If you want to know where the stimulus money winds up, don't look in my wife's
purse, because I have been there several fruitless times in the last few weeks,
and she almost caught me twice. And don't look in my wallet, as my kids have
been there several fruitless times in the last few weeks, too, until I started
strapping my wallet to myself with duct tape, which stopped that "Let's look in
daddy's wallet!" crap in its tracks.
So where is the money? In the classic "trickle down" theory and (I assume)
osmosis or something, it is supposed to, eventually, wind up as more money in
everybody's pockets as a wage or profit in some fabulous Keynesian moment of
transcendent glory, wherein the economy is saved from the excesses of too much
money creation and too much government spending by creating
even more excess money and staggeringly more government spending! Hahahaha!
But that laughable result is best left to the hypothetical future, which will,
alas, never get here, and the immediate answer is that the newly spent
government money first ends up in the pocket of somebody who was, obviously, at
the head of the line and got the money first, and who must now be wondering to
themselves, as they look around at the bleak, bewildering, unbelievable
economic landscape of massive government deficit-spending around the world, and
the massive creation of money by central banks around the world, with inflation
rising everywhere, "What do I do with all of this money?"
Well, lots and lots of it is going into stock markets and bond markets, as
these are the only two investments big enough to absorb that Stinking Much Cash
(SMC), which may be what led Hong Kong-based money manager Puru Saxena to the
similar conclusion that "Thanks to the consequences of monetary inflation,
prices rise over time and this phenomenon gives a boost to the future cash
flows of companies. Now, bearing in mind that stocks in the US have already
lost two-thirds of their real value over the past decade and the fact that
money-printers are running the economic world, it seems likely that stocks will
continue to appreciate over the following years."
And this does not even mention that bonds are paying less than the rate of
inflation, interest rates are at historical lows, and stocks are selling at
ridiculous price/earnings multiples. This is all so preposterously ludicrous
that I really got a bubblicious laugh out of a news article at Bloomberg that
reported "Bonds backed by commercial real estate loans are gaining as investors
flush with cash seek higher returns and the economic recovery gains steam."
Hahahaha!
It's hard not to laugh at the preposterous economic system that this implies,
especially when I don't know anything about commercial property, except that
you can't walk into a store without seeing security cameras everywhere these
days, which makes it easy to protest rising prices while spreading The Mogambo
Message (TMM) by shouting at the cameras, "Your prices are going up because the
Federal Reserve is creating more and more money, you morons, which comes
roaring into the economy via massive government deficit-spending, along with
the attendant increase in the national debt - which is now increasing at the
rate of over $2 freaking trillion a year! - which doesn't even mention the
Crucially Important Fact (CIF) of the terrifying inflation in the prices of
food and energy - at least! - that these huge, unprecedented increases in the
money supply will cause, and how you, so smug there behind your walls with your
little Security Guard badges and your security monitors, will also suffer and
be miserable because your precious few dollars will buy so little, less and
less all the time, as will your family and your friends, if you have any, which
I doubt, because you are so stupid that nobody wants to be around you, and
neither do I simply because you are not buying gold, silver and oil when you
see this horrifying inflation crap happening right in front of you, even after
I used my Precious Mogambo Time (PMT) to come down here tell you to do so,
right to your stupid faces, which only shows how stupid you are!"
Satisfied that my Mogambo Teaching Moment (MTM) went off well, we are still
left with the problem of the sheer tonnage of what I do not know about
commercial property, except that after being overpriced for years, commercial
property is said to be in a tailspin, which I assume is because people aren't
buying things with that legendary American "abandon and stupidity to excess"
because they finally, after bingeing for years on accumulating debt, continual
government deficit-spending and the Federal Reserve creating more and more
money to finance the whole deal, now owe So Freaking Much (SFM) that they can't
make ends meet, and are in no mood to spend more borrowed money, meaning that
businesses are closing up shop for lack of customers, leaving the commercial
property owner left with bittersweet memories, a few bad checks and more
vacancies.
The point is that investors are buying commercial property mortgages! Hahahaha!
In fact, investors have been buying so many of them that "Yields on senior
top-rated securities backed by mortgage payments for skyscrapers, hotels and
shopping malls fell 0.11 percentage point to 2.19 percentage points more than
Treasuries", which seems to me to be probably the most stupid thing that you
can do with money these days, while gold, silver and oil are the smartest thing
you can do, because they are still so ridiculously under-priced.
Apparently these weenies haven't heard about gold, silver and oil, nor that
"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 2010, The Daily Reckoning.
Head
Office: Unit B, 16/F, Li Dong Building, No. 9 Li Yuen Street East,
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