Living the nightmare of Hamiltonian
economics By The Mogambo Guru
Richard Schwartz of the Principles of the
Stock Market newsletter is quoted in Barron's as
saying, "It's not going to be the American
consumer that rolls over first this time. This
time, it's the financial system which is breaking
down first. And then, after that, the very
stressed, overburdened US consumer will be forced
to cut back because of rising unemployment."
So then I turn to the Financial Times to
read essentially the same thing, as "US bank
earnings plunged nearly 25% in the third
quarter, falling below $30
billion for the first time since 2003 as the
sagging US housing market hit profits." Yow!
Then, alarmed that the first half of Mr
Schwartz's prediction about the banks failing is
coming true, I look to see if the US consumer is
losing his job, and sure enough, I note with alarm
("Gong! Gong! Gong!") that Initial Jobless Claims
jumped to a very worrisome 352,000 last week,
continuing a rising streak.
Naturally, I
then think about the future of my own job, but my
boss refuses to answer me or even look me in the
eye, and instead says that since I was goofing off
and wasting company time reading Barron's and the
Financial Times instead of working, perhaps I
noticed that FT reports that loan loss provisions
for American banks "rose $9.2 billion, or 122%, to
$16.6 billion" in the third quarter. They note
that this "loss figure is the highest since the
second quarter of 1987 and the second highest
ever".
There are, apparently, a lot of
people who have bosses like mine and whose jobs
are hanging by a slender thread because they are
incompetent losers, too, and who have cut back on
their spending, as Reuters reports that "Consumer
spending inched up by an unexpectedly small 0.2%
last month and construction spending tumbled,
according to reports on Friday that heightened
concerns on the health of the economy."
And since we are talking about this
Reuters report, even worse news is that "While
personal spending rose slightly, the Commerce
Department said consumer prices climbed an even
greater 0.3%, leaving inflation-adjusted spending
flat in October after a slim 0.1% rise in
September." Yikes! Prices rising faster than
wages! We're freaking doomed!
Maybe this
explains why News.bbc.co.uk reports that "Over 1.3
million people, one in six New Yorkers, cannot
afford enough food, with queues at soup kitchens
getting longer, anti-poverty groups say," one of
which is the New York City Coalition Against
Hunger, and which "says the number of people who
use food pantries and soup kitchens in the city
increased by 20% in 2007". A 20% increase in
destitute people in one year!
It reminds
me of that Thomas Jefferson quote about how
allowing the economy to fall into the hands of
bankers is to (quoting from memory), "one day wake
up landless, in debt, and as miserable, bankrupt
slaves in the very country that our fathers fought
to give us, proving that having a central bank is
the biggest stupid mistake that a stupid country
could make, and to allow a central bank to have
the power to create excess money and credit out of
fiat currency and thin 'fractional reserve' air
will REALLY make things into a Big Stinking
Economic Mess (BSEM), leading to the ascendance of
The Mogambo, who shall lead us to the promised
land of Austrian economics, where all people will
live in the blissful heaven of a gold-standard
static money supply so that inflation in prices is
always zero - or less! - and so any increase in
wages means an instant increase in the standard of
living since prices have not increased, meaning
that you can buy more stuff with your paycheck,
whereas when you have inflation in prices caused
by a despicable central bank creating excessive
money and credit, the money goes into bidding for
goods and services, driving up their prices,
meaning that wages will LAG prices, so you have an
a constant FALL in the standard of living, and
this means that people will be stealing stuff from
you to make up for their shortfalls, which reminds
me to make sure I put that Second Amendment thing
in the Constitution before we ratify it."
Well, I admit that my recollection of
Jefferson's quote is a little fuzzy, but you get
the drift. And while I am not sure that he ever
actually referred to me directly, probably because
I wasn't even born yet, you could tell what he was
thinking.
But I saved myself a lot of
Precious Mogambo Time (PMT) by not looking up the
exact quote of Jefferson, and instead just using
some remarks from Thomas J DiLorenzo, a professor
of economics at Loyola College. He writes that
Alexander Hamilton was a moron Founding Father who
liked a powerful federal government, a wishy-washy
Constitution and central banks. He was,
thankfully, outvoted by Jefferson and the other
clear-thinking people in the room, maybe out of
horror at the prospect of that Mogambo thing.
Now, pick up that remote control and hit
the "fast-forward" button from 1776 to the last
half of the 20th century, where we see that we
have finally overruled the Jeffersonian republic
that made America into the world power that it
became, in favor of that Hamiltonian nightmare of
a huge, powerful, dictatorial, fascist federal
government, an eviscerated Constitution and a
corrupt Federal Reserve destroying the dollar.
Mr DiLorenzo sneers at me that I am being
much too narrow, and says that we now have "a
republic of excessive public debt; inflationary
finance fueled by a central bank that is the cause
of perpetual boom-and-bust cycles; a dictatorial
executive branch aided and abetted by 'black-robed
deities' who have 'reinterpreted' the Constitution
so much that the founders would not even recognize
what is called 'constitutional law'; a tax burden
that is even more excessive than that borne by
medieval serfs; a standing army that is misused at
the expense of genuine defense of America; an
arrogant, imperialistic, and monopolistic
government in Washington that rarely pays any
attention at all to the citizens of the
once-sovereign states; government policy that
routinely benefits big, politically-connected
businesses and wealthy individuals at the expense
of the rest of society (neo-mercantilism); and
protectionism."
The totality of it is that
"Every one of these policies has been a curse on
America. That is why every one of them, from
central banking to public debt to judicial
activism, was vigorously opposed by Hamilton's
nemesis, Thomas Jefferson, and his political
heirs, until they were finally snuffed out for
good by the Lincoln regime."
I will take
up the story from here and say that the republic
was then taken towards the ultimate, hideous
extremes ever since the deplorable Woodrow Wilson
authorized the despicable Federal Reserve in 1913,
which provided the money to pay for the Whole
Stinking Thing (WST).
Now, taking that
remote control once again in your hands, "fast
forward" again to today, and take a good look at
my Stupid Mogambo Face (SMF). Note the horror and
sheer terror in it as I contemplate the inflation
in prices that will destroy us, thanks to Wilson's
Federal Reserve. Note the disgusting, greasy film
on my lips and chin from my gobbling my lunch like
an uncouth, ravenous savage. Note the rancid smell
of something old and rotting that must have
slopped out of my mouth and down the inside of my
shirt. It doesn't get much worse than this. Ugh.
Mogambo sez: There are many reasons why
gold, silver and oil had a little downdraft in
prices recently. I particularly like the one about
how Someone Up There Likes You, and this
mysterious someone is arranging things so that you
can buy on a dip.
If you bought some, then
you know it was you that is so adored, as is
proved when their prices resume their inexorable
climb to where you can say "I'm freaking rich! Let
me pack a bag and I'm outta this dump for good!"
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.
Head
Office: Unit B, 16/F, Li Dong Building, No. 9 Li Yuen Street East,
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