May 26, 2008

Hello, Planet Earth

The Earthling economics experiment By The Mogambo Guru

There was a message waiting for me from Zolgarg, Supreme Overlord of this sector of the galaxy. I put off opening it because communications from Galactic Command Central (GCC) are always a big hassle for me, and I am always torn between doing my usual lazy job by just making something up and taking the rest of the day off, or doing a really good job and maybe getting transferred off this stupid planet as my reward, thus allowing me to get away from a population of moronic people that actually believe such stupid crap as "everyone can make money by
investing for the long-term", "inflation should be above zero", and "the government can painlessly buy its way out of any mess it can make, just by creating the money to pay for it."

Finally, I knew that my delaying the inevitable was starting to look bad, so I opened it. What he wanted was the worst of all; a report on the economic situation on Earth, since Earthlings are of particular interest to economists throughout the universe, being that Earthlings are considered by advanced civilizations to be one of the rather lower-middle forms of life in the universe, in that many Earthlings, culminating in Ludwig von Mises and the Austrian school of economics, proved that the species has the intellect to conceive of the idea that excessive inflation in the money supply leads to inflation in consumer prices, which leads to social upheaval.

And the people of this planet have discovered universal reading and writing, and so they know from their own history books what happens to any idiot country that uses, and then abuses, a fiat money and bank debt until the sum total of debt becomes literally un-payable.

What makes Earthlings so interesting is ... Why don't they do what they know they should, especially since the freaking constitution of the United States of America requires that money be only of only silver and gold, so that a fiat currency would be impossible?

Of course, the next thing is ... How can we make a bet on it? And that is, I suspect, the essence of this latest message from Zolgarg, as rumor has it that he already has more Quatloons wagered than he can afford on when the economy collapses, and another big wad of Quatloons on the exact day the US government declares war on Iran so as to start World War III as a distraction to an angry, bankrupted citizenry and country, and we all figure that one day Zolgarg is going to find his bookie coming over there with a couple of goons and they will break off one of his tentacles.

I mean, it's no secret that that we know what will happen when you let a government allow the money supply be constantly expanded; disaster!

And everybody, even unto the farthest reaches of interstellar space, knows what happens when a government uses that money to expand itself, like now, when the federal, state and local governments now employ one out of seven workers and collectively spends one-half of GDP; disaster again!

But Zolgarg obviously overestimated the collective smarts of Earthlings in protesting with riots and recall elections, and underestimated the sheer degree of frantic desperation of the Federal Reserve and governments.

I tried to warn him that even John Maynard Keynes himself said that "Markets can remain irrational longer than you can remain solvent", but nobody listens to me, and neither did he.
But his answer is logical; if you're going to bet, you gotta go with the fundamentals, and so by virtue of a corrupt and intellectually bankrupt Federal Reserve perpetually lowering interest rates, using a fiat currency, using literally zero reserves in the banking system, with a complicit corrupt Congress (except Ron Paul), it is just a matter of time, and the payoff is knowing HOW much time!

None of this is going to help me, or him, but he is not going to believe me, and it just means more work for to write the stupid report.

In the end I reverted to my slug-like, worthless ways, and just sent him a copy of Jim Willie of the Hat Trick Letter saying, "The Bear Stearns and Fannie Mae stories are loud billboard statements that the United States is now MONETIZING BANKRUPTCY. A profound US dollar risk remains constant. The US system is now insolvent, from the US government to US economic trade to US banks to US households."

I added an Executive Summary of "Not yet, but soon, because we are freaking doomed!"
To hopefully lighten the mood, I included a cartoon by Dan Piraro at with my report, which shows a business executive explaining to his staff the downward-sloping graph on the wall behind him. He says, "I wouldn't say the ship is 'sinking', but the mast is broken, we're out of food and water, sharks are circling and the captain is insane." Hahahaha!

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 2008, The Daily Reckoning.)

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