency was finally debased and it ruined them, and they then had gone back to the gold standard. But since mining gold was not yet invented, they, as I said, resorted to bartering meat and tools. But the point that I am trying to make, and if you are just patient enough you will find that I usually get back to the point, not one country has ever, EVER I tells ya, succeeded in printing their way out of their economic mess! Not one! None! Zero! Zip! Squat!

And to prove my point, I suggest that you go and take a look at the future of the planet. To do this, go and rent the videotapes of "The Planet of the Apes," or "Beneath the Planet of the Apes," or "Escape from the Planet of the Apes," or "Godzilla Attacks the Planet of the Apes," or "Rodan Escapes to the Planet of the Apes, and Went Beneath It, but Arose From Underground to Fight Godzilla, Which was Only Knocked Unconscious and Not Actually Killed in the Previous Planet of the Apes Movie," to name but a few. And when you see these movies, you can't help but notice that there were collapsed ruins of everything, including the New York Stock Exchange, and if you look closely in the background you can see Dick Grasso still collecting severance pay from it.

But, and mark you well, unexpectedly lapsing into a Shakespearean-sounding phrase of sorts for no apparent reason, you never see the ruins of the Federal Reserve building in any of these movies! I assume that is because the Fed is printing money with every ounce of strength that they can muster, and is promising to do more and more of it until the Earth is consumed by the sun going super-nova in a few billion years, and that the sheer power-consumption of creating that much money caused it to overheat and the whole thing glowed red-hot, and then white-hot, and then just melted into a big, smoking crater in the ground in a big, final meltdown. And how that, as we now know, is what is causing the collapse of the world, and our future is the destruction of mankind, the rise of the apes, and the subjugation of mankind, and Charleton Heston telling some ape to "Get your dirty paws of me, you filthy ape!" Remember? And that's how we got to be the Planet of the Apes! Remember now? Dude, didn't you learn anything in school?

Well, then, we'll just take my new TV show and have an educational segment, and air excepts from those movies, and show the people what happens when they let the Federal Reserve and their own government do these things!

- Charles V. Tulley is one of those guys who knows how desperately I need stuff to run my fat mouth about, and knows that I think all pensions, and especially extravagant pensions, have to be paid by somebody, and that means higher costs, and that means price inflation, and that means that the damn government or anything that can tax me or get money out of the damn government WILL tax me and WILL get money out of me, and how I am a believer that price inflation is what causes people to suffer and starve to death in the damn streets and then there is revolution and then there is chaos and lawless acts of desperation by desperate people, and the next thing you know all the donut shops are closed and gutted and THEN what in the hell do you do, huh? So he sends me a link and uses the catchy phrase, "Get a load of this."

I am instantly intrigued by the phrase "get a load of this," as there have been many, many moments in my life when something very amusing happened soon after somebody tells me to "get a load of this." So anyway, what he was referring to was an article entitled "Sac City to Revisit Pensions," by Dorothy Korber. The blurb underneath the headline was "Extra-lucrative plans of ex-superintendent, some others could haunt the district." One of the first paragraphs to jump out at me was, "The Sacramento City Unified School District faces serious questions about the legitimacy and propriety of a little-known retirement system that nearly tripled the pension of the district's top administrator and sweetens the benefits for 100 other employees." It comes down to, as I gather from my superficial reading without any comprehension whatsoever, that these guys set up a new pension plan that works out real sweet for them. So well, in fact, that guys and in their 50's, with less than three years on the plan, are retiring with more than double what the average family earns in a whole freaking year. Wow! And there are all sorts of recriminations and charges and counter-charges back and forth, as powerful entrenched political officials lash out like cornered rats and outraged people like me snipe at them like the snapping, angry dogs we are.

The most refreshing part was the admission by a guy name Sweeney, "I know damn well I didn't do anything wrong. The average person is trying to maximize their income and their retirement within the context of the law and what's right and fair. I want to get my fair share of income in my retirement for myself and for my family. I don't apologize for doing that."

Didja get that part about "fair share?" This is typical Leftist ethical corruption; totally unapologetic about raw power exercising raw greed, as it exploits a loophole in the literal law, and all neatly characterized as a loyal American meting out fairness and justice! Spreading freedom throughout the land! Helping the poor and downtrodden! And taking care of the precious children- thinking of nothing but the precious, precious children! -and the hallowed nuclear family. What a guy!

In a spookily-similar vein, we get another "get a load of this" from the article "Bean-Counting Bums," by Christopher Byron of the NY Post. In it, he lays accounting scandals at the feet of the willing perpetrators of accounting crimes, namely accountants. "Simply put, these accounting people are really despicable. They're educated, they're intelligent, and they call what they do a 'profession' - meaning that they regard it as work pursued for the excellence of the effort and not for the money. Yet when it comes to Wall Street and the institutionalized corruption that passes for self-regulation, they have been nothing more than the piano players in the brothel." Not having ever been a piano player in a brothel, but I secretly think, deep down, that it could be a really terrific job. But I am pretty sure he means it in a more pejorative way.

