-- Posted Tuesday, 2 October 2007 | Digg This Article
Junior Mogambo Ranger (JMR) Juan O. writes to call my attention to the disquieting fact that "oil trades at a higher number than the USD index. How funny is that? Or maybe it's just tragic."
Naturally, I craftily respond, "Tragic? What in the hell are you talking about? Who the hell are you? Where am I? Why am I tied up like this?"
JMR Juan then says, seemingly by way of explanation, "USD 79.51. Crude Oil 79.91", which I naturally take to be a code of some kind, probably a message that he is sending help and that the odds are even.
I was relieved to hear this, and thus I was relaxed enough to idly notice that if the dollar index, which has been falling, was at rough parity to the price of oil, which has been rising, and now they are crossing, and that made sense, too! Oil exporters don't want dollars, see? They want units of buying power that they can use right now (like ordering some pizza and liquid refreshments for everybody), or to use in the future (to order some pizza and liquid refreshments as soon as The Mogambo goes home so he won't be hogging it all and we won't watch him eat, or (even worse) listening to him slobbering and gulping and belching while he gorges on it all).
And because these oil exporters, like everybody else, don't see the U.S. dollar getting stronger in a real sense (because of economic vigor) or in a relative sense (because everybody else is debasing their own currencies even more tragically than we are), then the dollar going down would automatically make the price of oil rise, even though the true "value" exchanged would remain, theoretically, a constant!
So oil going higher as the dollar goes lower makes perfect sense, and I am glad that those stupid oil-exporting morons don't wake up and say, "Hey! We're getting screwed here by not raising the price of oil to compensate for the reduced value of buying power and reduced store of value of the damned dollar with which these deadbeats are paying for our oil, especially the part about the dollar being a 'store of value', so that by the time the damned Mogambo goes home and we can order some pizzas and beverages to get this party really started, the purchasing power of the dollar has dropped so much that we can't buy as much pizza and beverages as we can right now!"
They have a point! I mean, what Big Economic Moron (BEM) can't see the profound inequality of the value exchanging a barrel of oil today, which will be more valuable in the future, for 10 pizzas consumed today, versus the value of 9 pizzas consumed tomorrow? Or what is the relative value of 10 pizzas today worth, versus only 8 pizzas consumed next week? Or 6 pizzas next month? Or 1 pizza next year? What kind of idiot would hold dollars?
Likewise, what oil-selling nation would be so stupid as to constantly accumulate dollars, by exchanging a tiny bit of a finite amount of oil for them? Who would exchange their irreplaceable natural inheritance for a foreign currency when the value of that currency power was going down, down, down, down in buying power? Hahahaha!
Who would voluntarily accumulate dollars, and all your friends are laughing at you and chanting, "Hahahaha! Big oil-export moron selling oil for dol-lars! Devaluating dol-lars! Devaluating dol-lars! Mogambo him right! You are a big stupid oil-selling moron who doesn't get any pizza, and doesn't deserve any, because he was so stupid that somebody ought to come over there and slap your face until you stopped being so silly!"
I don't know if it is coincidence or what, but Kate "Short Fuse" Incontrera at DailyReckoning.com writes, "Also wearing on the greenback are rumors that the Saudi Arabian government are batting around the idea of de-pegging their currency, the riyal from the U.S. dollar - a move that would be a disaster for the already down-and-out U.S. currency."
And, even worse, it is not just oil and other imports that will cost more, but everything will cost more, too, even though it was made here, because our domestic production and exports will be so cheap to foreigners (thanks to their strong currencies) that prices will be bid up, tariffed-out, taxed, and boosted by demand.
For example, the CRB Index is a basket of 28 different tangible assets and other natural resources, and in the past seven months is up 14%! Hell, the Economist magazine's Dollar Index on the back page reports that "percentage change on one year" for "All items" is 21.5%!! Note the double exclamation points, which is a sure-fire way of detecting importance!
Worse, the Economist's category of "Food" lists the "%age change on one year" as 40%! I gasp in absolute horror! Prices for food, priced in dollars, are up by almost half, almost 50%, from 12 months ago!
Suddenly, I realize that this means that I'm literally paying for 1.5 items, but the snotty little cashier is waiting until my back is turned while I am unloading the shopping cart onto the little conveyor belt, and then she steals every third item that comes along! But when you turn around real fast to try and catch her and her thievery, she flashes that stupid little smile at you that she thinks will make me think that she is NOT stealing my food, but it just proves her guilt, as far as I am concerned.
And I have seen enough Star Trek episodes to know that videos can be altered in the computer, so it doesn't surprise me that the store's security cameras can't catch her stealing a third of everything I buy. Probably some kind of Klingon cloaking device or something. I dunno. Nothing that a photon torpedo couldn't handle, anyway.
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Editor's Note: 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.
The Mogambo Guru is quoted frequently in Barron's, The Daily Reckoning and other fine publications.
-- Posted Tuesday, 2 October 2007 | Digg This Article
