-- Posted Tuesday, 29 January 2008 | Digg This Article
| Source: GoldSeek.com
For a good reason why we are in such Big Freaking Trouble (BFT), I note that the Wall Street Journal, a big force in the financial world, is bizarrely out of touch with how things really work. And the reason I say this is not because I am jealous and petty about their preeminence in the financial world, although I am, but about the Journal's editorial piece, "We're All Keynesians Now", in last Friday's paper.
They were talking about the government's new plan to literally give money to people to spend as an economic stimulus, and the editorial writer ludicrously says, "But the $250 or $500 one-time rebate check they may now receive has to come from somewhere. The feds will pay for it either by taxing or borrowing from someone else, and those people will have that much less to spend or invest themselves. We are thus supposed to believe it is 'stimulating' to take money from one pocket and hand it to another." Hahaha! Wrong-o dude!
Oh, I admit that there was a time when the money supply was constant, and the only money that could be had by a government was by taxing it or borrowing it from people who saved some money, giving rise to such quaint notions as the federal government borrowing so much that it would be "crowding out" private borrowers. But those days have been long, long gone for over 20 years. You'd think the Wall Street Journal would have noticed!
The way it really, REALLY works is that the Federal Reserve creates more credit by pushing the Magic Money Button in Bernanke's office, which makes credit appear magically in the banks, which the banks can now lend out, which makes it easy for someone to borrow the money and buy the bonds that the government is selling!
Note that not only does the government get a lot of new money to spend, but nobody has "less to spend or invest themselves"! Everybody has the same, or more, money! Hahaha!
So you can imagine my surprise to later read in this same editorial that, "three of the four main economic issues cited by Americans are price-related." The four "economic issues" are; health care costs, inflation/rising prices overall, the price of gasoline, and high taxes.
For oodles and oodles of extra credit on your homework assignment tonight (and believe me when I tell you that most of you can use all of the extra credits that you can get between now and the end of the semester), find the one "economic issue" that is NOT "price-related."
But this kind of weird thing is all over the place, as I learned when I watched some of Bernanke's testimony the other day. The question was about how much this subprime mortgage bust is going to cost. Bernanke replied that there is about a trillion dollars in subprime mortgages, and that 20% are in arrears. So, he says, assuming that ALL of the loans in arrears go bad, then (and you gotta love this for quick thinking on his feet!) if that is the end of it, and THEN if prices rebound by 50% of the losses, then the total loss will be only $100 billion! Hahaha! I can't believe he pulled that crap right in front of my eyes! Hahaha! Too much! We truly ARE a nation of nitwits when he can do that to us, and our elected dimwits, and get away with it like that!
Fortunately, I was heavily sedated and in a straightjacket at the time, tied to a chair as the minimum precautions to watching Federal Reserve chairmen appearing in public, especially in front of one clueless Congressional bunch of yahoos or another.
Although the medications and retraining straps prevented me from moving or make a sound, I thought I could still spit at the TV in a mute display of disgusting-yet-gripping anger and outrage as a performance-art piece, maybe winning an award of some kind, maybe one with a cash prize. I was wrong. I could, instead, only drool and stare with dead, lifeless eyes.
And so my juicy wad of spit did not make it all the way to the TV screen, as per plan, but dripped drowsily down my chin into my lap, so it looked like I peed in my pants.
Then I realized it was a "mute display of disgusting anger and outrage" after all, maybe not as gripping, but I smiled in satisfaction. At least I think I smiled. It was better than nothing, 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. Click here to visit the Mogambo archive page.
-- Posted Tuesday, 29 January 2008 | Digg This Article | Source: GoldSeek.com