He continues, "There are plenty of individual accountants who are fine upstanding citizens, I am sure. But as a profession, forget it. They have a skewed moral compass that points to their paymasters instead of their customers; they game the system at every opportunity; and worst, they hide disingenuously behind bogus excuses like 'client confidentiality' to duck responsibility for their actions."

In similar vein, Tim Picks, writing an essay entitled, "Tech Bubble Lessons as Prologue" opines, as I now opine, that "One of the main lessons to be learned from the tech bubble is that a dishonest accounting system does great harm."

It is with this jaundiced view of accounting that I am surprised to read of the SP500 registering, suddenly, such huge gains in earnings. They went up $4.37 to $34.67, a gain of 14%. Just in time, too! The old earnings had a P/E of almost 34, which is insanely overpriced by any measure! Now the P/E is down to only 30, which is soooOOoooo much better, as it is not insane by ANY measure. Only on most measures. Almost all of them. But not all. After all, it was at a P/E of 34 not that long ago!

In another very similar vein, at least for me, we visit the Mises.org website to "get a load of this" in the essay by George Reisman, "Sins of Businessmen, Crimes of Politicians." Taking roughly the same take on despicable behavior, he approaches it from the perspective of the public officials and government corruption. Especially when the corruption has been financed by excessive, long-term and insanely generous fiscal and monetary policy. "Thus, a heavily interventionist economy necessarily seethes with corruption and immorality. In sharpest contrast, the activity of politicians and government officials is always inherently negative-it is always destructive or threatens destruction. Given the extent and scope of the transgressions of the government today, one must say that while there may be many businessmen engaged in activities ranging from various sharp practices to outright fraud, the government and the politicians who determine its activities are routinely, day in and day out, engaged in massive theft."

- Stephen Roach of Morgan Stanley must be an interesting guy, because he says some humorous things, like "America jobless recovery appears on a collision course with the Bush Administration's re-election hopes. With America's fiscal and monetary levers already fully engaged, the currency option takes on new and critical importance as the only means left to provide macro stimulus to a beleaguered labor market."

He was talking about the new push to devalue the dollar by letting currency markets clear without manipulation and intervention, and he thinks it will be an, "unequivocally positive development."

What are these unequivocally positive developments? "As an important aside, a weaker dollar will also be helpful in America anti-deflation campaign -- having the effect of transforming imported deflation into imported inflation." Hahahaha! Inflation is helpful! I told you this guy was a card!

But other things, too. "For the rest of the world -- or at least the major countries or regions that would have to bear the burden of the dollar's correction -- the impacts are the mirror image of those facing the US. As the yen and the euro rise in response, export competitiveness in Japan and Europe will be diminished."

He continues that "Some of the burden of the dollar's adjustment will now be shifted away from Europe to Japan." By this I suppose that these Japanese dudes who bought up all of those dollar-denominated assets will realize massive losses, when computed in new, stronger yen. Hahaha! Japs are chumps! Japs are chumps!

I got new for you Mr. Roach; you ain't seen nothing yet, as regards fiscal and monetary levers. You want fiscal policy levers pushed to "unconventional?" How about a tax credit for all my business losses, plus a nice 10%? Therefore, for every dollar my business loses in expenses, I get $1.10 back from the government! I'll start a dozen businesses tomorrow, and hire anybody who walk through the door!

You want the monetary lever similarly pushed to "unconventional," too? How about the Federal Reserve directly loaning us money at the Fed's discount window and then, as mini-banks unto ourselves, letting us use fractional reserve accounting to multiply that money by 100? It makes sense; we will not have to pay back all of the money at once, and so I need very little money on hand to make payments to the depositors, (the Fed) so why not fractional banking on a personal level?

Man, I could go on like this for hours and hours. Because when it comes to government wheezes, the sky's the limit!

- I was amused to read a Philly headline on the Prudent Bear website, "Use More Risky Investments, N.J. Pension Board Is Urged." So I practically break my arm trying to link to the site because I thought is said "more risque investments," but no such luck. But it was very interesting anyway, or at least I think it was, since I was sorta scanning superficially like I do and hoping there would be some pictures. "State officials say they need to try something to expand the fund more rapidly if they are to continue paying New Jersey's relatively generous pension benefits without requiring multi-billion-dollar taxpayer subsidies over the next several years." Now, for me, the first funny thing is that the New Jersey state officials use the cute phrase "taxpayer subsidies" instead of the word "taxes." Cute. Orwellian NewSpeak in action! This is so cool, to see whole chunks of his book, "1984", coming true in real life!

Anyway, I suppose that these state official weenies think that the assets that are in the damn retirement plan in the first place are NOT the result of taxes? Of course they were! Where else could the money have come from, doofuses?

But the big problem, which I will re-write as The Big Problem, or perhaps even shorten it to its acronym TBP, is, of course, that the New Jersey government jackasses have promised, like all government jackasses all over the place, more free lunches than they can deliver, and to keep from having to raise taxes ("increase taxpayer subsidies") to pay the vastly increased bill ("net asset transfer"), they are taking the assets ("net deferred taxpayer subsidies") down to the casino ("net return enhancement program") and placing riskier ("higher-yielding") and riskier ("even MORE higher-yielding") bets ("pension investments"). The funny thing is that they are piously wringing their hands, worried about the possibility of corruption that would come from a management and oversight structure of a riskier investment stance!

