From Asia Times Online my eyes lit upon the essay,
How central bankers could save the world by Chan Akya. "Wow!" I thought
to myself, "This is terrific! I thought banks were there to destroy the world
by destroying currencies and economies by creating too much money and credit!
But they can now save the world by doing this? Let me excitedly read on and
thus be enlightened!"
The sound of laughter was not Mr Akya chortling at me and my ignorance, which
is a nice change of pace, but he was laughing at the climate change discussions
in Bali, where their ridiculous Big
Plans To Save The World (BPTSTW) from the "global warming" of man-made emission
and pollution were being hatched.
He says, first off, that these people may have a point, as all industrial
activity obviously creates undeniable pollution. The problem is worse because,
"by and large, the world economy thrives on consumption, and especially the
American kind", which is proved when he quotes the statistic that "the US
economy supplies one in five dollars of global consumption. This, added to the
second dollar supplied by Europe, is what pushes global warming. All told," he
sums up, "various publications cite different figures, but it would not be
hazardous to assign some 30% of global emissions to the US current account
deficit," which is a rough third of $780 billion a year. Hahaha! Our gluttonous
consumption is causing global warming!
He sees me mulling this over and snickering at the irony of it, and he quickly
grows impatient waiting for me to come to some rational conclusion, which is
going to be "never", because as soon as I saw him looking at me with that
expectant look on his face, I forgot what in the hell he was talking about.
"This," he finally says, "is what the Greens miss completely - they count the
emissions of China and India in the same league as those of the US and Europe,
and that is wrong because a substantial portion of Asian emissions goes to the
manufacture of goods consumed in the US."
The bottom line? If we just stop consuming so damned much stuff, the pollution
created would automatically fall! And the central banks can accommodate that by
stopping their insane expansions of money and credit! It's that simple!
And who is to blame? For once it is not me, as I seem to get the blame for most
things around here, but instead it is, "To a large extent, the twin forces of a
disingenuous Fed (euphemism for outright liars) and harmony-seeking Asian
central banks (euphemism for dumb no-gooders who wouldn't get a job flipping
burgers if their uncles hadn't made them the governors of the People's Bank of
China or Bank of Japan or whatever) allow this circle of deficit-financed
consumption to persist."
And for these moronic central bankers allowing "this circle of deficit-financed
consumption to persist", I grab John Stepek of MoneyWeek.com and stick him
right in their stupid faces, because he uttered the most profound truism of
such a transcendent magnitude that no central banker in the world today has
even guessed at it. He gloriously said, "If the bank wanted to prevent sharp
falls in house prices, it should have prevented the sharp rise in house
prices." Exactly!
He follows that up with, "What goes up must come down. Falling house prices
will hurt - I'm not going to deny it. A house price boom is not a good thing -
it creates all sorts of distortions in the economy. But that's the trouble. Our
economy has been propped up by house prices and the availability of cheap debt
for so long that as it ends, the unwinding of all those distortions will be
very painful."
Always looking for a chance to be cruel to people who are better than me in any
way, I disrespectfully said, "Not for me, John! I have gold and I have no debts
to pay! Therefore, I do not have to suffer at all, and instead I will wax rich!
Rich! Rich and haughty! And the tabloids will be bursting with the exploits of
'The Gold Bugs' who are hogging all the good hot-spots of the world because we
are 'The New Rich' and some of us are 'The Rich, The Kinky And The Paranoid',
which will make a terrific soap opera on TV!"
Well, the bad news is that no TV producer will return my call about this
fabulous new TV show, and I soon forgot about it when I read the Associated
Press report that "Orders to US factories unexpectedly rose in October although
much of the gain reflected higher energy prices." Hahahaha!
This is too, too rich, as I am always finding humor in contemplating the
economic horror of high consumer price inflation, and because it hits so
spookily close to home! I mean, consider this coincidence: at the same time as
this factory orders news hits the wires, for the first time in more than five
years, Mogambo Intergalactic Enterprises (MIE) had unit sales fall by 50%.
Oops!
With such lackluster demand, we of the executive staff naturally fired damned
near everybody, just like the last time this happened, and we spent most of our
time stealing cash and assets with both hands and giving each other these
fabulous "golden parachute" severance packages with the money that we looted
from the employee pension fund.
But in the midst of this "restructuring", one of the little go-getters down in
the research department, who didn't notice that we fired him, says that he
noticed the good news that we were able to increase prices by 100%, so it
looked like we had more business than we really had, and on paper we actually
broke even! We sold half as much, but we charged twice as much, which surprised
the hell out of us executives, I'll tell you, although some of us seemed to
recall something about this in MBA school.
Anyway, prices going up is why it looks like factory orders increased, and is
the reason why I am gagging up blood, and if any of it gets on your shoes,
don't come running to me because I never said that economics was pretty.
And like the troubles at MIE, "much of the strength came from a big jump in the
cost of petroleum and other energy prices, which pumped up orders at oil
refineries and chemical plants". So they, too, are showing a profit only by
raising prices? Yow! We're freaking doomed! Ugh.
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,
Central, Hong Kong Thailand Bureau:
11/13 Petchkasem Road, Hua Hin, Prachuab Kirikhan, Thailand 77110
