Enough of this economic
claptrap By The Mogambo Guru
I was listening to Lew Rockwell, of
LewRockwell.com, wishing I could think of
something to say to show the other kids that I was
not as stupid as they say I am, and then he asks,
"Are consumers driving us into recession?"
Immediately, I think to myself, "Hey! I
can show this guy up, because that is stupid!
Consumers are supposed to be 70% of the economy,
or more, so if they are spending, then the economy
has to go up with it!"
Fortunately, just
as I was raising my hand so that I could impress
everyone with how smart I am and get a little of
the attention that I crave but never get, I
stopped when I suddenly thought to myself, "Whoa!
This is too easy! This could be a trap!" After immediately
putting my hand back down, I
quickly mentally went over the arsenal concealed
under my clothing, and was relieved ("Whew!") to
know that I could probably shoot my way out, no
matter what kind of trap.
It turns out, I
was right. He then went on to say that the whole
"stimulus" program, which is to give everybody a
wad of cash, is as big of a piece of inflationary
crap just like The Mogambo said. Okay, he really
didn't say that, but he said essentially the same
thing with, "Government has no money to spend on
anything that it doesn't extract from the pockets
of you and me and the whole American public. This
is easy enough to see concerning taxes. It is not
so easy to see when the government runs up debt
that is guaranteed by the printing presses." This
is so obviously true that even a dork like me
knows that monetary inflation soon causes
inflation in prices.
I say, "Even a dork
like me" knows about how monetary inflation causes
inflation in prices because I once tried to
impress Elizabeth (sweet Elizabeth with the eyes
that say, "Come hither, my Manly Mogambo Stud
(MMS)!" but lips that say, "Drop dead, creepy old
man!") with an explanation of this profound
economic truism, and she cruelly said to me,
"Everybody knows that, dork! Now go away! And
anyway, you smell funny!" and then she laughed at
me, and they all laughed at me, and even yet I
hear their mocking laughter echoing, echoing,
echoing in my ears until I cry out in anguish, and
the only way I can get them to shut up, shut up,
shut up is planning my revenge on them all, which
is now the only fun I have anymore.
So I
could tell that Mr Rockwell had already spoken to
Elizabeth and that he already knows that we all
know monetary-inflation-leads-to-price-inflation
stuff, so he just goes on to give a perfect
analogy of how the money has less buying power:
"The monetary issue can be understood by analogy
to orange juice. The more water you add, the less
substance it has. If you keep adding, eventually
you come to the point when you can no longer tell
that it was ever orange. This is the same with
money."
And indeed it is, as Frank Shostak
of M F Global, adjunct scholar of the Mises
Institute, seems to suggest that the money supply
will be goosed even more and the orange juice will
get more watery because Ben Bernanke, head
whack-job at the Federal Reserve said, in Foreign
Policy magazine in October 2000, that "History
proves, however, that a smart central bank can
protect the economy and the financial sector from
the nastier side effects of a stock market
collapse." Hahaha! I don't know what history this
idiot has been reading, but the history of the
planet Earth is that stupid central banks creating
excess money and credit destroys the currency and
everything else goes down with it, regardless of
some stupid stock market.
So I am really
getting bored with this stuff, and only casually
listened as Mr Shostak says that, "Bernanke
suggested that an easy monetary policy not only
raises stock prices but also lowers risk premiums.
Lower risk premiums cause consumers to trim their
precautionary savings. This reduction in turn
leads to more spending by households."
I
leap to my feet and shout, "Enough of this
econometric claptrap crap! Lowering interest rates
may send the stock of Mogambo Global Enterprises
up, but the management (me) is still the same
stupid embezzling halfwit who continually has us
on the brink of disaster! So risk premiums did NOT
go down because of any stupid easy money policy!"
I guess that few other businesses are as
poorly managed as mine, and so ignoring this
apparent "anomaly", the stupid econometric theory
crap goes on, "The effect of more spending in turn
on economic activity gets amplified through the
Keynesian multiplier."
Suddenly, I am
jolted awake! Keynesian multiplier! I run to the
MIT Dictionary of Modern Economics and look up
"multiplier", and I really read it this time,
instead of becoming instantly dismayed at the
sheer length of the entry, which means that there
is a lot of confusing stuff in it, and which leads
me to usually just say, "Screw that!"
But
this time I read the whole thing, and sure enough,
down towards the end, the dictionary says, "The
concept [of a multiplier] is Keynesian and
suggests that the idle resources that are employed
to increase income by some multiple of the
original injection are immediately forthcoming, at
an exogenously determined price."
Mr
Shostak finishes up saying that Bernanke believes,
thanks to the idiocy of his economic model, that
his cute little equations somehow "prove" that,
"The stock price multiplier of monetary policy is
between 3 and 6 - in other words, an unexpected
change in the federal funds rate of 25 basis
points leads, on average, to a movement of stock
prices in the opposite direction of between 0.75
percentage points and 1.50 percentage points." Ha
ha ha!
Let's take a look at how well it
has worked out. The Biz.Yahoo.com headline says it
all: "NMI [Non-Manufacturing Index] at 44.6%;
January Non-Manufacturing ISM Report On
Business(R); Business Activity Index at 41.9%; New
Orders Index at 43.5%; Employment Index at 43.9%."
In short, things are rapidly
deteriorating, and you don't need any equations to
prove that Bernanke is wrong, just as Greenspan
was wrong, as equations would be superfluous in
light of the staggering mountain of evidence. I
rest my case. All that is left to do is for me to
declare a "guilty" verdict and impose sentence on
them both.
I smile at the
thought.
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,
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