November 20, 2013
By:
The Mogambo Guru
Gearing up for Thanksgiving dinner, I am not going to be caught interpersonally unprepared this year, and am compiling some handy notes that I can use in the inevitable awkward family conversations, such as somebody remarking “Boy! There are some good smells coming out of the kitchen!”
This year I can keep the conversation ball rolling along by instantly having a clever comment at hand, such as “Yeah! Much nicer than the foul, stinking stench coming out of a corrupt, brain-dead Washington, which is, of course not coincidentally, where the evil Federal Reserve is located, which has been at the forefront of ‘corrupt and brain-dead’ for most of the last century.”
And if they respond with something dorky, like, saying something about pumpkin pie or trying to watch football on TV, then I can keep things moving along smoothly with another handy conversational tidbit, such as “And if you sniveling Earthling carbon-blobs think that you can escape the terrible, inevitable inflationary and bankrupting price to be paid for such irresponsible over-creation of currency and credit by your central banks, then from the Imperial Star-Chamber of the Inter-Galactic Tribunal I bring you their laughter, their scorn, and their utter disdain!”
At which point I will laugh a cruel and mirthless Mighty Mogambo Guffaw (MMG) in their dumbfounded faces, a laugh unmistakably reeking with the aforementioned scorn and utter disdain, “Hahahahahahaha!”
I began
thinking of this clever conversational trick when Junior Mogambo Ranger
(JMR) Phil S sent me an essay by Dr. Ron Paul, who is one of the very few
people that know what is really “going on” with fiscal and monetary
policy, and is thus (I assume) completely sure that We’re Freaking Doomed
(WFD) to suffer the burning inflationary hell and tragic collapse that
such insane increases in the money supply/debt always cause.
It was
at that precise moment that I realized I needed my new conversation
helpers, as instantly I comprehended that nobody of Dr. Paul’s caliber is
going to be at the Thanksgiving dinner, and so I’ll have nobody with which
to talk about important things, like how the Federal Reserve is the worst
thing that happened to this country since the traitorous FDR extorted
compliance from the Supreme Court to rule that he had the power to change
the Constitution where it says that money had to be gold and silver, put
there so as to constrain the growth of the money supply and prevent
inflation in prices, and that Roosevelt could make money out of anything
he wanted.
In
light of this treachery and perfidy, I note that, actually, Dr. Paul’s a
little too refined and classy for my tastes, as he has consistently proved
completely unwilling to (like me) happily and angrily slop around in the
filthy gutter of rude name-calling, slanderous mischaracterizations,
backstabbing blowhard blabbering and making loud, bellowing noises of
Ultimate Mogambo Outrage (UMO) about the evil Federal Reserve and
Keynesian morons everywhere who are absurdly justifying such suicidal
increases in the money supply to finance continual government
deficit-spending of more than a trillion dollars a year, and how they
should all be rounded up, tried in a quickie kangaroo court, found guilty,
and then shackled in some stinking, dark and dank dungeon as punishment
for their deliberately causing the inflation in prices and higher
bankrupting debt that all this new money necessarily causes, and who
directly cause the doleful destruction of the buying power of the poor
(who had no money to begin with), and the middle class, whose wage
increases always lag price increases.
“Thusly,” I thunder, “monetary increases are paid for with misery! Shame!
Shame and a pox on the Fed and all their houses!”
By
contrast, notice that Ron Paul never mentions anything about Ultimate
Mogambo Outrage (UMO), or about throwing Keynesians into prison, where
they get what they so richly deserve, for killing our money and the
economy with the idiotic, bone-headed conceit and arrogance of Keynesian
monetary stimulus.
Instead, the clever Junior Mogambo Rangers (JMRs) among you no doubt
noticed -- aha! -- that he says the exact same thing when he writes that “It
is no wonder that governments fight tooth and nail against sound money, as
sound money protects the well-being of the middle class and the poor while
preventing the expansion of government.”
And how to expand the
government? Easy! Get the Federal Reserve to create the currency and
credit necessary to buy more new government debt!
And how to do that?
