The dinosaur gold-standard economy
By The Mogambo Guru
Peter Schiff of Euro Pacific Capital is justifiably upset that CNBC, on which
he has appeared many, many times over the years, professes to be surprised at
current events, even though they are the same things he has consistently
predicted on their show! I know! I've seen him!
Schiff writes, "The current line at CNBC is that, prior to the 'unexpected'
contagion emanating from the subprime mess, the US economy was experiencing a
'Goldilocks' era of optimal health." To prove his case, he offers a link to a
video of a "CNBC match up from August 2006 between me and Arthur Laffer, a CNBC
favorite", which he says is "priceless" because it contains "Some of Laffer's
best one-liners" which include, "the US
economy has never been in better shape" and "monetary policy is spectacular".
Hahaha! He's right! Priceless!
I was envious at how everyone laughed when he looked directly into the camera
and, milking every drop of deadpan comedy out of it, dryly said, "I kid you
not." So I leap to my feet to try and claim a little jealous attention, too,
and exclaim, "Apparently, the theory of non-linear mathematics, popularly known
as the Butterfly Effect, nor news of the statistical proof of the certainty of
sudden, calamitous discontinuities, popularly known as Black Swan events, has
penetrated CNBC, both of which make a cruel mockery of the very idea that
anyone could have continuous, uninterrupted, healthy economic growth by using
gigantic expansions of the money supply via a fiat currency in an unlimited
fractional-reserve banking system to supply evermore cash to a wildly
expansionist government!"
A slight titter of nervous laughter barely rippled through the room, which was
very gratifying to me, but it seems to have rattled Mr Schiff, who nonetheless
still managed to upstage me in the laughter department by cleverly saying that
CNBC still believes that "if the Fed and the Government can divine the right
combination of fiscal and monetary policy, Goldilocks will once again be
blissfully picking daisies ... or more precisely, buying SUV's." Hahaha!
Goldilocks in an SUV! An interesting metaphor!
But the point is not that Mr Schiff is funnier than me without even trying, but
that we are freaking doomed, and CNBC would have known that if they had tuned
into the Daily Mogambo Business Network (DMBN), where they would have learned
during the course of any of numerous Raging Mogambo Editorial Rants (RMER) that
the Butterfly Effect proves that all money will influence, after just a few
iterations of the financial system, all other money, which means that to
laughably think that the subprime problem could be "contained" is absolutely
ludicrous; the truth is that it will literally affect every other piece of
money around the world, and to an unknown degree!
And, if they had taken the time to tune into the DMBN show, maybe snuggled down
with a bowl of hot popcorn and a cold beverage, or a soggy pizza and a bottle
of cheap tequila, they would also have learned the on-air report of the
recently discovered fascinating fact that the dinosaurs had a monetary system
based on gold, which explains why the historical record shows absolutely no
inflation in prices during the entire Jurassic period, and anyone who says
otherwise is a lying bag of crap.
The other news is that the dinosaur economy nevertheless had the Mother Of All
Black Swan Events when a giant meteor smashed into the Yucatan Peninsula,
destroying most of the life forms on the planet, and all of that fabled
dinosaur monetary conservatism was for naught.
But it is one thing for CNBC to not report the crucial discovery of the
dinosaur gold-standard economy and its stability, but it is quite another for
CNBC to actually believe that the Fed and the federal government can "divine
the right combination of fiscal and monetary policy" to put everything aright!
This is obviously where I would normally insert a Scathing Mogambo Laugh Of
Contempt (SMLOC) at such preposterousness, but actually, upon reflection, CNBC
is right! With wildly inflationary monetary policy and bizarre, giveaway fiscal
and regulatory policies, they actually CAN get things perking again! Nothing
could be easier!
I mean, how much is a house worth if a homebuyer could get back, in cash via a
tax credit, all of their interest payments on the loan? Or a tax credit for all
of the interest payments PLUS 10% of the principal?
How about if the government sent every taxpayer $1,000 per month for the next
year? How about $10,000 per month? How's THAT for an economic stimulus?
Hahahaha!
I've said it before, and I'll say it again; Ben Bernanke, now chairman of the
Federal Reserve (which is neither federal nor a reserve of anything, but is a
private bank that suspiciously signs its email with a "dotgov" suffix) was
absolutely, positively, 100% correct when he said that with a printing press
that can create money at almost zero cost, a determined government could always
create inflation, a horror which he is now obligated to inflict on us since he
has long, and now famously, shot his mouth off about how he is so smart and how
he is such an expert on the Great Depression, and how he knows exactly what
those idiots back in the '20s and '30s should have done, which is to keep
pounding, pounding, pounding money into the economy with lower and lower
interest rates and buying up a constant, huge stream of new government debt,
and buying up all kinds of things, irrespective of the resultant ruinous
inflation in prices at such horrifying monetary excesses.
It's too bad that Mr Bernanke is too busy to look at Zimbabwe to see how that
has worked out in actual practice, as Bill Bonner says, "What happens to a
paper currency when its custodians decide to destroy it? We have the answer to
that question illustrated for us in the headlines from Zimbabwe. Last we heard,
inflation was running at 100,000% per year. The average employee made millions
per day ... but could barely buy a can of beans with the money. Worse still,
the beans - and everything else - had disappeared from the shops ...
hyperinflation has destroyed the economy."
Is there a lesson in all this total destruction by inflation? Yes! The lesson
is, according to the Mogambo Big Book Of Economics (MBBOE), "Don't start
inflating the money supply, moron, because you will get inflation in consumer
prices, which will cause economic misery, and finally food riots and societal
disintegration will break out, and so that is why I called you a moron at the
beginning of the sentence, because only a moron would attempt such a thing when
the entire history of economic mankind shows that inflating the money supply
has ruined everyone who has ever, ever tried it!"
I look at Mr Bonner and he reluctantly agrees, "Yes, that's what happens. First
the money. Then, the economy. Finally, the society itself."
And then raving gold-bug lunatics like me and the Austrian Business Cycle
Theory prove to be right after all, and we take over the joint because we
bought gold, and now we are rich, rich, rich!
And when a creepy little jerk like The Mogambo gets that kind of money and
power, then you know that Mr Bonner was right; decent people in a civil
society, and society itself, don't have a chance against such outrageous and
shameless hedonistic gluttony. Ahhh! Gold!
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.
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