----- Original Message ----- From: "The Daily Reckoning" <[EMAIL PROTECTED]> To: <[EMAIL PROTECTED]> Sent: Monday, July 07, 2003 12:06 PM Subject: A Short History of Fantastical Government Incompetence
> A Short History of Fantastical Government Incompetence > > The Daily Reckoning > > Paris, France > > Monday, 7 July 2003 > > -------------------- > > *** Job picture, worse than we thought...But not in > China... > > *** If the foreigners only knew... > > *** Housing P/E dangerously high...too bad Americans went > short...Mogambo on Monday!...and more... > > -------------------- > > American markets were closed for the 4th of July on Friday. > So we have no news from Eric or from New York. > > But the dizzy world of money in the late Dollar Standard > period still spun around...throwing off bits and pieces as > it went... > > The Labor Department took another look at April and May, > and lo...it discovered that more jobs had been lost than > previously thought. About 100,000 more. > > What happened to those jobs? > > "It's hard to tell anything from the figures," explained a > British investor who visited us this past weekend. "They > report that sales are going up and everyone thinks it is a > good sign. But so many of those sales now go overseas. So, > I guess it is a good sign for the Chinese economy..." > > "Microsoft Corporation is starting to shift U.S.-based jobs > to India," begins a Reuters report. > > In the manufacturing sector, the trend is already well > developed...like the Irish during the potato famine, U.S. > jobs gather up their belongings and hope for a better life > overseas, 179,000 of them last month alone. > > Don't worry. The U.S. still has its #1 export - the dollar. > As long as foreigners take it, this monetary epoch > continues. > > But Fed policymakers are caught in a contradiction or an > oxymoronic lie. They must assure lenders and bondholders > that the dollar will hold its value...while assuring > consumers and borrowers that it won't. In order to keep the > Dollar Standard system going - in which people are > encouraged to spend beyond their means - the Fed must avoid > deflation at all costs. Japan could survive deflation > nicely, but in America, it would turn a whole generation > into paupers. > > Total credit market debt in the U.S. was less than 130% of > GDP in the '50s. By the early '70s, when the Dollar Standard > system began, it was still less than 150%. Now it is > 300%...or more than $31 trillion. If that debt were magnified > just a little bit, by deflation, the nation would be ruined. > > [Ed note: How would deflation affect your investments? See > Mark Nestman's piece: "Surviving Deflation" > http://www.dailyreckoning.com/body_headline.cfm?id=3294 ] > > Of course, the Fed assures the world that it will not > happen: "We'll run the printing presses night and day...if > we have to...until they turn red hot...until the steel > melts." These are not words that Fed governor Ben Bernanke > has used yet. But it is what he has meant to say. > > And there's the rub. The American nation of debtors relies > upon nations of savers to lend back the money it spends. > The Chinese factory owner must take his profits and buy > U.S. bonds, or the curtain comes down on the whole Dollar > Standard spectacle. Otherwise, American consumers cannot > afford to spend...and if they don't buy his widgets, who > will? > > And yet, why would he want to buy U.S. bonds, when the > custodians of the currency in which they are issued are > putting turbo chargers on their printing presses and > talking as if they had gone mad? > > "If foreigners understood our policy is what I think it > is," said Ned Davis to Barron's, "that is, making cash > trash, why would they keep their $3 trillion [net > investment in dollar assets] in this country? At the point > they realize this, this nice decline in the dollar all of a > sudden becomes tremendously bad." > > "A dollar crisis is only a matter of time," adds Marc > Faber. > > So far, the big decline in the dollar has come in > comparison to the euro. Asian currencies have fought the > trend, either by aggressively trading their own currencies > for dollars - in order to keep the dollar high and their > own currencies low or, as the Chinese have done, fixing > their own money to the U.S. standard. > > All over the world, no one wants the relative trade > disadvantage of a strong currency. Even the Swiss have > announced their intention to knock down the Swiss franc, if > necessary. "We're ready to step in and intervene if the > strong franc hurts our exports," said the president of the > Swiss National Bank recently. > > As his contribution to worldwide inflation, people expected > Wim Duisenberg to lower short-term euro rates. But Thursday > came and went with no rate cut by the ECB, which probably > means that