Get the Keynesians to justify it with some of their preposterous,
incestuous equations and their century-old, idiotically vague promise of
one day “paying down the debt” out of the, supposed, economic growth,
which has never actually happened in the last 100 years.
Well, guess what? One
of the basic, building-block keystones of the Keynesian school of
economics is the Marginal Propensity to Consume, which is the answer to
the question “If you give a man a dollar, how much will he save and how
much will he spend on consumption?”
It
turns out that, according to an article in Bloomberg Businessweek
magazine, that somebody realized that “the poor behave differently from
the rich” when it comes to Marginal Propensity to Consume! Give a poor man
a dollar and give a rich man a dollar, and they do different things with
it!
And
now, shockingly, a Keynesian constant has been shown to be a variable!
In short, the whole mathematical edifice of the travesty known as
Keynesian economics is resting squarely on a farce! No wonder it has never
worked! Hahahaha!
Sadly,
this isn’t the end of it, as one of the more idiotic parts of current fad
of Keynesian/Federal Reserve thinking is that they think that inflation in
prices is “good” because it allows a debtor to pay off old debt “cheaply”
since that old debt has fallen in value because of the inflation, and thus
interest rates are now higher.
This
insane proposition is equivalent to replacing old, low interest-rate
Treasury debt with new, higher interest-rate Treasury debt! Hahaha! This
really cracks me up!
From
the investor’s perspective, suppose he originally paid $1,000 for a bond
with a 1-percent coupon (meaning that it pays $10 per year), when interest
rates were 1 percent.
But
when interest rates double to 2 percent, that $1,000 bond, still throwing
off that $10 per year, is worth only a measly $500. The owner of the bond
has lost half his investment!
He invested a thousand to have only five hundred left! Yikes!
This is
the point when I expect people to rise as one, indignantly jumping to
their feet and shouting their anger to the skies. “The Mogambo was right!
We’re being screwed by a fiat currency and a corrupt government! Abolish
the Federal Reserve and put the dollar back on a gold standard before we
perish in bitter anguish!”, but they never do.
From
the perspective of the banks and government, however, it’s a pretty sweet
deal: They borrowed $1,000 at 1 percent ($10 per year) from some sucker,
and to pay it off would cost them $500. “Thanks, suckers!”
Offsetting this, though, is the fact that the $500 needed to pay off the
bond would have to be borrowed from some other sucker at 2 percent,
costing the banks the same $10 per year.
So (and
this is the important part) at the End Of The Freaking Day (EOTFD), the
government still paying the same $10 in interest expense, has half as much
debt, some pathetic lender is screwed out of half of his investment, and
everything costs more (since all the money involved was originally created
from thin air and has long since worked its way into the economy), making
life more miserable for the poor, and (of course) for the people who
invested in government bonds.
To add
to the nightmarish quality of this upcoming Thanksgiving, Janet Yellen,
the ridiculous Federal Reserve hotshot destined to be the next chairman of
the Federal Reserve, thinks that inflation is good! She’s actually said
it, making it a grim certainty! How’s THAT for giving thanks?
Hopefully, someone at the Thanksgiving dinner will pause, perhaps
mid-forkful, and ask “Please tell us, Fabulous And Wonderful Mogambo
(FAWM), what can we do? Are we doomed to suffer catastrophe because we are
so stupid as to allow the Federal Reserve to create so much currency and
credit that we must drown under absurd levels of debt and a gargantuan,
gorged, gluttonous Gestapo-like government? Is there no hope?”
It is
then -- then! – that I make my move into Thanksgiving history, where
legend will say that I smiled enigmatically, arched one eyebrow, leaned
forward conspiratorially, and with a sneering smile of smug certitude,
revealed Profound Cosmic Wisdom (PCW) by saying three words.
“Gold.
Silver. Oil.”
The
legend will say nothing about me saying “Whee! This investing stuff is
easy!”, but you can be sure that’s what I will be thinking.
And
giving thanks for it at Thanksgiving, too, being such a lazy guy who is
too stupid to do anything complicated or make a series of good decisions.