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.)
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