the dollar will continue to decline against the > euro in the short run. In the long run, all paper > currencies will go down against gold. > > "I suppose that hard assets, including precious metals, > commodities, real estate, art, etc. will appreciate not > only against the dollar but also against all currencies," > Marc Faber explained. "In fact...commodity prices have > already increased - in some cases, sharply - from their > lows in the 1998-2002 period." > > A list of 20 commodities shows average gains of 77% since > the historic lows recorded in the late '90s/early '00s > period. > > *** Two charts in this week's Barron's caught our eye. One > shows how mortgage debt has grown since 1982. After a 20- > year boom, householders in the land of the free are > shackled to the heaviest ball and chain of mortgage debt in > history. In 1982, the average person with a house owned > nearly 70% of it. As of the first quarter of this year, he > owns only 55%. > > *** The other chart shows what the authors call 'Housing's > P/E,' which is described as multiplying "existing home > sales by average home prices" and then dividing by personal > disposable income. Thus measured, housing's P/E went from a > low of about 6 in '82 to a high of nearly 16 today. > > Too bad the owners didn't hold onto to more of their own > homes. By mortgaging more and more of their homes, they > were effectively going short when house prices were rising. > And they are poorer for it. > > Bill Bonner, > The Daily Reckoning > > *** The Mogambo Guru lives!...more below... > > --- Advertisement --- > > The Best - And Safest - Way To Get Very Rich, Very Quickly > > You don't need to risk your money on highflying tech stocks > or go-nowhere blue chips to make big profits this year. > > You can learn a proven formula that will help you > consistently rack up double and triple-digit investment > profits without ever buying a single stock, bond or mutual > fund - whether the market soars or crashes - and with > strictly limited risk! > > Learn How Today! > http://www.agora-inc.com/reports/400SOPTC/YourProfits/ > > --------------------- > > The Daily Reckoning PRESENTS: The Mogambo Guru takes on the > US government with disgust, and snotty undertones. > > > A SHORT HISTORY OF FANTASTICAL GOVERNMENT INCOMPETENCE > by The Mogambo Guru > > I know you, ever wise and clever and well-educated person > that you are, have heard the age-old adage that Karl Marx > and that British guy Philip Guedalla were so fond of > saying: "history repeats itself." Personally, I like how > Mark Twain put it better, which is not to say that it > "repeats" itself, but that it does, in fact, "rhyme." > > Well, I don't know if you'd call it repeating or rhyming or > ranting or raving or something else no one has thought of > yet, but whatever it is, there's been some serious "r" > usage in the history of fantastical government > incompetence, as we shall see. > > William L Anderson, adjunct scholar of the Mises Institute > who also teaches economics at Frostburg State University, > writes on the Mises site: "For many years, economics has > been plagued with the 'lump of jobs' fallacy in which it is > believed there are only a limited amount of things to do > and once they are done, people have no means of employment. > The truth is the polar opposite; there literally are an > infinite number of things that must be done. As Alchian and > Allen have noted in their 1983 book Exchange and > Production, the elimination of some tasks due to improved > methods of productivity frees up scarce labor to do other > things. That, they point out, is how an economy grows, a > simple truth that seems to have escaped most of the > economics profession." > > And I add, with that snotty undertone of disgust that has > made "Mogambo Guru" synonymous with "disgust with snotty > undertones," not only have they missed THAT completely, my > dear professor, but they have also ignored that, > increasingly and increasingly, these "infinite number of > things that must be done" have now all become government > jobs, or jobs related to dealing with other guys who are > doing THEIR government jobs, or supplying a good or service > that is now paid for by the government, as a result of the > government just doing its job, which it has perversely > described as "providing more goods and services to the > American people." > > This reminds me of the time, years and years ago, when I > was consulting to a certain city on budget matters, and I > got into a private tangle with the local City Manager over > his use of the phrase, in written documents, as some kind > of superficial credo of all the underlings in city service, > that he was committed to the City providing to the citizens > the bounty of, and I quote, "Continually providing higher > levels of service." When I