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     Oct 28, 2008
Unapologetic economic stupidity
By The Mogambo Guru

Michael Pento of Delta Global Advisors says, "One of the major ramifications of having our national debt move above the US$10 trillion mark is that the sustainability of the government, consumer spending and the economy rests on the continuation of artificially low interest rates. In fact, low rates that are the result of money printing have become our addiction." Yikes! He's right!

In fact, he reported, "It now takes about 10 cents on every tax dollar collected just to pay the interest on the debt," which doesn't seem so bad until you realize that "As bad as that is, it is only because interest rates are at record lows that the debt service is still manageable."

As an example, he notes that "The yield on the 10-year note as of

 

this writing is 4.01%. To illustrate how low that yield is in historical terms, the average constant yield on the 10-year treasury going back 46 years is 7.04%."

So a miserable 4% is just over HALF of the historical average? Yow! Then our increased debt service would be expected to be 20 cents on every tax dollar, or more? Yikes!

Mr Pento is careful to not to say he agrees with me or even acknowledges my existence, but does say, "Keep in mind that this historically low yield exists at the same time consumer price inflation has increased by 5.4% over the last 12 months. Why are real yields negative while debt levels are soaring and the monetary base is growing at a 114% annual rate (you read that correctly - 114% annualized in recent weeks)?"

I think that Mr Pento is actually being too conservative in relying on "official" government statistics of consumer price inflation, and DeepCaster.com seems to say the same thing when they interject that "Real US Consumer Price Inflation is running at around 13% annually, Real US Unemployment at about 14.5% annually, and Real US GDP is at a negative 2%, while real M3 (monetary creation) is running at 14% annually according to the quite credible calculations of shadowstats.com."

And as to who in the hell ShadowStats.com is and why they think they are smarter than the government, well, firstly, they calculate the inflation numbers "as they were prior to the 'gimmicking' that became widely used beginning in the early 1990s", and as for why they think they are smarter than the government, hell, EVERYBODY is smarter than the government! Hahaha! Just look around you at the job that the government is doing and the caliber of people that you run into when dealing with them! Hahahaha!

Well, nobody is interested in my barbed criticism of government, and instead of the rousing round of applause with people shouting, "Hooray for the Clever And Humorous Mogambo (CAHM)!", all that could be heard were a few nervous giggles and people mumbling, "What in the hell is this Mogambo idiot yammering about, anyway?"

Mr Pento senses my embarrassment and distracts the crowd by saying, "The bottom line is this: debts at the public and private levels have risen to the point that in order to insure against default, interest rates must remain at an unnaturally low and negative real level. In order to achieve that artificial level, the Federal Reserve must continually inflate the money supply."

And if you are not horrified at the prospect of continually inflating the money supply, then I know that you either work for the Federal Reserve, teach economics at Princeton or are just plain brain-damaged, because even birds instinctively know that inflation in the money supply always results in inflation in consumer prices, and that is probably why they are now flying south by the droves; they need to get away from the terrifying stupidity of the Federal Reserve and the Congress in Washington, DC! Hahaha!

Birds are too stupid to protect themselves by buying gold, silver and oil, and that is where they always make their big mistake. Don't you make that same mistake.

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.)


THE COMPLETE MOGAMBO GURU


1.
China gets a jump on US in space

2. The velocity of worthless money

3. Tokyo's nexus with India deepens

4. US government throws oil on fire

5. Pretenders all of us

6. US worldviews worlds apart

7. Wrecked Iraq

8. Heaven's above! What's up with Kim?

9. The Bush doctrine in ruins

10. Graveyard of Indian idealism

11. An Indonesian example for the US

(Oct 24-26, 2008)

 
 


 

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