Lightening the mood with a deflator
By The Mogambo Guru
The bad news is that prices of some investments are falling below their
long-term moving averages, which seems to be the most important piece of
technical analysis that there is, and that is why all kinds of trading programs
are kicking out "sell orders", which has to be immediately counterpunched by
the central banks, governments and "interested parties" (meaning mostly
retirement funds and other institutional investors, as the Financial Times
reports that these institutions own a "66% share of all stocks").
The upshot is that the captive "investors" of these institutions are getting
scared, although if you walk up to one of these self-professed "scared" guys
and ask, "Hey, do you have a bunker in your backyard?" they will say "No"; and
if you ask, "Hey, are you packing heat?" they say, "No"; and if you ask them,
"Hey, are
you buying gold, silver and oil with every freaking bit of money that you can
get your grubby little mitts on as a defense against the monetary madness of
the Fed and the other central banks of the world?", again they will say "No".
So I laugh in scorn at them - Hahaha! - as they obviously know nothing about
being scared! Hell, I'm so scared that I haven't had a bowel movement in a
month, although I'm securely locked into the Mogambo Bunker Of Defensive Power
(MBODP), and I'm dripping with weapons and "good luck" charms! Now THAT'S
scared! And probably why I am so cranky!
About what am I scared? All kinds of economic crap that all leads to the
inescapable conclusion that We're Freaking Doomed (WFD) to die from inflation,
like, for instance, the national debt went up by US$21 billion in the last week
alone!
Or, to lighten the mood, that the government's GDP deflator was revised DOWN to
1.2%! Hahaha! I am laughing insanely at the sheer hilarity that inflation is
estimated to be 1.2%, and yet I am so scared and outraged at this insult to my
intelligence that my teeth are clenched and grinding so hard that sparks are
actually flying out of my mouth, which is not as easy as it sounds.
Hell, the Consumer Price Index was up 8% in the first quarter alone!
I was going to just let it all drop and get back to drinking to excess so that
I will pass out and not have to deal with any of this, but then I saw that
there was a new girl in class, Shirley, and I figured that the best way to
impress her was to make a big stink about how the raw data of the gross
domestic product (the entire output of goods and services produced by this
country, as measured by prices paid) was achieved only by adjusting GDP by a
piddly 1.2% inflation in prices, hoping that she would say, "Oh, Mogambo!
You're so Smart And Handsome (SAH)!", when my dreams are dashed by Mish
Shedlock at Globaleconomicanalysis.blogspot.com suddenly saying the same thing!
"Part of the reason the GDP number looked so good," he says, "was because the
GDP price index for the second quarter was marked at just 1.2. In other words,
(the Bureau of Economic Analysis) subtracted from nominal GDP 1.2% in order to
produce their version of 'real' (inflation-adjusted) GDP. GDP would have been
negative if a larger deflator was used."
Next, Mr Shedlock quotes a report that government spending is soaring, as "Real
federal government consumption expenditures and gross investment increased 6.8%
in the second quarter, compared with an increase of 5.8% in the first." Hahaha!
Then he visibly impresses Shirley by dryly opining, "I question the merit of
adding all government spending, no matter how useless, to the GDP, but that is
what is done."
Unhappily, I can see by the way she is positively swooning over his erudite
remark that I have irretrievably lost Shirley. With true Mogambo Sour Grapes
(MSG), I dismiss her as a moron who would have just strung me along until all
my money was gone and then tossed me aside, and having never understood
Austrian Business Cycle Theory at all. Bah! I leave her to Mr Shedlock.
I turn instead to John Williams at shadowstats.com who says that he agrees with
us, and that "One can believe the GDP numbers or not. I don't. The US economy
is contracting and the assumptions used to show expansion are getting more and
more absurd with each report."
Well, the GDP reports are absurd, the GDP deflator is absurd, and the prices of
gold, silver and oil going down is absurd. What can one do in such
circumstances except to buy gold, silver and oil while downing copious amounts
of alcohol and pining for the lost Shirley?
Fortunately, I am not long into a new bottle before I note that gold, silver
and oil will go back up when the current interventions cease, while the
beautiful Shirley is gone forever.
And one day soon, when they have risen in price to their real value, I can have
all the Shirleys I want. And anything else I want, too! Whee!
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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