The S&P 500 is down to where everybody
who bought that index any time in the last year
has lost money, and if the average price was
indeed US$1,400, then, "investors" lost about 7%.
To be fair, earnings are also lower than at
anytime in 2007.
Now, subtract the losses
due to inflation, which is now running at about
13%, and what do you get? Hahaha! You had a 20%
loss, in real (inflation-adjusted) terms! Hahaha!
And now you need a 25% gain just to break even!
Hahaha! "Invest for the long-term!" Hahaha!
How long will you have to invest before
you get your money back? Hahaha! You never will,
as inflation in prices is NOT going to abate for
the rest of your life, because the federal
government must continually spend more and more
money for the rest of your
life,
and so the Federal Reserve will be given free rein
to create as much money as they want for the rest
of your life, too!
I can see that many of
you are turning your radio dials, as you figure
that you have heard this "investing for the
long-term is a lie" from me so many times that
listening to it one more time seems like a
punishment. You are wrong!
This is not
about "investing for the long-term" at all, but
about inflation in prices, which is much more
important than some nitwit "investor" who is so
stupid that he cannot understand that he or she is
being fleeced by the financial services industry,
even as they notice that they have not made a
damned dime, even in nominal terms, and after
looking at it from an inflation viewpoint, they
are horrified to learn that they are getting
screwed out of money that way, too, all thanks to
the Federal Reserve that creates the excess money
and credit that creates inflation in prices,
including inflation in the prices of stocks.
The interesting thing is that Treasury
Gross Public Debt is now $9.244 trillion, up from
$5.65 trillion in the middle of 2001, when the
current government-borrowing binge started going
bananas, suddenly rising at a steady $50 billion
per month or so.
And for a little
perspective, that $3.594 trillion in additional
debt means that, at even 5% interest, the
government is now paying out $180 billion a year
just in the additional interest payments on just
this additional debt, which is more than the
entire total of the "economic stimulus" checks
that are going to be mailed out! This is insane!
And scary as hell!
And speaking of scary
things, Adrian Ash at WhiskeyandGunpowder.com
reports one of the most astonishing quotes you
will ever hear, in this case from Martin Weale,
the director of the National Institute of Economic
and Social Research. He was commenting that the
economic slowdown in Britain gives the Bank of
England "room for further cautious reductions in
interest rates", which means a theoretical spurt
in the money supply, which means a theoretical
spurt in price inflation.
The astonishing
part is when Mr Weale said, "I don't see the risk
of inflation being a constraint." Yikes!
And doubly yikes when you read that Janet
Yellen, one of the brain-dead econometric zombies
mistakenly placed in charge of the nation's money,
economy and banks by being president of the San
Francisco Fed bank, said that she doesn't care
about you, or your children, or your parents or
anybody else, and as far as she is concerned,
inflation in prices can eat all of us alive and
destroy the money of the United States, the
economy of the United States and the people of the
United States, and she doesn't care that the
Federal Reserve is mandated to protect the value
of the dollar, and if you don't like it then you
can go to hell and take The Mogambo with you.
Well, you probably guessed that she did
not actually say that in so many words, but she
said the same thing when she said, "We need to
remain very focused on the downside risks to the
economy." What? Who the hell says so?
And
how to do that, anyway? She doesn't say, but she
did supply a metaphor that was as clueless as her
economics; she thinks the job of the Fed is to
create a "fire wall" of some kind, so that the,
"fire doesn't hurt innocent bystanders". What?
Huh? What? Hahaha! This is the kind of people
given control of the money, the banks, and the
economy! Hahaha! And yikes!
And doubly
"yikes" if you contrast this economic gibberish
with Mr Ash quoting Mervyn King, now governor at
the Bank of England, as profoundly saying that,
"Few empirical regularities in economics are so
well documented as the co-movement of money
[supply] and inflation."
In fact, Mr King
himself quoted the statistics that, "Over the
30-year horizon 1968-98, the correlation
coefficient between the growth rates of both
narrow and broad money, on the one hand, and
inflation, on the other, was 0.99."
Mr Ash
graciously acknowledges that many of us took a
statistics course many years ago, and we didn't
really understand it then, and so this "0.99
correlation coefficient" thing is pretty
meaningless to us, and it looks like we are
wasting our time here if he is going to converse
with the math eggheads in the crowd about things
we don't understand, and since it is almost
lunchtime, then I am outta here!
So he
politely explains that, "0.99 is as near perfect
as you'll find in any pair of data. An absolute
1.00 only ever exists for the very same thing
measured against itself - say, the cost of living
mapped onto the cost of living, or gold prices
correlated with gold prices, for example."
So we out here in the audience nod our
heads to signify that we understand the concept of
"virtually guaranteed", but we are soon sorry that
we did, as our blood thickens in our veins at the
sheer economic horror revealed as he goes on, "But
ignoring the flood of money - first created as
credit and now stacked up in Treasury bonds across
the emerging economies - would mean ignoring the
connection between growth in the money supply and
inflation in prices", like China registering an
18% plus growth in money, India 22.4% a year
growth, Singapore 14%, Britain up by 12.3%,
Western Europe 11.5%, Australia16%, Canada 13%,
and Saudi Arabia 22%!
He ends with the
sorrowful news that, "The US money supply - if the
Fed still reported M3 - is now guesstimated to be
showing 15% annual expansion."
Then I
think back to Mr King saying that, "Few empirical
regularities in economics are so well documented
as the co-movement of money and inflation", which
turns out to be an almost perfect correlation, and
I break out into a sweat as I realize that with
money in the USA expanding at 15% a year, 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,
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11/13 Petchkasem Road, Hua Hin, Prachuab Kirikhan, Thailand 77110
