The headline on Wolfgang Munchau's column in the Financial Times read
"Recession Is Not The Worst Possible Outcome". I naturally assumed that he was
referring to the inevitable "outcome" after the stupid Federal Reserve created
so damned irresponsibly much money and credit over the past few decades so that
the government could borrow a cumulative US$10 trillion and institute
innumerable new government programs and agencies, paid for by reaping enormous
floods of tax revenues during the economy's decades-long buying-and-selling
spree in response to this irresponsible monetary and fiscal orgy of gluttony.
Which, I admit, sounds real nice!
I was pleased, therefore, as he seemed to be doing my very
bidding in insulting the Federal Reserve when he first talks about the late
economist Hyman Minsky's "financial instability hypothesis", which postulates
that long-term economic stability breeds its own instability through a "vicious
circle" of rampant financial speculation and Ponzi financing, which grows and
grows until, at its "Minsky Moment", the frauds are revealed, and it all
collapses in a heap of instability and chaos.
The predictable result, of course, is that the Implacable Screaming Mogambo
(ISM) goes freaking berserk at the economic insanity of it all as he watches,
horrified, as asset prices get bid higher and higher in a boiling frenzy of
speculation with all of this new Federal Reserve money and credit, and which
will end badly when the Ponzi game falls apart, as Ponzi schemes must, which is
why Ponzi scams are illegal in all 50 freaking states of the US and every
country in the world, but still unbelievably legal in the budgeting of the
damned federal government!
As examples of Ponzi schemes going bust, look at Social Security and Medicare!
I was hoping that he would then segue into Mogambo Invasion Plan Number One
(MIPNO), which is how the whole country should rise as one and storm
Washington, DC, with flaming torches and a steaming, screaming sense of
outrage, and run every government employee either out of town or into prison,
or both, and install The Wise And Wonderful Mogambo (TWAWM) as Omnipotent
Emperor Mogambo (OEM) with a fabulous, fabulous salary and benefit package.
Failing that, maybe he could expose the stupid-yet-fraudulent idea of a whole
nation "investing long-term in the stock market to fund a retirement" to be the
stinking lie that it is!
I mean, not only is it mathematically impossible, and not only has it never
happened anywhere in the whole history of the world, but it is not happening
now, either, as implied by Mark Gongloff, writing at blogs.wsj.com's
Marketbeat, whose article is titled, "Lost Decade".
I think I vaguely remember being drunk when I saw the movie The Lost Weekend,
which was about alcoholism (always a fun topic!) and the title The Lost Decade
is just as unsavory, and rightfully so, because he explains, "Adjusted for
inflation and dividends, the return on the S&P 500 was negative for the
decade that ended on June 30." Hahaha - 10 years of nothing! No growth in
buying power for 10 years! Hahahaha! Nice "investing for the long-term" there!
So, anyone investing in the S&P 500, which is just a compilation index of
the 500 biggest companies in America, for the last 10 years produced negative
real (inflation-adjusted) results? Hahaha! And you are going to fund a
retirement by never gaining any buying power? Hahahaha!
But he did not mention any of this, and so naturally I am wondering why in the
hell he is wasting my time with it. Well, it turns out that the reason Mr
Munchau brings this up at all is that he gets into explaining about "New
Keynesianism" which is, "in fact, probably the most influential macroeconomic
theory of our time. At the heart of the doctrine stands the so-called dynamic
stochastic general equilibrium model, nowadays the main analytical tool of
central banks all over the world."
Hahaha! It even sounds stupid! "Dynamic stochastic general equilibrium model"!
Hahaha!
Mr Munchau apparently does not see the humor, and ignores me by going on, "In
this model, money and credit play no direct role. Nor does the financial
market. The model's technical features ensure that financial markets have no
economic consequences in the long run."
I can see the obvious advantages of never suffering the consequences of my
actions, and I am busily taking notes to use at my next Employee Annual
Performance Survey! Whee!
Almost as an understatement, he says, "This model has significant policy
implications." I think to myself, "I am waaAAAaaaay ahead of you, dude!"
"One of them," he goes on, "is that central banks can safely ignore monetary
aggregates and credit. They should also ignore asset prices and deal only with
the economic consequences of an asset price bust." Wow!
I was going to interrupt to make some rude comments about such a theory and
some more rude comments about the Federal Reserve for even contemplating such
absurdities, as I am sure that they parallel his own. But since I figure that
it is good to know a guy who writes for the Financial Times, what better way to
ingratiate myself than to agree with him?
Then he hits me between the eyes with the sledgehammer of, "They should also
ignore headline inflation"!!!! Note the clever way I used four exclamation
points as punctuation to indicate anger, horror, stark terror and homicidal
outrage!
By this time, I am in dire need of medications to calm my pounding heart, and
even he cautiously suggests, ever the gentleman, that "we might want to
question whether the recipes that got us into this mess are also most suited to
get us out again." Hahaha! "Also suited!" Hahahaha! What a wonderfully dry
sense of humor! Hahaha!
He sums up by saying that to forestall the deserved collapse of the bloated,
malignant economic system as currently constituted with more and more heroic
monetary and fiscal insanity, and more and more governmental policy blunders,
means that "a recession is not the worst possible outcome. The worst is for
this crisis to go on and on, for Minsky's moment to become an eternity."
Constant collapse. Brrrr! Thank goodness for the warmth of gold and silver
against such a chill!
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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