Around here I am famous for many things (and many people have a fistful of
restraining orders against me to prove it), but most of them are for always
loudly recommending that people buy gold, silver and oil when their governments
are acting like spendthrift, profligate, leftist morons. Like now.
Undeterred, I am always soon back to screeching - again loudly - that everyone
should be buying gold, silver and oil ... while some people feel compelled to
make helpful comments ("You should shut up and die, you idiot!").
Others have questions, such as, "Mogambo, why are you always recommending that
people buy oil-related investments, and even buying and storing oil itself if
they have an empty swimming pool nearby, a spare sink or a lot of empty bottles
lying around the
living room amongst the old newspapers, empty pizza boxes and old buckets of
fried chicken, which would explain all the chicken bones everywhere?"
It is always difficult to know how to respond. To cover it up, I usually go
into a Long Mogambo Harangue (LMH) about how oil has the most intrinsic energy
per cubic unit of volume, how it has the most developed applications, the
Utter, Utter Dependency (UUD) on oil for every aspect of modern civilization,
or the fact that Peak Oil is obviously not a myth and how we have not only
passed the point where half of the world's in-ground oil is used up and gone,
but we are surely past the point where there will be much more oil discovered
in large quantities, which is terrifying when considering how China is already
demanding huge amounts of oil and their demand seems destined to increase.
As proof, you don't have to listen to me and my loud mouth this week, which
many of you will be pleased to know, but you can read it at Bloomberg.com where
they reported that China, which is already the world's second-largest energy
user, "increased crude-oil imports to a record last month, taking advantage of
falling prices, as domestic refining capacity climbed. Crude imports surged 46%
to 20 million metric tons or 4.87 million barrels a day in September from a
year earlier." Imports of oil went up by almost half! Half! In a year!
However, happily I no longer have to waste my Valuable Mogambo Time (VMT) with
expressing my fear and horror of inflation in the price of oil, usually
involving Sickening Spittle Spewing (SSS), which is hard to say five times in a
row, and I usually end up being subdued by burly security guards or paramedics
as I escalate a loud, disjointed, xenophobic, libelous, overtly threatening,
irrational tirade against the villainous Federal Reserve, the utter, utter
stupidity and corruption of the traitorous Congress (except Ron Paul), the
Supreme Court, and anybody who even looks at me cross-eyed these days.
But that is not actually the point, and what I am trying to finally get to has
already been perfectly stated in a Chevron Oil advertisement where they say,
"It took us 125 years to use the first trillion barrels of oil. We'll use the
next trillion in 30."
And you can soon see the effects of having a strong currency, as Bloomberg.com
seems to report when they write that China can now export inflation. To wit:
"China's trade surplus widened to a record in September as exports withstood
the global economic slowdown and falling commodity prices reduced the import
bill." Nice work!
No wonder all our Treasury secretaries always said that "a strong dollar is in
the interests of America", and now we see that, similarly, a strong yuan is in
the interests of China, as it makes oil, food and all imports cheaper!
And while headlines like how China's "Exports rose 21.5% from a year earlier to
US$136.4 billion after gaining 21.1% in August" seem wonderful and bright, the
fact remains that China's trade surplus is only $29.3 billion, whereas our
annual US trade deficit is 27 times higher - at about $850 billion.
On the other hand, there was another Bloomberg.com article that gave me the
distinct idea that China's new rulers are complete economic morons, and they
are going to purposely create price inflation in China so severe that people
will starve to death in the streets because they cannot afford to pay the
rising costs of food, so that there will be a large domestic uprising or a war
where a lot of male Chinese people will die, which would solve a lot of their
problems, as I gather from a Bloomberg.com article that "China's Communist
Party aims to double rural incomes in a bid to boost domestic consumption."
Gaaahhh!
Well, if they think that doubling incomes will boost consumption, and that the
higher consumption will be met by higher productions, then they are perfectly
correct, and it will almost certainly work like a charm, too.
If you are like me, then you are NOT thinking about that at all, but rather you
sat there, your mouth hanging open in stunned disbelief, your eyes bugging out,
drool actually dripping down your chin, paralyzed in horror at the sentence
"double rural incomes", and whole swaths of your brain's neurons turned to a
burnt-out, cinder-like substance at the sheer inflationary monetary horror of
such a thing, and you end up regaining consciousness looking up into the face
of "Hi! I'm Steve!" the paramedic as he is trying to strap you down and take
your vital signs while you are pleading, "Please, you have got to stop those
stupid damned Chinese from doubling incomes! The inflation in prices unleashed
from such monetary inflation will destroy them! Unleashed! Unleashed, I tells
ya!"
Well, they finally let me go when I resorted to the Mogambo Big Gun (MBG), and
I politely inform them that I consider any further encroachment upon my person
as a threat of physical violence against my person, and seeing as how this is a
0.44 magnum, the most powerful handgun on the face of the earth, it will blow
their heads clean off, they had to ask themselves a question: "Do I feel
lucky?" and I so said, "Well, do ya, punk?", and they said "No!"
Well, as I finish herding them out of my office and hearing them mumbling
terrible things about me under their breaths, I read that the Bloomberg article
goes on "The government aims to achieve those goals and eliminate 'absolute'
poverty in rural areas by 2020." Eleven years! Gaaaah!
Now I am again on the floor, gasping for breath, clutching my pounding heart at
the prospect of incomes rising at almost 7% a year to start with, and then at
the prospect of the Chinese consumers figuring out that borrowing and consuming
now is a smart move, since they will be paying back long-term loans with
guaranteed higher incomes and a much cheaper yuan, thanks to all that
inflation! Gaaaahhh!
We're all so freaking doomed!
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.)
Head
Office: Unit B, 16/F, Li Dong Building, No. 9 Li Yuen Street East,
Central, Hong Kong Thailand Bureau:
11/13 Petchkasem Road, Hua Hin, Prachuab Kirikhan, Thailand 77110
