How It's Really Done
March 2, 2016
By:
The Mogambo Guru
In the old days, you would gradually provide for your retirement by saving
money, either stashing cash under the floorboards or at a bank.
By the term “in old days”, I actually DO mean all the way back to
dinosaurs, who did NOT save for their retirements (which you can easily
prove for yourself by examining the fossil record), and they all died
penniless. Let that be a lesson to you.
Anyway, the bank at which you saved towards retirement would pay you
somepiddly rate of interest that at least offset the rate of inflation,
and little by little your little stash grew and grew, until one day it was
a mighty oak tree, majestically spreading its strong, leafy branches to
the beaconing sky and... Oops. Sorry. I don’t know where that came from.
Anyway, the bank would use your measly deposit to loan ten times as much
to creditworthy people and businesses, charging them a slightly higher
interest rate. The bank’s profit was the spread between interest paid by
the bank to the depositor, and the monies paid to the bank by the
borrower.
After a while, after years of working like a damned dog at some stupid job
with a horrible supervisor who hated you and refused to recognize your
genius, you would realize that you had enough savings in the bank that you
could take a little risk with some of it.
Make a nice profit. Maybe make enough to retire early!
Quit the stupid job that you were complaining about at the
beginning of this paragraph!
Or maybe - maybe! - make enough that you can ditch the stupid job, pay off
the wife AND the kids, and pick up a hot young trophy wife, retiring to a
giddy life of wildly hedonistic excesses and your own private golf course!
So, with delightful, dazzling, dreamland visions that seemed hitherto
utterly unattainable, you eagerly invest some money in something that your
brother-in-law says will make you (and I quote) a freaking fortune.
Alas, it never does. This is because by the time you invest, everybody
else is already in, you are the last to know, and you are buying at the
high when they are selling out.
Plus, let’s not forget the inescapable mathematical fact that the majority
of investors have to lose so that a minority of investors can make a
profit.
And this, my darling Junior Mogambo Ranger (JMR), is how you painfully
learn that the world is indeed against you, just as you always suspected,
and is always plotting against you behind your back.
You can easily prove this for yourself.
The next time you unexpectedly walk into a room and you see your family
huddled together, furtively whispering something amongst themselves,
notice how they suddenly stop when they see you, with guilt written all
over their surprised faces.
Being a part of the family, you naturally want to be included in the
conversation, so you innocently ask “So what in the hell are you
treacherous, blood-sucking leeches talking about?”
They will all innocently say, almost in unison, “Nothing!”
And if you, just trying to make pleasant conversation, casually ask the
obvious follow-up question, “Are you vicious, emasculating millstones
wrapped around my neck actually plotting to kill me?”, they get all huffy
and answer “We’ve said too much already!”
Case proved!
As an interesting correlated thought, why invest at all, when your success
would just give your family MORE incentive to bump you off and bury your
body in a shallow grave somewhere?
Well, that’s the way it used to be, when one thought of retirement. In
1982, things changed. In that
momentous year, tax-advantaged plans (IRAs, SEPs, 401(k)s, etc.) were
authorized by Congress, all designed to get you to stop that ridiculous
saving and spending of your money, and instead get you to invest long-term
in a glorious gluttony of massive supply-side stimulus (to help the rich)
and the attendant “trickle-down” theory that would, theoretically,
(according to the rich) help the poor.
As it turned out, this meant borrowing money to buy literally tons of
every kind of gimcracks, geegaws and googlies to amuse ourselves, and
“taking care of retirement” by buying an ever-expanding universe of
overvalued stocks, overvalued bonds, overvalued houses, and a huge,
mindboggling swamp of overvalued “born to lose” derivatives from a
gigantic, rapacious financial services industry and the evil banks.
At first, as history proves, it works like magic for everybody! How could
it not? Tons and tons of cash, more and more every year, cascading into
companies young and old, everybody rolling in all that new money! Cash
pouring in with a mandate to build and expand businesses!
Which increased employment of every kind! Which increased
government tax revenues! Which expanded government programs!
Whoopee! Interconnected economies around the globe all busy, busy, busy,
prospering, prospering, prospering on a “build it and they will come”
mentality that required consumers, businesses and governments to amass
gigantic oceans of crushing, unpayable debt to support the colossal,
cataclysmic, crackpot structure built on the idiocy of this false supply
and demand.
And that’s not the bad news.
You doubtlessly noticed the lack of an exclamation point, when it is
obviously deserved, but its absence is used here as a literary device to
cleverly show total exhaustion and loss of all hope.
Well, such gloominess is probably the result of being tired, having just
finished writing another voluminous stack of hate mail to the Federal
Reserve about their monetary policy (“Dear Federal Reserve, You suck!
(signed) Angry Man Who Thinks You Suck”).
This riveting message was composed under the theory that brevity is the
soul of wit, as opposed to my earlier hate mail (“Dear Federal Reserve,
Stop creating more and more dollars and debt, which is guaranteed to end
in total catastrophic inflationary and deflationary failures because (and
pay particular attention here, nitwits) That’s The Freaking Way It Works
(TTFWIW), all the way through history, you fatuous, narcissistic, dim-bulb
Keynesian morons!”) which was obviously ignored, since nothing ever
changed. Except to get worse,
of course.
What originally set me off this time was a piece in Bloomberg Businessweek
about price inflation, which is The Thing To Be Feared (TTTBF).
According to the Fed itself, while their Personal Consumption
Expenditure inflation measure of current fame registers a miniscule 0.4%,
the Fed also calculates other, less benign, estimates from the same data,
all with differing levels of manipulation.
If you strip out food and energy, CPE inflation is running 1.3%. If you
throw out “the most volatile components in any given month,” then it rises
to 1.7%.
If you actually track “what urban consumers pay for a basket of goods” but
without food and energy, then inflation calculates to an unwelcome 2.0%.
And finally, if you pay more attention to “prices of items that are slower
to change with economic conditions” then the Fed calculates that inflation
is up to a worrisome 2.4%!
A 600% difference, with the same data!
Of course, if you look at an unbiased and classical calculation of
inflation as graciously provided by John Williams at ShadowStats.com, then
the inflation-meter seems rudely pegged somewhere in the red zone, north
of 6%, on the famous Mogambo Meter Of Doom (MMOD).
And, being an old fart who has to take a lot of medicines, I am aghast at
AP reporting that AARP’s RxPrice Watch found that “the average cost for a
year’s supply of a prescription drug doubled in just seven years to more
than $11,000.” Doubled! In
even years! For one lousy prescription!
That one pill alone rises more than 10 % a year in raw price inflation!
And think: Can you think of anything that has not gone up in price, a lot,
in those selfsame seven years?
I thought not.
And since the evil Federal Reserve and all the other dirtbag banks around
the world are desperately cooking up more ways to continue to boost the
money supply by increasing debt, which destroys the buying power of
dollars, which creates price inflation, which distorts the economy, which
destroys the market value of your financial assets, which destroys
people, things are going to get worse.
Much worse.
Much, MUCH worse.
And yet you still, unbelievably, hesitate to buy gold and silver bullion,
when the entire corpus of economic history in the last 2,500 years says
that this is EXACTLY what you should do?