The Economist magazine implies that we
ought to start taking some defensive action, and
maybe putting in some barbed wire on that exposed
left flank out by the garage, by reporting that
"America's jobless rate is now 0.6 percentage
points above the cyclical trough reached in March
2007."
If you are like me, you yawned and
were bored at such a measly increase, and that
means it must be time for a snack, but you don't
have anything tasty at hand, and all the other
employees have started hiding their lunches from
me. What to do?
My actual second thought
is that my blood sugar is too low
because my first thought was
to just attack them, throw them aside, and ransack
their desks until I find something yummy to eat,
and keep this search-and-consume mission going,
desk after desk and cubicle after cubicle, until I
pass the point where marginal utility equals
marginal cost; the hassle just ain't worth another
Twinkie or candy bar.
But I was saved from
both strenuous activity and further musings along
that line when the article went on to say that the
significance of this piddly little 0.6% move,
which is probably just a statistical rounding
error as far as I am concerned, is much more than
that, in that Merrill Lynch pointed out that, "At
no point in the past 60 years has the unemployment
rate risen by more than half a percentage point
from its trough without the economy slipping into
a recession." Oops!
Maybe it is because of
that blood sugar thing, or maybe out of envy that
the Economist magazine has such spread and
influence while I am stuck here in this stupid
little closet, cloistered "away from the other
employees" at their stupid request, and nobody
ever listens to me, but I feel compelled to get
right in their faces to remind Merrill Lynch and
the Economist magazine that ALSO "at no time in
the last 60 years" has the definition of recession
been so grossly distorted by the fact that the
miserable squirt Alan Greenspan and the equally
miserable Michael Boskin came up with all those
inventive ways to discount inflation by
"adjusting" prices for changes in quality (the car
costs twice as much, but you get fancy hubcaps!)
or potential utility (the computer costs twice as
much, but is assumed to have gone up in value
because it is twice as fast but costs less than
double!), which is a real stupid load of crap
because you still use your faster computer to goof
off at work, playing games of solitaire at the
same slow speed and downloading pornography, which
slows everything down because the computer still
has to go around compacting files and looking for
places to store it all.
The effect is that
the rise in nominal GDP is not adjusted for the
full effects of inflation, making GDP look bigger
than it is. For example, if Mogambo Enterprises
sold 10 widgets last year for a dollar apiece,
then Mogambo GDP was $10. If this year Mogambo
Enterprises sells only 8 widgets, but at $2
apiece, it looks like we made money! We had total
revenue of $16, whereas last year we only booked
$10! Everybody is happy until my boss realizes
that inflation was 100%, and so Mogambo
Enterprises had a real, inflation-adjusted loss of
20%!
This must be the reason why I never
seem to tire of screeching my Loud Mogambo
Disagreement (LMD) with the ridiculous idea of
"investing for the long term" and putting your
money into common stocks to fund your retirement.
Only idiots could possibly believe that investors
as a group can take more out of a bucket than they
put in it.
But it is a hard slog to
convince people of something contrary to what
everyone seems to agree on, even though there is
not one shred of evidence that such a preposterous
notion could possibly be true, and my throat is
raw and sore from yelling and calling people
idiots for believing something so Utterly, Utterly
Stupid (UUS).
Now, I save my energy, as I
have a chart from chartoftheday.com, which
"illustrates the Dow adjusted for inflation since
1925". As they say, "There are several points of
interest. For one, when adjusted for inflation,
the bear market that concluded in the early 1980s
was almost as severe as the one that concluded in
the early 1930s. It is also interesting to note
that the inflation-adjusted Dow is now less than
three times higher than where it was in 1929 and a
little over double where it was in 1965. Not that
spectacular a performance considering the time
frames involved."
Then they go on to show
how the damned Alan Greenspan and his despicable
Federal Reserve created so much monetary inflation
that all that money and debt slopped over into
everything. Chartoftheday.com continues, "However,
the magnitude of the bull market of 1982 to 1999
(even when adjusted for inflation) was truly of
historic proportions. While the Dow is currently
more than 1,000 points above the dot-com peak that
occurred eight years ago, today's chart does
illustrate that on an inflation-adjusted basis the
Dow still trades below its 1999 peak."
So
nobody made any money in the stock market in over
eight years! Hahaha! "Investing for the long
term"! Hahaha! "Investing for retirement"!
Hahahahaha! What idiocy!
And what the
chart shows, but nobody is saying, is that it
wasn't until 1960 that the Dow rose high enough to
equal the very peak in 1929. "Investing for the
long term"! Hahaha!
In short, inflation
ruins everything, and yelling about it won't make
it better. You have to let gold yell for you.
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 2008, 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
