Robert Morley has an essay posted at thetrumpet.com titled "How This Recession
Could Change the World", which is kind of funny, as it would be REALLY weird if
a recession DIDN'T change the world in some way! Hahaha!
Hell, just getting short-changed by a lousy $10 by the snotty little cashier at
the supermarket changed my world! Hahaha!
My attempts at humor falling flat, he brushes me aside and starts out asking,
"Did you know that lower oil prices may set events in motion that will have a
much bigger impact on your wallet than a few dollars off at the tank? There is
an unexpected side effect of
today's breathe-easier gas prices - and it is a big one."
I say, "Yeah, I know!" Now I can afford to cruise the streets looking for
hitchhikers, so that I can give them a ride while I explain to them, "Hey, kid!
Did you know that money is created by debt nowadays? It is! It starts when the
Federal Reserve creates, at its whim, credit in the banks, which becomes money
when someone borrows it from a bank, for which the borrower owes both the
principal and interest. The borrower owes more than was borrowed! Hahaha! Do
you understand the significance of knowing that every dollar you have is not
enough to pay back what you owe? Hahahaha!
"And now we owe So Freaking Much Money (SFMM) that it is around 400% of our
GDP, of about US$13 trillion, which is the total value of everything this
country produces in a whole year! And the government has an accrued liability
of $95 trillion, on top of that, right freaking now! We're freaking screwed!"
By this time, I have merged back with traffic, horn honking, tires squealing,
giving me the opportunity to say, "And then the Federal Reserve and regulators
all looked the other way and acted stupid when derivatives got So Damned Weird
(SDW) so that now, globally, there is over $650 trillion's worth of them in the
USA, and a reported $1.25 quadrillion in the world! Hahaha!"
Dangerously weaving in and out of traffic so as to focus my passenger's rapt
attention, then I tell them, "The Burning Question That Will Plague The Future
(BQTWPTF) will be: How could these Earth people be such buttheads that
Glomdorrm, high overlord of this sector of the galaxy, had to send The Mogambo,
which is me, to Earth here to tell them to peg their money strictly to gold or,
in the immortal words of Glomdorrm, 'die the dreadful death of inflation at the
hands of governmental overspending and increasing enlargement of the
governmental apparatus therewith' which admittedly does not flow trippingly
from the tongue?"
By this time, their eyes are bugging out, but I continue relentlessly, "And if
the governments did not do that, then each Earthling should, again in the words
of His Excellency Glomdorrm, 'accumulate as much gold and silver as possible
because this is the only rational response of intelligent beings to such
stupidity by a government, and if people react appropriately, as befits
intelligent beings, and start buying gold in response to such monumental
governmental stupidity, then we will not incinerate the planet Earth into a
burned-out cinder with our plasma ray-guns!'"
Well, usually, I find that such momentous revelations are too much for tiny
Earthling brains to absorb, and they start whining and crying and begging me
not to hurt them, and how they just want to get out of the car after just a few
blocks, and I am yelling at them "You begged for a ride to go two lousy blocks,
you hateful little creep?"
They never answer, or even say "thanks"; they just open the door and run away,
usually screaming and crying, which I figure means they understood the enormity
of the situation, which was my plan all along! Mission accomplished, Mogambo!
But Mr Morley is not talking about that, but about how "As expensive as $147
per barrel oil was for consumers, and as bad as that was for the economy in
general, believe it or not, it was a bit of a blessing for the US government.
As US consumers sent hundreds of billions of dollars to oil exporters such as
Saudi Arabia, Kuwait, Nigeria and others, these countries recycled large
portions of those dollars into the United States by lending them to the federal
government. They did this by purchasing US Teasuries and other US agency debt,
such as Fannie Mae and Freddie Mac bonds."
He notes that one result is that "This oil-dollar recycling had one huge
short-term benefit for Americans: It helped keep interest rates low", which is
true, but all I can think about is how much tax money all those governments
raised as a result, and how they spent it instituting permanent programs to
take care of another swath of now-dependent parasites, and how the government
will keep deficit-spending, and the Federal Reserve will keep creating the
money to pay for the spending, and things will cost more and more, and one day
$147 per oil will seem like a pleasant dream.
At first, I am despondent and suicidal, as usual. And then I remember that as
oil will be higher, ditto the prices of gold, silver and oil!
Then, I feel better when I realize, "Whee! This investing stuff is easy!"
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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