US"GDP goes up!"... Mogambo says:-))

verfasst von Das_Orakel_aus_Oberlahnstein, 23.09.2003, 12:50

-->TRADE POLICIES OF THE CAVEMEN
by The Mogambo Guru

US GDP is supposed to be still rising, even though the
number of people with jobs is going down.

One question: who are these people with jobs that can
maintain their spending lifestyles, and actually increase
their spending to make up for the fact that less people
even HAVE jobs with which they are to get the money to do
the spending?

Well, the fact is, none of it's really true...

Just as Michael Boskin showed the government how to lie
with statistics about inflation - as if the government ever
needed any help with lying, since they seem to cleave to it
so naturally - our sainted leaders make ludicrous
assumptions about adjusting prices for quality and the
substitution effect and all the rest of that lying crapola
that any second-grade kid can easily see through. But to
get with the program and show that I am a team player, I
want to prove to you that the Mogambo can be just as
clever, and has just as many tricks up his economic sleeve.

The lights dim, and I reach out and slowly raise my
seemingly empty hand, turning it slowly around, presenting
to the audience every square inch of my empty hand for
their inspection, so that later they can verify that there
is no freaking way that anyone could have had anything
concealed. And yet, they all agree that an instant later, a
white-tipped black magic wand, which eye-witnesses estimate
was about a foot long, maybe more, appeared at my
fingertips out of nowhere! The audience, of course, is
delighted, and claps their hands in glee, shouting
"Mogambo! Mogambo!"

For my first trick, I note that there are fewer people with
jobs. To demonstrate, I remove some billiard balls out of
one bowl filled with billiard balls, and deposit them into
another, but empty, glass bowl. I continue to move the
balls one by one, as I explain that the filled bowl
represents the traffic situation, as all of the billiard
balls filling up the bowl were likewise filling up the
roads. As I remove the balls one by one, I explain how
there are fewer people on the road in the morning, and so
there are fewer people clogging up the roads getting TO
their jobs.

When I get to the last ball in the bowl, I say,"Therefore,
the traffic congestion is lessened, and therefore you don't
spend as much time tied up in traffic, and in fact you have
the whole road to yourself. And therefore you are spending
less time commuting, which means that you are more
productive, and therefore GDP must," (I strike the bowl
with the magic wand, producing a puff of smoke and a loud
bang. The bowl is instantly, magically, filled with money),
"go up!"

Again, the audience is delighted beyond words, and they
instinctively rise to their feet and clap their hands,
again in childish glee, shouting"Mogambo! Mogambo!"

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Encouraged, I go on to my next trick. I note that there are
television shows that have an"and" in the title. For
example,"Law and Order." You are not just getting law. You
are not just getting order. So you are getting, at once,
both law AND order. You are getting twice the entertainment
value for your buck! Therefore, for the same expenditure of
time watching the TV, you are more productive! Therefore
GDP again (I strike out with my magic wand, and another
bowl of money appears out of thin air) goes up!

This time, the audience has sunk into their chairs in
stupefied amazement, struck dumb by the fabulous magician,
namely me, Marvelous Magical Mogambo, performing what seem
to be impossible feats. They clap wildly, shouting
"Mogambo! Mogambo!"

Not giving the audience a chance to catch its breath, I
launch into my third trick, which shows how the Patriot Act
allows the government to go snooping around, even breaking
into your house for a 'sneak and peek,' and all the rest of
that Big Brother-ish police-state stuff that is so popular
these days. In theory, they will round up all the nasty
people, and then you will feel so much safer, and since you
feel so much safer, then you don't have to spend as much
time on self-defense and home-protection, and therefore you
will experience an adjusted quality of life! Therefore, GDP
(and again we do the magic wand thing and again another
bowl full of money appears) goes up!

The audience collapses in a swoon, literally falling to the
floor unconscious, paralyzed with amazement, trying to
mouth the words"Mogambo! Mogambo!" but it comes out
sounding like"Moahgo! Moahgo!"

Man, this is all so cool! I could do this all day long! I
can prove to you, just like Greenspan and that group of
lying hustlers he hangs out with do it, that GDP has risen
by any number you want!

So you would think that this demonstration of my talent, my
Big Mojo, would have Alan Greenspan calling me on the
phone, offering me a big, fat contract to create economic
guidelines based upon my genius. The bad news is that, in
grim reality, I have to sit here in this locked closet,
with burly caretakers sitting outside the door to make sure
I don't get out again, angrily banging away on my little
computer, while Michael Boskin and Alan Greenspan get to
eat high-cholesterol foods in a classy restaurant and rake
in the big bucks for doing the exact same thing! So they
next time somebody says"Life isn't fair," you tell them
that the Mogambo says"Amen, brother!"

Congress, for their part, who seem to delight not only in
being stupid but also in doing one stupid thing after
another, are now threatening China with a 27.5% punitive
tariff on Chinese imports if they don't trash the U.S.
dollar. Oops, I mean, if they don't let their currency
float.

Who gets the money raised by these tariffs? The government.
But that is, of course, not news. I mean, that's all
governments EVER do, so it WOULD be news if the government
DIDN'T act like greedy vampires and suck the damn money out
of you.

