Goldnews.Bullionvault.com notes that Henry Hazlitt, economist extraordinaire
and erstwhile Newsweek and New York Times editor, categorically stated that
"The word 'inflation' originally applied solely to the quantity of money. It
meant that the volume of money was inflated, blown up, overextended."
Mr Hazlitt went on to say that, "To use the word 'inflation' to mean 'a rise in
prices' is to deflect attention away from the real cause of inflation and the
real cure for it."
This reminded me that it was time to wade through the piles of potato chip
bags, empty pizza boxes and beer bottles all over the floor and go over to the
Mogambo Economic Detector Unit (MEDU) and see what happened with Total Fed
Credit last week, as TFC is, literally, the money from thin air to which Mr
Hazlitt was referring in his classy, educated way, and which The Mogambo
screeches and wails about in terror in his Loud
Mogambo Way (LMW), which is neither classy nor educated, but it gets the point
across via volume.
Anyway, Total Fed Credit was actually down by US$4.2 billion last week, which
is good news and bad news, all in one, as it means that the Fed is not
inflating the money supply (and thus creating price inflation) for one damned,
lousy week, which is good news; but it also means that the Fed is not inflating
the money supply to finance buying and selling to make undeserved profits,
which is bad news.
This brings up John Mauldin of Frontlinelthoughts.com, who writes, "I remember
in the summer of 2006 I would face my blank computer screen on a Friday and
wonder, what I could write about?"
Immediately, I started thinking about my own "Summer of 2006", and then I
remember that's when I started drinking heavily to forget the summer of 2006,
when you-know-who found out about you-know-what, and now that I think about it,
I realize I never did get my barbecue tongs or rubber handcuffs back, either,
which made everything worse! Damn! See the kind of crap I have to put up with
around here all the damned time?
But this is not about me or some stupid ancient scandals with a troupe of
traveling acrobats from Romania, but about how in 2006 it was, as he says,
"Goldilocks, all the time. Today, there is such a target-rich environment. The
problem today is trying to decide what not to write about"! Exactly!
In 2006, for me, there was always former Federal Reserve chairman Alan
Greenspan to write about, making a fool of myself in print and in line at the
grocery store when I loudly and indignantly denounce that worthless, corrupt
egomaniacal bastard as the, well, worthless, corrupt egomaniacal bastard that
he is, and I could, and did, go on for pages and pages about how he and the Fed
destroyed the dollar by creating so damned much of them, about $10 billion of
them every freaking month, month after month, year after year, since 1997!
I know that you are sick of hearing me talk about it, but all this new money is
the classical definition of inflation, which immediately shows up as a rise in
some prices (usually stocks and bonds), and later shows up as a rise in more
prices, and then more prices, until it has shown up as rises in all prices for
everything, which is also popularly called inflation, but it isn't, as Mr
Hazlitt explained in the 1960s.
And this doesn't even mention the cancerous growth in the size of government,
which grew by borrowing a big chunk of all the money that the Fed created, and
taxing the profits everybody else made with what was left, and the government
used it to create incomes for more and more people, until the federal
government now supports half of the population, all of whom unfortunately need
more money because of the higher prices.
Now, total government taxation consumes half of all incomes, all of which goes
around and around until my head is spinning and I wonder how it is possible
that any country with as many schools, colleges and universities as we have can
be so freakishly, perversely, brain-dead as to believe that such idiocy was
even freaking possible?
Then there was, and still is, Greenspan's successor, Ben Bernanke, to write
about, another worthless corrupt piece of Federal Reserve arrogance with blind
allegiance to a laughable academic econometric theory of one bizarre kind or
another, which is peculiar because even a complete idiot like me can look at
the economic landscape it has engendered and immediately recognize the
importance of getting gold and silver immediately, because this is truly
economic stupidity on a grand scale!
I thought that maybe Mr Mauldin would want to add a few remarks along those
lines, but he says the more immediate evidence is that nobody has a damned job
with which to make money with which to buy gold and silver, as the latest news
is that US unemployment rose to 5.5%, and "we probably saw a decrease in jobs
of at least 100,000. The market was upset with 40,000."
Then he ominously asks, "What will it do when the monthly number prints 100,000
later this year? And it likely will." Yow!
Naturally, I want to know how he knows that, and I raised my hand to ask the
question. Apparently he was ready for me, and says that "The Federal Reserve
projects that unemployment will rise to 6%. That means there are a lot more
jobs to be lost."
Since he did not say HOW many jobs would be lost, I figure that a civil labor
force of 145 million means that another 725,000 jobs will be lost. Suddenly my
life flashed before my eyes, as I see the ax coming, and once again I will be
tossed out onto the street, rudely advised by in-house counsel and stupid
co-workers to "never come back".
And my slim, slim chances of surviving a corporate cutback grew even more bleak
when he said, "And that is if unemployment stops at 6%, which would be a very
mild recession indeed." At this, I gave out an involuntary little yelp.
I could see that he was tired of dealing with me, so he turns me over to The
Liscio Report for the next part of my flogging, which immediately said the
employment figure for "March was revised down by 7,000, and April by 8,000.
We've now had four consecutive months of downward first revisions, and also
four consecutive downward second revisions - unusual strings that support the
picture of a weakening employment trend."
If you are like me, then your sensitive Mogambo Economic Senses (MES) are
tingling at the news of "unusual things", like "unusual strings of downward
second revisions" of unemployment estimates, and suddenly you are bathed in a
cold sweat of fear as you again think of being fired from your stupid job just
because you made a few mistakes, goofed off most of the time, and you took a
lot of "sick time" to go off playing golf and bar-hopping with your hoodlum
friends.
That is why I was cheered when Mr Mauldin revealed the technical analysis gem
that "One of the best indicators of the direction of employment is temporary
employment. If the workload is shrinking, the first thing you do is lay off
your temporary help, or simply do not hire them."
Sure enough, he says, "Temporary employment is down 5.7% year over year and is
showing continued monthly deterioration with each passing month since last
October."
I think to myself, "Terrific news! Maybe they will lay off the temps, and keep
me!" Especially if I start the rumors that I have incriminating photos of
everybody doing something illegal or kinky, which has just recently become the
cornerstone of my new Save My Freaking Job (SMFJ) campaign! Here's hoping!
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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