gently reminded him that this > endorses higher costs, and thus higher taxes and more > onerous deadweight loss on the community, and thus he was > actually working at odds to the interests of people who pay > the taxes, he was, umm, let me choose the perfect word > here, dumbfounded. > > Well, to be honest, perhaps some of his > dumbfoundednessosity can be explained by the fact that it > was the also first time I had tried theatrical techniques > to make a presentation. In this landmark approach, which, > of course, I hope you will remember that I personally > invented, I sat in a chair opposite him and silently > fashioned a hangman's noose out of a length of rope. > Finishing tying the Hangman's Knot, I stood up, and hung a > sign that read "Taxpayer" around my neck. Without a word - > and I could see out of the corner of my eye that the City > Manager was spellbound by my inspired performance so far - > I climbed onto the chair, put the noose around my neck, and > jerked it tight. Standing on one foot, I kicked the other > spasmodically in simulated death throes, let my tongue loll > out of my mouth and my eyes roll back in my head. Oh, it > was a thrilling moment! > > I milked the scene for as long as I could, and for almost a > full minute I stood there, the noose around my neck, my leg > convulsions finally subsiding to eerie stillness. You could > have heard the proverbial pin drop. Way off in the > distance, you could hear a wolf howling. > > The finale was supposed to be where I do this fabulous > ghost thing, where the economically murdered taxpayers > curse the city manager and every municipal employee from > beyond the grave. But no sooner had I put on the ghost > costume, turned out the lights, and, sticking a flashlight > under my chin to look really spooky, the city manager, for > some reason I cannot fathom, lost it, and I was rudely > escorted out of his office by a surprisingly strong > secretary, who has to be seventy if she's a day, but real > wiry, if you know what I mean, and I think she works out, > too. And I had to endure his tirade about how it's his > office, and his city, and he takes directions from the City > Council, and if I have anything further to say, then I > should say it to them, and how he forbids me to ever set > foot in his office again, blah blah blah. I mostly forget > the details of what he said, but I do remember thinking at > the time that I had never heard the "F" word used so many > times in so short a span of time, so that was kind of cool. > > Things immediately went downhill from there, and I usually > stop telling this story before we get to this last part, > and now that I read it, I realize the wisdom of why I do > that. But it is too late now, so forget about it, because > the point is not how to conduct an effective presentation, > but that the escalation of the government doing jobs that > they think need to be done is going to ruin us. > > But that's not all, noooOOOooo siree indeed, not only is > the government permanently bent on doing more and more jobs > it thinks it needs to, which it doesn't, but it's also > always spending more and more time and money trying to keep > those poor people who still have non-government jobs from > doing them, or at least from doing them well and turning a > profit. Not to mention keeping the shady capitalists in > line by turning America into a vast, expensive bureaucracy > of micro-regulators, so that yet more people can work for > the government. Which came back to the same idea, but in a > different way. > > Anyway, economist Paul Craig Roberts points out that "the > relatively well-educated but low-earning laborers of many > Asian countries gain an advantage to workers in this > country because of our legal situation." Well, duh, huh? > But he was setting us up for the gem of Infinite Wisdom > that he drops on us next. He writes: "The advantage (of > foreign workers) increases with the absence of tort lawyer > extortions and harassing and fining IRS, EPA, OSHA, EEOC > and other regulatory bureaucracies, whose budgets demand a > never-ending supply of wrongdoers to be penalized." > > The Big Truth That Is Revealed Here is the phrase > "...regulatory bureaucracies, whose budgets demand a never- > ending supply of wrongdoers to be penalized." It makes me > slap myself on the forehead and say, "Ain't that the truth, > bro!" Didn't we just get through with another example of > the government finding things to do with its considerable > time? It seems to be one of the natural imperatives, like > seeking food and water, of government to grow bigger and > stronger. > > Roberts sums it up by actually quoting me, the Mogambo, > when he says, "We cannot have big, intrusive government and > a healthy economy at the same time." Well, although he > quoted me almost verbatim, he did NOT