-- Posted Sunday, 10 February 2008 | Digg This Article
| Source: GoldSeek.com
I was listening to Lew Rockwell, of LewRockwell.com, wishing I could think of something to say to show the other kids that I was not as stupid as they say I am, and then he asks, "Are Consumers Driving Us Into Recession?"
Immediately, I think to myself, "Hey! I can show this guy up, because that is stupid! Consumers are supposed to be 70% of the economy, or more, so if they are spending, then the economy has to go up with it!"
Fortunately, just as I was raising my hand so that I could impress everyone with how smart I am and get a little of the attention that I crave but never get, I stopped when I suddenly thought to myself, "Whoa! This is too easy! This could be a trap"! After immediately putting my hand back down, I quickly mentally went over the arsenal concealed under my clothing, and was relieved ("Whew!") to know that I could probably shoot my way out, no matter what kind of trap!
It turns out, I was right. He then went on to say that the whole "stimulus" program, which is to give everybody a wad of cash, is as big of a piece of inflationary crap just like The Mogambo said. Okay, he really didn't say that, but he said essentially the same thing with, "Government has no money to spend on anything that it doesn't extract from the pockets of you and me and the whole American public. This is easy enough to see concerning taxes. It is not so easy to see when the government runs up debt that is guaranteed by the printing presses." This is so obviously true that even a dork like me knows that monetary inflation soon causes inflation in prices.
I say, "Even a dork like me" knows about how monetary inflation causes inflation in prices because I once tried to impress Elizabeth (sweet Elizabeth with the eyes that say, "Come hither, my Manly Mogambo Stud (MMS)!" but lips that say, "Drop dead, creepy old man!") with an explanation of this profound economic truism, and she cruelly said to me, "Everybody knows that, dork! Now go away! And anyway, you smell funny!" and then she laughed at me, and they all laughed at me, and even yet I hear their mocking laughter echoing, echoing, echoing in my ears until I cry out in anguish, and the only way I can get them to shut up, shut up, shut up is planning my revenge on them all, which is now the only fun I have anymore.
So I could tell that Mr. Rockwell had already spoken to Elizabeth and that he already knows that we all know monetary-inflation-leads-to-price-inflation stuff, so he just goes on to give a perfect analogy of how the money has less buying power; "The monetary issue can be understood by analogy to orange juice. The more water you add, the less substance it has. If you keep adding, eventually you come to the point when you can no longer tell that it was ever orange. This is the same with money."
And indeed it is, as Frank Shostak of M. F. Global, adjunct scholar of the Mises Institute, seems to suggest that the money supply will be goosed even more and the orange juice will get more watery because Ben Bernanke, head whack-job at the Federal Reserve said, in Foreign Policy magazine in October 2000, that "History proves, however, that a smart central bank can protect the economy and the financial sector from the nastier side effects of a stock market collapse." Hahaha! I don't know what history this idiot has been reading, but the history of the planet Earth is that stupid central banks creating excess money and credit destroys the currency and everything else goes down with it, regardless of some stupid stock market.
So I am really getting bored with this stuff, and only casually listened as Mr. Shostak says that, "Bernanke suggested that an easy monetary policy not only raises stock prices but also lowers risk premiums. Lower risk premiums cause consumers to trim their precautionary savings. This reduction in turn leads to more spending by households."
I leap to my feet and shout, "Enough of this econometric claptrap crap! Lowering interest rates may send the stock of Mogambo Global Enterprises up, but the management (me) is still the same stupid embezzling halfwit who continually has us on the brink of disaster! So risk premiums did NOT go down because of any stupid easy money policy!"
I guess that few other businesses are as poorly managed as mine, and so ignoring this apparent "anomaly", the stupid econometric theory crap goes on, "The effect of more spending in turn on economic activity gets amplified through the Keynesian multiplier."
Suddenly, I am jolted awake! Keynesian multiplier! I run to the MIT Dictionary of Modern Economics and look up "multiplier", and I really read it this time, instead of becoming instantly dismayed at the sheer length of the entry, which means that there is a lot of confusing stuff in it, and which leads me to usually just say, "Screw that!"
But this time I read the whole thing, and sure enough, down towards the end, the dictionary says, "The concept (of a multiplier) is Keynesian and suggests that the idle resources that are employed to increase income by some multiple of the original injection are immediately forthcoming, at an exogenously determined price."
Mr. Shostak finishes up saying that Bernanke believes, thanks to the idiocy of his economic model, that his cute little equations somehow "prove" that, "The stock price multiplier of monetary policy is between 3 and 6 - in other words, an unexpected change in the federal funds rate of 25 basis points leads, on average, to a movement of stock prices in the opposite direction of between ¾ percentage points and 1 ½ percentage points." Hahaha!
Let's take a look at how well it has worked out. The Biz.Yahoo.com headline says it all; "NMI (Non-Manufacturing Index) at 44.6%; January Non-Manufacturing ISM Report On Business(R); Business Activity Index at 41.9%; New Orders Index at 43.5%; Employment Index at 43.9%."
In short, things are rapidly deteriorating, and you don't need any equations to prove that Bernanke is wrong, just as Greenspan was wrong, as equations would be superfluous in light of the staggering mountain of evidence. I rest my case. All that is left to do is for me to declare a "guilty" verdict and impose sentence on them both.
I smile at the thought.
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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 Sunday, 10 February 2008 | Digg This Article | Source: GoldSeek.com
