I almost choked when I read the Associated
Press report that the latest data from India's
government, which has every reason to lie just
like everybody else's government lies about
inflation, revealed that their "key inflation rate
surged to a three-year high of 7.41% last month,
according to government data".
Of course,
real Americans could not care less what happens to
Indians or anybody else, and we only care what is
happening to us, by which I mean, of course, "me".
Apparently, Junior Mogambo Ranger Joe McD
feels the same way about himself, and writes that
he has been looking at inflation in consumer
prices in terms of dollars-per-unit-of-measure in
the
prices that he is having to pay
at the grocery store.
The result is that
the price of packaged food is going up by more
than the rise in the underlying commodities would
suggest, which (according to government
statistics) is at least 20% in the last year, and
often much, much more.
One ploy is for
producers to use smaller boxes and packages so
that they don't have to charge so much more per
box or package, thus masking the inflation, and
then you won't have to suffer the indignity of
having your wife come home after grocery shopping
and yelling, "They wouldn't take my credit card at
the store because it is maxed out! Why haven't you
paid at least the minimum required payment, you
Stupid Mogambo Moron (SMM)?", and so you have to
explain it to her that she is spending too much
money on food, and that you are sending "a
message" to her, just like the British did to
India, and then she says, "What in the hell is
THAT supposed to mean, you idiot?" and you explain
by shouting, "Shut up! Shut up! Shut up!" over and
over until she gives up in disgust and leaves.
JMR Joe wisely doesn't want to get in the
middle of that touchy little domestic disturbance
and hurriedly implies that he has been too busy to
notice our noisy squabbles, as he has been
"watching the price changes closely and the
reduction in size of the commodities".
The
Ugly, Ugly Result (UUR) that he has uncovered is
that everybody is paying higher prices for smaller
portions, so that the price-per-unit-of-measure
(like "cost-per-damned-mouthful") has gone up
"between 30% and 40%" in the last year! I
involuntarily screamed in fear at such horrifying
news, and I might have peed in my pants, too,
although I am too scared and embarrassed to look.
This brings us to News Of The Weird And
Wonderful (NOTWAW), where the "weird" part is that
gold is not exploding upward in price at this
horrific news about global inflation.
The
"wonderful" part is two-fold, in that I looked and
saw that I did NOT pee in my pants as previously
feared, and also that anybody who is buying gold
is actually getting a hell of a bargain, unless it
truly IS different this time than at all the other
times in the last 4,000 freaking years of human
economic history when a stupid government-centric
economy and everybody in it wallowed like pigs in
the toxic excesses of a fiat currency or too much
debt, or especially (like right now) when they
indulged in both, or doubly especially when (again
like right now) they indulged in history-making,
never-seen-before, greedy, gluttonous levels of
excesses of debt and consumption (at the expense
of production capacity and savings) in every
corner of the economy and society.
And
what is it going to get us? Well, Bill Bonner here
at The Daily Reckoning figures that we are going
to get, as he puts it, "flation", and says.
"Flation is inevitable in the financial system.
And our guess is that this flation will show
itself in rising prices for gold, commodities, and
emerging markets ... but lower (relative) prices
for stocks, property and financial assets,
generally."
And why is "flation"
inevitable? Mr Bonner says it is "because there
are billions ... no, probably trillions ... of
dollars worth of financial mistakes in need of
correction and a world full of financial
authorities trying to prevent it."
And
then he gets to housing prices, and he asks, "What
is a no-money-down mortgage but an option to buy a
house later? And now that house prices are going
down, the mom-and-pop options are expiring
worthless."
And as a guy who once traded
options as a living, options expiring worthless
means just what it seems; it's all irretrievably
gone, like my youth, my optimism, my looks, my
hair, the respect and love of my family, my knees,
my teeth, my hearing, several internal organs and
most of my money.
In short, all the money
is gone, and the bad news from Bloomberg.com is
that this is already spilling over into the most
important half of the economy; the governments.
The article reveals that "US states expect to have
at least US$26 billion less than they need to pay
their bills during the next budget year as a
slumping economy erodes tax receipts", according
to a "study by the National Conference of State
Legislatures" which "shows that pressure is
mounting in nearly half of the states as
businesses fire workers, fuel prices soar and
consumers grow more worried about the economy."
How pervasive is all of this? The article
says, "Deficits are forecast in 23 states for the
2009 budget year."
In short, in half of
the states, in a country where government spending
is half of the economy, there is going to be a $26
billion hole in aggregate spending, and all
because tax receipts were down to start with? And
you think that the stock market and the economy
will thrive from here? Hahahaha! That's funny!
Thanks! I needed the laugh!
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