give me credit for > originally saying this little gem of profundity. And I have > been saying it for a long time, too, so don't give me any > of that crap about how he didn't have the time to look it > up. And, to add insult to injury, he also completely > mangles my original quote! > > To show you the depth of the man's vile plagiarism and > barbaric hacking to death of my memorable and timeless > witticisms, here is what I probably originally said, and I > remember it exactly: "You dim-witted American voters who > elect these Democrat and Republican weenies promising you > cradle-to-grave safety nets and outright support of > everybody, think, in your defective little pea-sized > brains, that you can, but you cannot, have a big, > intrusive, suffocating, expensive, re-distributionist, > megalithic, cruel, suppressing, fascist, bankrupting, > corrupt and repressive in the totalitarian sense > government, and have a healthy economy at the same freaking > time, you incredibly stupid morons! > > "And just who in the freaking hell do you think you are > that you are so smart that you can pull of a stupid stunt > like that, when in fact nobody, no ruler, no gods, no king, > no government, no alien masters from outer space with mind- > controlling beams and these giant robots, no nothing, has > ever, in the whole freaking history of the world, ever, and > I mean EVER, pulled off a crazy re-distribution Ponzi- > scheme stunt like that, not even back when there were > omnipotent emperors with god-like powers running the joint > who could have you fed, kicking and screaming and raising a > hell of a fuss, to ravenous lions so that they could watch > jungle beasts eat you alive! And just for something amusing > to do to relieve the boredom of a slow day! But now, you > think that somehow this stinking gaggle of honking > Congresspersons and clueless American Federal Reserve > eggheads can collectively come up with a scheme that will > finally pull that silly crap off? > > "Hahahahaha! > > "And to make matters worse, and to make yourselves look > even more stupid, you think that even if they can't do it, > that they will be able to come up with something marvelous, > some Economic Magic, to keep you from having to pay the > price for even trying? Hahahaha! Stop it! My sides are > hurting from laughter! Hahahah! Stop it! Hahaha! You're > killing me here!" > > Okay, his version is shorter, but it lacks the fire that > the sheer importance of the subject calls for. But you can > certainly see how he ripped me off, can't you? > > Times are really getting pretty freaking weird out there. > But if you don't believe me, then catch the Jerry Springer > Show sometime. It seems to be the chronicle of the lowest- > common-denominator-meets-Gladiators, in this case women > waging combat by baring their breasts and repeatedly > attempting assault and battery upon each other and various > people who are in some relationship to each other. But it > is seldom the cute ones, but their fat sisty uglers, as the > comic once said, I forget who, so I quickly lose interest. > > What has this got to do with economics? Everything. Compare > BET, MTV, and the Jerry Springer Show with how many times > can I get Mozart on TV per freaking year. Then recall that > economics is human action, and thus the popularity of these > shows, reflected in their sheer tonnage of hours per day, > is people taking action to see these shows, to the > voluntary and total neglect of Mozart, the greatest > composer, by far, in the history of music. > > Imagine! > > Now, go back in history and find me one society that > benefited from that kind of purposeful action. The one that > came to my mind, of course, was Sodom and Gomorrah, old- > Testament party towns, and that didn't work out too well > for them in the end, as I recall. > > But you, ever the quizzical one concerning economics, ask, > "But if they were spending all their time partying-down > with the homeys, how did they finance that deliciously > hedonistic lifestyle?" Now, this is a question that has > puzzled many a Biblical scholar, I am sure, and I > personally spent a lot of time pondering how to finance my > OWN hedonistic, party lifestyle. > > And it turns out the answer is simplicity itself, bringing > us to yet another thing governments have always done, > continue to do, and will probably keep on doing for the > foreseeable future, unless something really cataclysmic > happens, to ruin its citizens. This is the part of the > Bible that nobody talks about, so I hear, because it is in > small print way in the back somewhere, which nobody reads > because it is the part that concerns monetary and fiscal > policy, and is therefore so very uninteresting that not > even cloistered celibate PRIESTS who are completely bored > out of their skulls for want of novelty