The Daily Reckoning - The Sunny Optimism Of Youth (Mogambo Guru)

verfasst von Firmian, 25.12.2003, 16:55

-->The Sunny Optimism Of Youth

The Daily Reckoning

Ouzilly, France

Monday, 22 December 2003


-------------------------

*** The 'recovery' is a scam... hiding behind a fraud...

*** Oracle outsources... Champions of the world....

*** Bollywood epics... and more!

-------------------------

A scam pretending to be a mountebank.

That is the problem with the 'recovery,' dear reader. You
cannot simply pull off its fake beard and show the world
what it really is. Because beneath the beard is a
mask... and under that is a false moustache.

Unemployment is said to be declining... stocks are said to
be going up... the economy is said to be growing at a near-
record pace.

If you don't look too hard, it could pass for a 'recovery.'

But yank off the beard and the unemployment numbers appear
pathetic for this stage of a real recovery... and the jobs
that are being created are"restaurant hiring" - low-wage,
low-value-added service jobs.

Stocks are going up, but if you adjust prices for the fall
in the dollar, Americans have gotten no richer.

And the economy? Take out government deficits, military
spending, tax cuts, hedonic adjusts and other one-time
flukes and frauds... then adjust the number for the fall in
the dollars....and the economy is not growing at all.

But that is only the scam. Even if all these numbers were
true, the 'recovery' would still be a mountebank - for the
pace of it only measures the rate at which Americans ruin
themselves. Already deep in debt, with a national savings
rate near zero, Americans can only increase their spending
by borrowing and spending more! Yet, that is what the Fed
and the Bush administration are banking on... and what is
applauded on Wall Street and CNBC. Everyone is counting on
the American consumer to continue being the world's patsy-
of-last-resort... buying what he doesn't really need with
money he doesn't really have, impoverishing himself and his
nation.

As recently as the mid-80s, about the time that Alan
Greenspan took over at the Fed, America's accounts with the
rest of the world were even. Now, we're $3 trillion in the
hole... and going deeper in the hole at the rate of $500
billion per year. Our dollar is falling... and soon will no
longer be the world's reserve currency. And our ability to
earn money - by making and selling things - is being
exported overseas!

Most of human striving, scratching, and grasping is really
only intended to make a man feel superior to this fellows.
When he succeeds, at least he can honestly pound his chest
and howl. But he is a pathetic sight when feels himself
superior and pounds his chest... all the while he is
actually slipping behind.

Over to Eric for more news:

------------

Eric Fry, writing from Manhattan...

- A"credible and imminent" threat of terrorism in New York
City spooked the stock market Friday morning. Around
noontime, ABC News reported U.S. intelligence had received
information that New York City could be the target of a
terrorist attack, possibly by a female suicide bomber.
Share prices dropped immediately, but recouped most of
their losses later in the day after the Department of
Homeland Security said it could not confirm the threat.

- Despite the specter of imminent, life-threatening
terrorism, your New York editor bravely strode down Park
Avenue yesterday afternoon to buy a double espresso at the
23rd Street Starbucks. He passed many females en route, any
one of whom could have been a suicide bomber. He maintained
an acute vigilance while standing in line at Starbucks,
closely eyeing each and every female in sight, solely for
the purpose of national security, you understand.

- Happily, the bomb threat proved to be a dud and New York
City enjoyed another terror-free day. But a credible and
imminent threat remains... down on Wall Street. From our
vantage point, the pricey stock market poses a credible and
imminent threat of capital destruction. At any moment, the
stock market might catch a financial trip wire - like a
dollar crisis, for example - that would rip apart investor
confidence and blow a few thousand points off of the Dow
Jones Industrial Average.

- But maybe we shouldn't worry about such risks. After all,
if we live in fear, the terrorists (and short sellers) win.
So let's look on the bright side. All week long, one
government agency after another issued reports showing
renewed economic vitality: Inflation is tame, factories are
humming, leading economic indicators are pointing skyward,
houses are selling like 'Nelly' CDs and yes, the stock
market is surging higher.

