There was an interesting article in last Tuesday's Wall Street Journal titled
"Watch Out for Sovereign Debt Risk" by Carmen Reinhart and Kenneth Rogoff, a
couple of economics professors at the universities of Maryland and Harvard
respectively.
I thought that it would be about all those dollars that foreigners have in
their "sovereign wealth funds", thanks to the damned Federal Reserve creating
it all, and then us borrowing it and then spending it on imports of foreign
goods and services, enough to produce a merchandise trade balance deficit of
almost US$850 billion a year!
Or maybe the article would be about how all that money being wielded by
sovereign wealth funds is actually not worth the paper it is printing on, and
if they think that they can conduct business
with worthless collateral and assets, then we should all rise and say, "Welcome
to American Fantasy World, as we Americans have constructed an entire economy
based on this very same stupid idea, and convinced everyone else to go along
with it! And now you are stuck with it! Hahaha!"
Naturally, I was breaking out the nachos and tequila to celebrate the fun we
are going to have watching these foreign weenies go berserk when they find out
that they have been bamboozled by a fiat currency, and everyone will start to
look at the dollar with a look of disgust, like my fellow workers look at me
when I come to work in the morning; warily, suspiciously, filled with envy and
thinly disguised hate.
Yes, envy! They are jealous and envious that I am smart enough to be buying
gold and silver with every dime I can get my hands on (well, I would if I could
get my hands on an extra dime these days!) in response to the preposterous
monetary policies of this country and the world, but they are all so stupid
that they are NOT buying gold and silver in response to the blatant idiocy that
is Modern Monetary Economics, which is so stupidly dangerous that even little
children immediately see that it is total crap!
If you don't believe me, try this little experiment; walk up to some strange
little kid, it doesn't matter how young, and grab the youngster by the shirt,
yank him right up off the ground and haul him to eyeball level, and snarling
right in his surprised little face forcefully enough to make sure that that you
are heard loud and clear, say, "Hey, you stupid kid! What do you think about
the Federal Reserve creating monetary inflation by creating too much money and
credit, which immediately causes a dollar-for-dollar increase in debt AND sets
the stage for a raging, crippling, terrible, long-lasting inflation in consumer
prices, which means that you are going to watch your mother and father
screaming as they are financially killed by the ruination of all their assets
and their money, and they will lose everything, thanks to the Federal Reserve.
And then all of you will die horrible, painful deaths! How do you like Modern
Economic Theory so far, you doomed, ugly little rug-rat?"
Repeated trials will prove that any kid, not matter how young, will invariably
be upset at this kind of Federal Reserve policy, usually resulting in screaming
and crying, kicking and writhing, and teeth gnashing, which is the Classically
Correct Appropriate Mogambo Response (CCAMR), and which does not even mention
the violence and obscenities, mostly from the stupid kid's parents and directed
at me, like it's all my fault or something!
Thus it is proved: The supreme idiocy of the Federal Reserve, abetted by a
corrupt Congress that lets them get away with it, is so obviously and
tragically wrong that even little kids, and even little kids who don't even
speak English, react the same way, as they instinctively know how
catastrophically, terribly wrong it all is!
But this is not about the damned Federal Reserve or the horrid former Fed
chairman Alan Greenspan, as the Journal article notes, "Already, a good share
of Argentina's debt is in default. What else to do you call it when a
government that owes over $30 billion in inflation-indexed debt manipulates its
consumer price statistics?" Hahaha! I call it, "Welcome to the real world,
chumps!" Hahaha!
The scam boils down to the fact that "the government is publishing an
understated inflation rate that is used for calculating indexation payments",
which we Americans know as business-as-usual, thanks to Alan Greenspan and
economist Michael Boskin rigging the Consumer Price Index, which is then used
to compute increases in the Cost Of Living Allowances (COLAs) to make sure that
Social Security payments, welfare payments and all kinds of payments to all
kinds of people (and lots of them!) keep up with the ravages of inflation in
prices.
Hell, apparently these two college professors don't know that, right now, the
United States is paying, on its inflation-index bonds (TIPS), less than
inflation (as measured the old-fashioned way; changes in prices), meaning that
if you hold one of these piece of garbage Treasury Inflation Protected Security
bonds, you are paying money to loan money to the government! Hahahaha!
And don't get me started on how increases in Social Security payments have
lagged increases in prices for years and years, because I hear plenty of that
from people who depend on Social Security checks.
I thought that they would note by my disrespectful remarks that this is old
news. They admit, "Fudging indexation clauses to effectively default on debt is
an old game", and then they go on to note how India essentially did it in the
'70s, Brazil did it in the '80s, and the USA did it in the Great Depression by
revaluing gold to $35 an ounce from $20 an ounce, "effectively rewriting the
contracts of foreign holders of US debt."
And now we are doing it again, just like everybody else! Hahaha! As Bugs Bunny
once slyly put it, "Ain't we stinkers?" Hahaha!
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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