Llewellyn H Rockwell Jr, president of the
Ludwig von Mises Institute, writes, "All this
nonsense about digging ourselves out of recession
through government intervention began with the New
Deal" when FDR "used the economic downturn as the
great excuse to make himself the economic fuhrer
of America".
But this, thankfully, is not
about history or about how I did not do last
night's homework, but that Mr Rockwell noted that
"here is the amazing fact: not once has this
strategy worked. Not in the New Deal. Not in the
1970s. Not in the 1980s. Not in the 1990s. Not
once has government done anything to restore
prosperity during a slump. What happens again and
again is that government spends, the Fed inflates,
the regulators punish, there is wailing and
gnashing of teeth, and then, at some point, we hit
bottom, and normalcy begins to return again. The
most
government can do is prolong the
period at the bottom. Otherwise, it is just
wasting resources."
Like what? Well, when
the Fed cut interest rates from 3% to 2.25%, it
not only hacked the hell out of interest rates by
a whopping quarter in a huge "25% off sale!" on
money, but in the process took the Fed Funds rate
to a real (inflation-adjusted) rate of less than
zero, even if one takes the "official" rate of
inflation of 4%! Negative real interest rates!
But, hell; the two-year bond is yielding a
nominal 1.3% a year (a loss of 2.7% in buying
power), the 10-note year is yielding 3.3% (a loss
of 0.7%), and some "investor" morons are buying
30-year bonds at prices so high that they are
yielding barely 4%! All of this at the same time
as the money supply is growing at 17% a year! Yow!
Un-freaking-believable!
So if you want to
know why we are in such big trouble and why people
who try and save a little money have to be
crushed, why your grandparents and your parents
are going to be calling you up wanting to borrow
some money, and why my new Mogambo Instructional
Booklet (MIB) "50 ways to say 'No! And never call
me again" will be such a smash hit, it is because
we are obviously idiots, thanks to a ruinously
incompetent education system, for which US Fed
chief Ben Bernanke (erstwhile head of Princeton
University's economics department) is living
proof.
I mean, three-month T-bills are now
yielding 0.5%, which is one-half of one percent,
which is also the lowest level in 50 years! This
low rate may be expected in such short-term paper
when the Fed is pounding more and more money into
the economy, but it takes a real idiot to see
that, and yet turn right around to buy a 10-year
government bond to yield, for every day of the
coming 10 years, 3.33%! On which tax is due!
Hahaha!
This brings up Tim McTague saying,
in his "DC Current" column in Barron's, that Bill
Dunkelberg, of Liberty Bell Bank, "opposes recent
rate cuts, which he says are punishing smaller
financial institutions like his and legions of
elderly people who depend on savings for income."
Mr McTague notes that the rate for a
five-year certificate of deposit is now paying a
piddly 3.37% interest, while "The headline rate of
inflation, which includes food and fuel, exceeds
4%. In essence, savers are losing money to prop up
the big Wall Street brokerage houses" and other
financial institutions.
Mr Dunkelberg is
more direct, and says that people who depend on
their little bits of interest that they make on
their saved money (like the elderly) "are being
screwed by the Fed", which has a little more of
that raw disdain and contempt that the Fed so
clearly deserves.
And where is the
Congress in all of this? Helping! Like the old
joke goes, "We're from the government, and we're
here to help you", which explicitly means that you
will soon suffer, as we learn from Bloomberg.com:
"The US may pay a steep price to free itself of
its economic and financial travails: bigger
government, faster inflation and a poorer
country." Gaahhhh!
To relieve the tension,
I made up a new joke. A guy walks into a bar and
the place is full of beautiful young ladies. They
say, "Mogambo! We love you and you make us so hot!
Let's celebrate with some of your hot monkey
love!" And the guy says to the bartender, "I have
some good news and some bad news! The US may pay a
steep price to free itself of its economic and
financial travails: bigger government, faster
inflation and a poorer country."
The
bartender says, "My God! That's the price? What's
the good news?", and the stranger says, "That IS
the good news!" Hahahahaha!
I hope this
little humor comforts you as you suffer a falling
standard of living for the rest of your life! Too
bad it's not funny.
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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