An article by Ambrose Evans-Pritchard in the Telegraph had the headline, "If
Eastern Europe falls, world is next", which I take to be a new domino theory,
as the domino theories I am used to, run along the lines of, "If anything
happens to America, everybody else is freaking toast!" and the more personal,
"If anything happens to the cookies in my lunchbox, Mogambo, you are a dead
man!"
Well, Mr Evans-Pritchard does not mention any of that in this new theory, and
instead starts off with the attention-grabbing sentence, "The unfolding debt
drama in Russia, Ukraine, and the EU states of Eastern Europe has reached an
acute danger point" - by which he means things like the European Bank for
Reconstruction and Development (EBRD) saying that "bad debts
will top 10% and may reach 20%", which is very bad news indeed for a bunch of
crooked speculator trash who leveraged everything to the hilt and now their
entire capital base, which was probably less than 10% of the amount invested,
has been wiped out by the 10% losses, and now all the money is gone! Bankrupt!
Hahaha!
An unfamiliar metaphor arises when we read, "The Vienna press said Bank Austria
and its Italian owner Unicredit face a 'monetary Stalingrad' in the East" which
obviously means more to Europeans and Russians than it means to us Americans,
as all I seem to remember about Stalingrad was writing on a history midterm
exam one time in high school that "Stalingrad is a Russian city named after a
man named Stalin. It has many people in it today, although a lot of them got
killed fighting the Nazis, and I forget what happened or who won, but there
were lots of dead guys all over the place."
I also remember that I realized it was a weak answer, and then I took a real
gamble and wrote, praying for a miracle, "The chief exports of Stalingrad are
copper and maize, which native people call corn, or maybe the other way around,
I forget because it's kind of confusing who calls what what." I also forget
whether I got that part right or not, but I must have eventually graduated,
because here I am, and all's well that ends well!
Anyway, Stalingrad and my high school days are a long way from Austria's
finance minister Josef Proll, who "made frantic efforts last week" to arrange
something to save his butt, as, "His banks have lent 230 billion euroes to the
region, equal to 70% of Austria's GDP." Wow! Hahaha!
The amount of leverage must be off the charts, as Mr Evans-Pritchard reports
that Der Standard in Vienna announced that "A failure rate of 10% would lead to
the collapse of the Austrian financial sector" which, Mr Evans-Pritchard
figures, "Unfortunately, that is about to happen."
He goes on, "If mishandled by the world policy establishment, this debacle is
big enough to shatter the fragile banking systems of Western Europe and set off
Round 2 of our financial Gotterdammerung" which is a word that I had to look
up, and although I know what Gotterdammerung LOOKS like it means, it really
means some mythical end-time when the gods fight with evil and everything is
destroyed.
Well, all that fightin' and feudin' makes for a good story to tell the kids
when the power has gone out because you can't afford to pay the electric bill
and the damned kids refuse to patrol the perimeter, which is (you pointedly
explain to them) how evil gets in and causes Gotterdammerung in the first
place, which is a Bad, Bad Time (BBT) when everything is destroyed, "including
video games and hanging out with your weird, hoodlum friends", which seems to
get their attention.
But everyone's problems were actually caused by the satanic Alan Greenspan
during his chairmanship of the US Federal Reserve, by the US Congress for being
so childishly stupid, self-centered and deliberately ignorant, and by the
loathsome US Supreme Court for ruling that the US Constitution allows it all!
I bring this up because I have learned, to my pleasant surprise, that not
everyone at the Fed is a low-IQ halfwit lowlife pile of pigeon squirt,
mindlessly turning out one piece of loathsome Fed-approved econometric crap
after another with which to further destroy the economy.
Two of these brave-and-unusual Fed economists are Arthur Rolnick and Warren
Weber at the Federal Reserve Bank of Minneapolis, who, as Judy Shelton reports
in her piece in the Wall Street Journal, "concluded that gold and silver
standards consistently outperform fiat standards. Analyzing data over many
decades for a large sample of countries, they found that 'every country in our
sample experienced a higher rate of inflation in the period during which it was
operating under a fiat standard than in the period during which it was
operating under a commodity standard.'"
Eureka! She concludes, "economists who promote the government-knows-best
approach of Keynesian economics fail to comprehend the damaging consequences of
spurring economic activity through a money illusion."
The best news is towards the end, where she reports that "any move toward a new
international monetary system based on gold will more likely take place through
the grass-roots efforts of Americans" like, for instance, "The Indiana Honest
Money Act" which would "allow citizens the option of paying in or receiving
back gold, silver or the equivalent electronic receipt as an alternative to
Federal Reserve notes for all transactions conducted with the state of
Indiana."
This is wonderful! I can hardly wait! If this wonderful bill is enacted as
state law, I suggest moving there and finding ways of paying Indiana too much
money!
For example, say I am speeding along in my snazzy red Jag convertible with the
top down, cute Hollywood starlets at my side, radio blaring, honking at pretty
young ladies and generally making a dangerous, motor-roaring, wheel-spinning,
speed-demon nuisance of myself. Further, suppose I keep this up until some cop
pulls me over and gives me a speeding ticket for, say, $220, which is the fine
for "going in excess of 30 miles an hour over the speed limit in a posted
zone."
Now, we spring our financial trap, and immediately pay the fine, but cleverly
send them a check for $22,000.00, which they cash, whereupon I say, "Hey! I
accidentally paid too much! Give me my money back! And by the way, I want the
whole $21,780 returned to me in gold! Hahahaha!"
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 2009, The Daily Reckoning.)
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