But, on the other side of the coin, right off the bat you
and me and the rest of us doofus consumers out here will
immediately notice a big increase in the price of things
for sale in WalMart, almost all of which come from China,
as far as I can tell. So the government GETS the money that
tariffs bring in, and that makes the prices go up, and we
final consumers PAY all the money. Which will also be
reflected, then lauded mercilessly by the great unwashed
financial media hoards, in a rising GDP number.

In the old days, in those halcyon days before Michael
Boskin and Alan Greenspan, when prices went up, it was
called 'inflation,' and it was considered a bad thing.
Nowadays, of course, is called 'preventing deflation,' and
for some reason it is NOT considered a bad thing.

But, just as a rose by any other name smells as sweet, the
end result is the same. Namely, prices go up. You can call
getting hit on the head with a baseball bat a 'goodnight
kiss' if you want, but it still feels exactly the same as a
whack on the head, because it IS a whack on the head.

The idea behind the tariff is simplicity itself, and you
might want to write this down because in later years you
are going to think about this time in your life and wonder
to yourself,"Were we ever so stupid as a nation that we
believed such a thing could possibly work?" The answer, of
course, is 'yes,' but the theory is that these higher
prices, see, will induce American producers to salivate
over making that big moolah, and vow to produce some of
that now-expensive stuff we are importing from China, which
is, as you know, damn near everything anymore.

And when we industrious Americans gear up the factories,
pack our lunchboxes and head off to work to produce this
stuff again, see, it will be putting Americans back to
work. And, for all I know, it might work. Stranger things
have happened.

But, and when I say 'but' you know that there is something
wrong here, I mean, was there ever a time in all of history
when tariffs didn't have a huge downside? Huh? I mean, how
many times do I have to read about our pre-Neanderthal
ancestors levying tariffs on cheap imported dinosaur meat
on the theory that local hunters could then compete and
stimulate their economy? We've all read the damn articles,
and there was that whole History Channel series about
"Trade Policies of the Cavemen," so it is obviously NOT a
new idea.

And since tariffs are NOT a new idea, the results are
probably not going to be new, either. At the end of the
day, and at the end of the year, and at the end of many
years after that, prices are higher. And you will not like
that. Nobody likes that. And that is why, in subsequent
years, everybody agrees that tariffs are a bad idea, and
they stop, and then they start yammering about free trade
again.

I'm surprised nobody is bringing up Smoot-Hawley. Which
was, if memory serves, a tariff! And Smoot-Hawley is
commonly regarded as one of the worst ideas to come out of
a Congress, and is considered by some, me for one, to be
strongly implicated in the causes of the Great Depression!

For crying out loud, people! And yet here we are in 2003,
and we pick up the morning newspaper and are astonished to
read that Congress is passing another tariff! The same
Congress, but populated by a different set of ignorant
bozos sitting on their fat worthless butts, who are
obviously even dumber than the clods who passed the
original Smoot-Hawley tariff, because these current weenies
have the disaster of the Smoot-Hawley to look back on and
learn, and can say to each other,"Hey, dude! We better not
pass this tariff, because - wow! - look at what happened
with the Smoot-Hawley thingie! What a gnarly bummer, dude!"

Whereas the guys who actually DID pass the Smoot-Hawley
back in those old days at least had an excuse for their
stupidity, because maybe they did not have a specific,
horrific example to learn from.

And, I note for the record, that all the guys who voted to
pass Smoot-Hawley are now dead, so maybe there is a curse
thing attached to tariffs. Spooky, huh?


Sincerely,

The Mogambo Guru,
for The Daily Reckoning

P.S. Fortunately, I am not as alone as I feared. Stephen
Roach of Morgan Stanley weighed in and wrote,"In my
opinion, this is a classic example of opportunistic
politics leading to bad economics. Such an approach would
have negative impacts on the U.S., China and the broader
global economy. It is right out of the script of the
nightmares of the 1930s."

So, now that's TWO of us talking about this Smoot-Hawley
thingie, dude.

Mogambo Sez: I remind you, every day, to take the time to
stop and smell the flowers, as one day very soon the world
that we know will be swept away in the coming economic
cataclysm, as all other worlds in all other times were
swept away when their economic stupidities got to the point
where we are now.

As a coda to that, I will quote Doug Noland,"This is an
extraordinary, fascinating, historic period for Credit
Bubble analysis. And if there were doubts that the Credit
Bubble had entered the precarious 'blow-off' stage, the
Federal Reserve's second quarter Z1 'flow of funds' report
certainly provides ample evidence. It's One for the Time
Capsule.

"In the 21 quarters prior to the second quarter (since the
beginning of 1998), total Credit Market Borrowings (Non-
financial and Financial) surged 51% - or $10.9 Trillion -
to $32.1 Trillion. After such an extended period of
historic excess, Credit growth has now gone 'parabolic.'"

And if you don't know the horrific ramifications of debt
growth going parabolic, don't worry. You will.

---

Grüße aus OL

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• US"GDP goes up!"... Mogambo says:-)) - Das_Orakel_aus_Oberlahnstein, 23.09.2003, 12:50