Freaking doomed by doubling
power By The Mogambo Guru
Dave Gonigam at The Desidooru Saloon
reports that it looks like the "economic stimulus
plan" being formulated and enacted by the
government will "result in tax rebates of $300 per
person, $600 per couple, just like when the same
scheme was used in 2001".
The funny part
is that Gonigam notes that, "$300 per person did
nothing to goose the economy in 2001, and it'll do
even less now." Immediately, he was hooted down by
non-believers who said, "Says who? You? If you are
being quoted by that Lowlife Mogambo Idiot (LMI),
then you must be an idiot, too!"
But good
old Dave was cool, and just said, with a hint of a
mocking smile in his voice, "Using the Minneapolis
Fed's handy-dandy inflation calculator, just
equaling that figure adjusted for
inflation would take $350."
Hahaha! Thanks to the incompetence of government,
the dollar has been devalued by 17% since 2001?
Hahaha! We're freaking doomed!
"And," he
goes on, "God only knows what it would be if the
inflation numbers weren't doctored; the fearless
John Williams says if the CPI were calculated the
way it was back in Jimmy Carter's day, it would be
close to 12%." Yikes! Inflation at 12%!
Hoping that they were wrong, because this
rate of inflation would be horrendous, I went to
Mr William's ShadowStats.com to find, sure enough,
that inflation has taken a sudden spike to 12%,
with no sign of stopping! Yikes!
Suddenly,
I was surprised that people were clapping me on
the back and congratulating me on actually looking
something up for myself, instead of me always
stealing the ideas and work of other people and
other employees.
And it must have
surprised Bill Bonner, too, who also had a wry
take on the stimulus package, which "is only $145
billion. US stocks lost more than twice that much
in the first few seconds of trading [Monday]."
Hahaha! Good point!
And when you plug this
kind of loss into the Federal Reserve's precious
little models containing the "wealth effect", then
things get real gloomy, and pretty soon you are
really getting scared, and you know it is only a
matter of time before you pee in your pants out of
sheer terror, and I'll bet everyone at the Federal
Reserve is wearing a disposable adult diaper under
their clothes right now, just like I am here in
the Ultimate Mogambo Bunker (UMB), and believe me
it is mighty, mighty comforting!
Mr
Bonner, as usual, is apparently not into
discussing nasty little people like me peeing in
their pants and swilling wine out of a bottle in a
paper sack, and says, "And the whole idea of
providing more cash and credit is the wrong
strategy anyway. These efforts at Keynesian
stimulus were designed to overcome a different
kind of enemy … a case where consumer demand was
low … or where consumers saved too much money.
Keynes worried that people had a 'propensity to
save', which needed to be corrected by reducing
the returns to savers. But the real rate on
savings now is less than zero. And the savings
rate is down to minus 0.5% of disposable income."
"No," he says, "the problem is not that
consumers spend too little, but that they spend
too much they don't have. Nor is the problem that
consumers save too much, but that they don't save
enough."
True enough! And then I notice
that all of this leads to the big freaking problem
of falling tax revenues. As the American economy
morphed into one that relies on government
spending for over half of all economic activity,
any drop in revenues is bad news at the federal
level, but catastrophic news if you are a citizen
in one of the states that spent every extra dime
of revenue from the boom to create permanent
spending programs. And most did! Hahaha!
Jim Sinclair at jsmineset.com agrees with
me, even though everyone is too polite to tell him
so, and says that "lower economic activity equals
lower profits", which is bad enough for investors,
but that, "lower profits leads to lower federal
tax revenues", which is even worse for the
enormous, sprawling, rapacious system of
government with which we have saddled ourselves,
which is enough to send me into a Mogambo
Screaming Fit Of Outrage (MSFOO) because these
government weenies are going to be borrowing lots
and lots and lots of money, creating money and
debt like crazy during the long, ugly coming
economic downturn, which means higher taxes at the
exact wrong time of the cycle or less government
spending at the exact wrong time of the cycle,
too.
In fact, I was actually taking in a
deep breath to really start the MSFOO in style,
when I was saved from certain embarrassment by Mr
Sinclair, who says that the problem is a lot worse
than I think, because, "Lower federal tax revenues
in the face of increased federal spending causes
geometric, not arithmetic, rises in the US federal
budget deficit. This is also true for cities and
states as it is for the federal government."
And if you want to see what happens in a
geometric rise, take a blank piece of paper and
write down a 1, double it to get 2, double that to
get 4, double that to get 8, double that to get
16, and keep doubling and doubling until the
numbers reach a point where you suddenly leap to
your feet and say, "Holy crap, Batman! That Stupid
Mogambo Moron (SMM) is right; we're freaking
doomed!"
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
