At the drop of a hat, it seems, almost anything can predictably get me worked
up about inflation, and I was just getting ready to, you know, go freaking
ballistic about how the damned US Federal Reserve has condemned us to the Hell
Of Inflationary Horror That Makes The Mogambo Scream His Guts Out In Terror
(HOIHTMTMSHGOIT) with its insane-yet-irresponsible over-creation of money and
credit for all these long lonely decades (and especially so since 1997!), when
Barron's cuts me off by noting that "recent analysis of oil prices over the
past 50 years, adjusted for the increase in the money supply as measured by a
gauge known as M3", shows that "the price of a barrel of
petroleum today should be LOWER than it was in 1959" .
And why isn't crude oil today priced lower than at any time in the last half of
a freaking century, but instead is a zillion times higher?
I think to myself, "That question is easy! It's because the damned Congress
(except Ron Paul) let the damned Federal Reserve create so much money and
credit, so insanely much money and credit, so freaking damned insanely much
money and credit that the purchasing power of the dollar was destroyed in the
process, and that means that things priced in dollars will go up in price, such
as oil, as we see here!"
Naturally, I was startled and surprised that I knew the answer to a question!
After all these long, lonely years of teachers calling on me in class and
asking me some stupid questions to which I had no answer - or even any clue!
But where I learned that, like all cornered, paranoid rats, I instinctively get
vicious and belligerent, snarling and biting, ruthlessly clawing my way out of
the situation.
But now, at last, I know the answer! I raise my hand to get permission to speak
so that I can show off, but then I figure, "What's the point? Nobody will
believe the Austrian school of economics after all these decades, especially
after every one of them has been indoctrinated in that whole neo-Keynesian,
'deficits don't matter', 'inflation doesn't matter',
'lowering-interest-rates-works-every time without limit', econometric crapola
of a stupid, stupid, stupid economic theory, which is my excuse for wasting my
health and my life by getting drunk and having a ruined family life."
So you can imagine that I was pretty despondent, in that I knew the answer, but
resigned myself to being ignored again. Instead, imagine my delight and
surprise that Barron's correctly "lays the blame for surging petro prices
squarely at the feet of Uncle Sam, particularly the Federal Reserve"! Hooray
for Barron's!
Again, I am despondent because it shows that Barron's no longer needs me to
call them up and yell into the phone, "We're freaking doomed, you bozos,
because the Fed is creating so damned much money and credit that a roaring
inflation will descend upon us! Why don't you alert the nation, or put me on
the cover and I'll do it for you, you morons!"
Well, maybe I finally got through to them, or maybe they got smart because the
cover of a recent Economist magazine screams out " Inflation's back" , but with
the qualifier "but not where you think", which is their clever way of saying
that America and Europe are not the centers of the universe, but that
"Double-digit prices rises are about to afflict two-thirds of the world's
population".
The Economist dryly notes, "The average world inflation rate has risen to
5.5%," because central bankers made a mistake "to hold monetary policy too
loose", which brings up the pivotal point that "it is worrying that global
monetary policy is now at its loosest since the 1970s: the average world real
interest rate is negative". Hahaha! Negative!
It's "worrying", they say! Hahaha! Monetary policy is so loose that real
interest rates (the nominal interest rate less the rate of inflation) are less
than zero, and they think it is "worrying"? Talk about British reserve and
understatement!
The net result is that not only is this self-serving, worldwide spider's web of
"investment professional" cretins tying up everyone's money for up to 30 years
or more at yields that are at record lows, so that for the rest of your life
you are derisively known around the office as "old buy-at-the-top", but they
are also guaranteeing that you will suffer a huge, huge net loss as the market
price of your debt goes down as interest rates rise!
And you think that interest rates are NOT going to climb dramatically, handing
huge, huge, HUGE freaking losses to any idiot stupid enough to own debt that is
so grossly, grossly, grossly over-priced? Do you actually, really, truly
believe that interest rates will always stay below the rate of inflation?
Hahahaha! Stop it! My sides are hurting from laughing! Hahahaha!
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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Office: Unit B, 16/F, Li Dong Building, No. 9 Li Yuen Street East,
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