Now, the conservative investment approach that they have been using is nothing to get excited about, either. "New Jersey lost about $25 billion, or 30 percent, of funds' value in the 2000-02 bear market." Now, this horrendous investing performance was with LESS risk than what they are now being urged to take on! They still lost with less risk!

They lost 30% in two years, and now they want to take that incredible investing acumen and apply it to riskier things? Wow! But since there is nothing in the news about mobs of angry, screaming people taking to the streets in blood-lust, I must assume that the people of New Jersey are not the least bit concerned that their retirement accounts are being managed by guys who are, apparently, pretty incompetent. For me, I count my lucky stars that my retirement account is NOT in the capable hands of the state of New Jersey, or else I would be gobbling down tranquilizers like candy, just to keep from screaming and crying uncontrollably in stark, paralyzing fear. Ugh.

---Mogambo Sez: The market will probably hold up until the end of the month as the end-of-quarter window dressing takes place, as loser money managers sell their losers and buy the stocks that were winners.

Richard Daughty is general partner and C.O.O. for Smith Consultant Group, serving the financial and medical communities, and the writer/publisher of the Mogambo Guru economic newsletter, an avocational exercise the better to heap disrespect on those who desperately deserve it. The Mogambo Guru is quoted frequently in Barron's, The Daily Reckoning, and other fine publications.

The reality of the situation is that the Fed has not 'handled' anything other than prolonging an increasingly dangerous Bubble.

"There are bubble signs for the stock market as well. The signs include wildly excessive stock market valuations and rampant optimism combined with tightening credit conditions. This combination has always been lethal in the past. There is always a delay between the time when credit is tightened and when it finally impacts the stock market and the economy. A sharp drop in financial activity started during June, and the slide has persisted since then. The economic impact is just now becoming visible through rising unemployment claims."

The market will probably hold up until the end of the month as the end-of-quarter window dressing takes place, as loser money managers sell their losers and buy the stocks that were winners.

1. Right

2. Right

3. Wrong

Richard W.

" So anyway, both me and the guys at the 321.gold website thought that a line penned by Charley Reese was perfect, shimmering in sparkling brevity and wit, which always makes people says "Hey, Mogambo! How come YOU can't come up with a little brevity and wit?" Anyway, the line was, "All consumption and no production, and we're dead as a nation."

Single best part of this very, very, incredibly, amazingly, gut-wrenchingly long article. I like Mogambo, but dang if he doesn't need to lay off the caffeine. Edit, man, edit! Fewer words, more actual talking points. Is this guy paid by the word?

I like Mogambo, but dang if he doesn't need to lay off the caffeine.

The guru without caffeine is like coffee without caffeine -- why bother. Ever listen to Kudlow and Cramer? Now there are a couple of REAL screwballs that should have been locked up long ago.

Richard W.

According to the Guru, this will come to a head soon (November)According to the chart at Zeal Research, the market hasn't hit bottom yet in terms of P/E ratios..

A couple of threads back, there was a link to an article in which a young american journalist spent some time with an old Austrian economist. The old Austrian gave the US economy 12 - 18 months before it tanked. If I remember my U.S history, the stock market tanked first, and then six to eight months later, jobs disappeared. Things we were warned about appear to be coming true. What do you think?

If I remember my U.S history, the stock market tanked first, and then six to eight months later, jobs disappeared. Things we were warned about appear to be coming true. What do you think?

I believe that we are living on borrow time -- and money. The economy is on life support provided by the massive liquidity injections of the FED and a runaway government trying to borrow and spend its way through the next election. Lots of political power is being exerted on the economy right now as the illusion of economic recovery must be preserved. Can the monetarists delay paying the piper? Yes, and they are pulling out all the stops doing so -- which will make the final reckoning just that much worse. Can the avoid paying the piper -- NO.

Greenspan has turned the economy on its head already with his silly ideas about new era structured finance and his arrogance at being able to micro manage everything. Black is white and good is bad. Savings are bad and borrowing and spending are good. It is a sure plan for disaster.

Richard W.

Can the monetarists delay paying the piper? Yes, and they are pulling out all the stops doing so -- which will make the final reckoning just that much worse. Can they avoid paying the piper -- NO.

Thanks for your reply. Although I took only basic economics in college, it appears to me that the U.S. economy is heading for a major train wreck. The civil servant pensions that the Guru talks about are a big deal - a direct result of the rise of civil service PAC's IMHO.

What worries me is that there is a very large percentage of people who are now employed by the government. I'm looking at the decline in tax revenues, coupled with the debasement of our currency (ie. potential hyper-inflation due to excessive credit creation by the fed), and I'm thinking to myself "this is going to get extremely nasty." Government make-work programs are part of the problem this time, and it is difficult for me to see them as part of the solution, (ie. CCC, WPA etc.) like FDR did in the 1930's. So, this begs the question: How will the United States find it's way out of this mess?

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