The Economist magazine, in a column wryly titled "Pangloss Revisited", notes
that "The average deficit over the next decade in now expect to be 5.1% of GDP
[gross domestic product], compared with an average of 4% in the original
budget", and that even in the last year of the forecast, 2019, the budget
deficit is supposed to be 5% of GDP! Wow!
As weird as that is, it gets weirder later in the article when Peter Orzag of
the White House's Office of Management and Budget (OMB), whom the article
called "Mr Obama's top budget man", has "tried to put a positive spin on the
situation. By 2019, he argued on his blog, America's primary deficit (the
difference between revenue and spending excluding interest payments) would be
only 0.6% of GDP."
Excluding interest payments? Hahaha! Why in the hell would you
exclude interest payments? Hahaha! You shake your head in amazement that this
is the kind of Silly, Stupid Crap (SSC) that is everywhere these days!
"Excluding interest payments"! Hahahaha!
Immediately I realized that, again, I was too hasty, and this brilliant little
stratagem could solve my problems at work! My main problem is that money comes
hard these days, customers don't buy as much these days, and they don't want to
spend what little money they have with (and I quote) "a disagreeable moron"
like me these days, which makes me fear for my job and the bankruptcy of the
company these days.
However, with this new ploy in hand, now we'll see who the moron is when I
cleverly arrange for the company to borrow money with an interest-only,
balloon-payment-at-the-end, loan, that comes due after I retire, so that it
looks in the meantime like money is coming in but no money is going out because
I "exclude interest payments"! It's like free money! Hahaha!
I know there is an obvious flaw in the plan, and it gets even weirder when you
learn that this same Mr Orzag and this same OMB, for some bizarre reason that I
assume only makes sense if you are mentally ill or taking drugs, or both,
presupposes that "the average interest rate on government debt in 2019 is the
same as the rate of economic growth". What? Hahaha!
Of course, The Economist gets it wrong when it says, "Federal debt will read
77% of GDP in 2019, up from 41% in 2008", in that they are only counting the
federal debt held by the public, and conveniently ignoring that whole freaking
giant glob of debt held by the Social Security Trust Fund and dozens and dozens
of other places where public money has been "invested" by buying government
bonds and thus giving the cash to Congress to spend, a fact that is so obvious
that it makes me laugh in Utter, Utter Contempt (UUC) at such a rookie mistake,
which makes you wonder what kind of boneheads they are hiring at The Economist
magazine since the actual debt is almost $12 trillion and the GDP is $14
trillion, making the debt-to-GDP ratio 86% already!
But before I get too hard on The Economist magazine, I will note that it is
exactly right when it says that the reappointment of Ben Bernanke as chairman
of the Federal Reserve "ignores the fact that Mr Bernanke was complicit in
creating the loose monetary conditions which fueled the financial frenzy in the
first place. As a governor of the Fed earlier this decade, he was even more
convinced than Alan Greenspan that central banks had no business raising
interest rates to head off asset bubbles."
The good news in the article is that polls show that Americans are waking up
the fact that the Federal Reserve is a disastrous failure and it has ruined the
dollar and America, which I interpret from the news that "Americans think less
of the Fed than of the Internal Revenue Service".
And since the smart play is to buy gold, silver and oil when the government is
behaving so badly, the best news was not in the article at all, but for us
greedy money-grubbers who want to make a lot of money without working and think
that gold, silver and oil is the way to do that because that is what seems to
be the lesson of the last 4,500 years, it is wonderful news that the majority
of investors are not yet buying gold, silver and oil, which makes sense because
it is mathematically impossible for the majority of investors in anything to
make a profit, and only a minority betting against the crowd can, by
mathematical imperative, make a profit!
You cannot see the Utter Mogambo Sincerity (UMS) in my eyes, and so you will
just have to take my word for it that this is only one - one! - of the many,
many reasons why I say, when buying gold, silver and oil, "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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