The dinner roll model of Yale
economics By The Mogambo Guru
Clif Droke asks in his headline "Is
Recession Unavoidable?" If I had been assigned
that topic upon which to write the definitive
essay, I could have saved both the readers and me
a lot of time with my easy, succinct, one-word
essay: "No."
Mr Droke (of Clif Droke
Market Analysis - clifdroke.com) is obviously not
as lazy or worthless as I am, nor as impressed
with my startling brevity, which is supposed to be
the soul of wit, and says the same thing by
quoting a letter he had received from a
reader of his, who writes, "I
work for Yellow Freight (YRC Worldwide). I can
tell you that volume has dropped drastically over
the past year and it is very slow right now
considering this is the busy time of year for
transportation. Our volume has dropped down to
half of what it was last year at this time."
Not unsurprisingly, then, "Earnings are
dropping at all transportation carriers." Then he
reminds us that "transportation companies are
leading indicators for the state of the economy",
which I remember learning a long time ago, but
since I don't trade for a living anymore, I kind
of fell away from paying attention to this kind of
fundamental analysis. So, sheepishly, I go and
look at the Dow Jones Transportation Average, and
sure enough, it DOES look kind of punkish!
So if this is a leading indicator, then
watch out!
But the surprising thing is
that shipping volume dropped by half! Wow! Before
I can digest this terrifying bit of news, he goes
on, "I believe we are in a recession because
people are not buying. I also believe the Fed is
lying to the general public in regards to the
state of the economy."
Well, as to the
latter belief, only an idiot could ever believe
that the government is not lying, as there are
actually very few instances in history when a
government was NOT lying!
And as to the
former belief, it must be true, or retailers would
be ordering more stuff, which would then need to
be shipped, and the letter writer would be on the
road, jamming those gears and honking the horn,
honk, honk!
Even worse, according to Say's
Law, if people aren't buying, then they aren't
producing, either, notwithstanding some bizarre,
weird, corrupt, once-in-a-lifetime massive buying
spree paid for by idiotic consumers and suicidal
governments amassing massive amounts of debt,
colossal amounts of debt, so staggeringly much
backbreaking debt that it makes me want to scream
in horror at the prospect, which I often do.
Apparently horrified at the prospect of a
Chilling Mogambo Scream Of Terror (CMSOT), Mr
Droke changes the subject completely, and says
that Robert Shiller, the "famous Yale university
economist", has actually said that "the collapse
of home prices might turn out to be the most
severe since the Great Depression", which I fully
agree with; but (unbelievably) he also said that
"The Federal Reserve will undoubtedly take
aggressive actions, which will mitigate its
severity."
Mitigation? I read this, and
then I look at how Mr Shiller is a "famous Yale
university economist", and I think to myself that
famous or not, Yale or not, this is a pretty
stupid thing to say, because if the Federal
Reserve takes "aggressive actions", whatever
"mitigation" of the bust is achieved will only be
by virtue of postponing the rest of the pain and
suffering, which will be paid for by continually
more inflation in prices.
To think
otherwise, as this famous-yet-laughable bonehead
has done, is to get the stupid idea that there is
such a thing as a partial free lunch! This guy is
saying that there IS such a thing as a free lunch!
Hahaha! Bigshot Yale economist! Hahahaha! Free
lunch!
I mean, this Robert Shiller guy is
literally saying that, thanks to the Federal
Reserve "aggressively" lowering interest rates or
something, we can have a monetary boom and only
have to suffer a portion of the bust, which is the
equivalent of going to a nice restaurant, ordering
a 5-course steak dinner, eating the dinner while
stuffing rolls ("Hey! Waiter! More rolls over
here, dude!") and extra silverware into your
pockets when they aren't looking, and at the end,
only paying for the salad! And everything will be
fine! Hahaha!
Well, I hope it works out
like this, and it ends up working better for me
than the old tried-and-true, "climbing out of the
bathroom window trick to achieve essentially the
same result!" I love this Yale economics stuff!
Hahahaha!
Richard Daughty is
general partner and COO for Smith Consultant
Group, serving the financial and medical
communities, and the editor of The Mogambo Guru
economic newsletter - an avocational exercise to
heap disrespect on those who desperately deserve
it.
Republished with permission from The Daily Reckoning.
Copyright 2007, The Daily
Reckoning.
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