will read it. > > I never heard of it either, and that is because this is the > part that is NOT about sex and parties and orgies and > getting drunk and having a wonderful time, but it IS the > part about how to PAY for all the sex and parties and > orgies and getting drunk and having a wonderful time. And, > so we come to find out, they did it all on credit. And I am > happy to report that what was normal 2,000 years ago is > relevant today, as neither I nor anybody I ever even knew > really worried about how to PAY for having a wonderful time > WHILE they were having the wonderful time. A few passing > thoughts, maybe. Perhaps some waving of the hand in polite > dismissal. But never worry. And always on credit. > > So, year after year the governments of Sodom and Gomorrah > financed themselves through deficit-spending, and running > up big credit-parchment debt loads was a big industry, > wherein you could buy on credit! Year after year! More and > more! > > And then houses, and stocks and bonds and government- > sponsored enterprises! And the government printed up more > and more! Debt was accumulated at levels that set new > records every day! More lending! More borrowing! More > spending! More debt! More printing up money! Around and > around and around! And then one day, it was ka-boom! That's > the part that is supposed to be The Big Lesson, one of > those instructive parables that the Bible is so famous for. > > But the only lesson that we seemed to have learned is that > in the golden days leading UP to that dreadful day of > reckoning, it was party hearty! Or par-tay har-tay, if you > will. For a long, memorable time, S & G sure were popular > places, and real estate values soared! I hear that college > students on Spring Break, flooding into Sodom, made city > revenues soar by 100%! And so there is Biblical precedent > for the Austrian economics idea that accumulating debt in > excess of ability to pay is a bad thing. > > But if we've got to the point where no one pays any > attention to history anymore, even when it's in the Bible, > then by golly, we are in a pickle. Because there's no way > any government is ever going to stop repeating itself into > financial insolvency, eventually. > > > Regards, > > The Mogambo Guru, > for the Daily Reckoning > > P.S. Well, I am sure that you are highly impressed with > that little stupid diatribe, and I think you will agree > with me that I am well-advised to change my tack here on my > painful and fruitless quest for that elusive Nobel Prize in > Economics, which those snotty Nobel Institute people will > not even consider awarding me just because I am laughably > incompetent and utterly undeserving. So, I have now decided > to go for the Nobel Prize in Literature, instead! Assuming > that there is such a thing, of course, and the million > dollars, too. Let's not forget the cash prize. Or maybe a > Pulitzer Prize! Or something that has a cold cash > component, which is a nice alliteration there, if I do say > so myself, which I just did, further cementing my claim on > some kind of literary award. > > Anyway, my ground-breaking and completely new approach to > literature, which I now pronounce "lit-rah-CHA" in > preparation for my new career as lecture circuit monkey, or > whatever they call themselves, is combining, for the first > time in the annals of Printed Language, what appears to be > blasphemy of some kind with opinionated discourse about > things economic, which is probably a record of some kind in > sheer arrogance. And dammit, if you set a new record in > something, then SOMEBODY ought to pay you some money! But > I'll probably end up getting screwed out of that money, > too, just like I always do, because, as I prove over and > over, week after week, everybody is out to get me. All the > time. In everything. The bastards. > > --- Mogambo Sez: Somebody is going to have to take the > whack to the head, and somebody is going to do the > whacking. The only questions are who, when and how, and > that is what consumes the attention of the world now. > > > Editor's note: Richard Daughty is general partner and > C.O.O. for Smith Consultant Group, serving the financial > and medical communities, and the editor of the Mogambo Guru > economic newsletter, an avocational exercise the better to > heap disrespect on those who desperately deserve it. > > The Mogambo Guru is quoted frequently in Barron's, The US > version of the Daily Reckoning, and other fine > publications. You can catch the whole 'gambo diatribe each > Wednesday, right here: > > The Big Truth Revealed > http://www.dailyreckoning.com/body_headline.cfm?id=3293 > > ------------------------------------------------------ > > The Daily Reckoning is a FREE e-mail service of Agora > Financial Publishing. 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