- So ideal is the world we inhabit that the Dow Jones
Industrial Average established a new 19-month high four
days in a row last week. The blue-chip index gained 2.4%
for the week to 10,278. But the rallying Dow provided no
boost to the struggling dollar, which shed another 1% of
its value against the euro to $1.237. Meanwhile, the gold
price dropped for the first week in four, slipping 20 cents
to $409.90 an ounce.

- We can find much to like about this economy of ours, as
long as we don't examine it too closely. Initial jobless
claims are trending downward... and that's a good thing. But
the quality of the employment growth leaves something to be
desired.

-"It is important to examine the quality of the jobs
gained relative to those lost," the Economic Policy
Institute observes."Over the course of the recovery (from
November 2001 to November 2003), 1.3 million jobs in
manufacturing have been lost, 272,000 jobs in information
services, and 93,000 jobs in professional/technical
services, all sectors that pay above-average wages. At the
same time, jobs have been added in administrative services
and accommodations/food services, two lower-wage sectors."

- In other words, compared to the job market of the latter
1990s, many of the new jobs added in this recovery pay
relatively low wages."Over the past two years," the EPI
continues,"expanding industries paid $14.65 per hour,
while contracting industries paid $16.92... In percentage
terms, expanding industries now pay 13% less than
contracting ones; in the 1998 to 2000 period, growth
industries paid 12% more... This dynamic, in tandem with the
fact that wages are rising more slowly within specific
industries right now, has the potential to significantly
slow the growth of living standards for working families."

- Not to worry, says Paul Kasriel, Director of Economic
Research at Northern Trust."2004 promises to be a year in
which the global economy grows at its fastest pace since
2000. Not only is global growth likely to be strong, but
widespread as well. Why the optimism for 2004? For
starters, the largest economy in the world, the U.S.
economy, is forecast to grow in excess of 4% in 2004 - its
fastest growth since 1999. A combination of very aggressive
monetary and fiscal policies finally appears to be getting
some traction."

- In other words, the Fed's low interest rate policy,
combined with Treasury's dollar-annihilation policy will
enable the American consumer to continue spending money he
doesn't have on things he doesn't need. A kind of
statistically pleasing economic growth will result.

- At the same time, the Chinese yuan money supply is now
growing in excess of 20% a year - a phenomenon that is
stimulating the Chinese economy. To a lesser extent, other
Asian central banks are doing the same thing as the PBOC.
It all adds up to a booming global economy, resting on the
shaky foundation of a soaring global money supply.

- Is economic recovery really this easy? Can the world's
central banks"manufacture" prosperity, merely by keeping
the printing presses running during the graveyard shift?
Are pigment and parchment the keys to global prosperity?
We, as usual, are dubious.

-"What could go wrong?" Kasriel wonders."The biggest risk
to this optimistic global economic scenario would be a run
on the dollar. If this were to occur, it would result in
spikes in U.S. inflation and interest rates... But this is
more likely to occur in 2005. So, sit back and enjoy 2004,
which is shaping up to be the best year for the global
economy since 2000."

- Yes... enjoy... but don't forget to salt away a bit of gold
from time to time.

------------

Bill Bonner, back in Ouzilly...

*** Oracle pleased investors with its announcement that
sales had risen 8%. Many of the sales were made
overseas... and adjusted back into dollars, the increase was
only 1%... but investors seemed not to notice. Nor did they
seem to mind the accompanying announcement that Oracle was
letting 1,364 employees in the U.S. go. It will, meanwhile,
add 1,334 employees overseas.

We did not check, but we wouldn't be surprised if many of
these new employees were hired in India, which seems to be
picking up more and more jobs in the software/service
sector.

*** A recent issue of India Today comes with the cover
headline:"Champion of the World." In the race of global
economic competition, India says it is the lead
position... and pulling away.

The numbers are suspect, but India has one of the highest
GDP growth rates in the world. While China hogs the
headlines, India is where English-speaking outsourcers look
first when they are trying to cut costs. The country is a
bureaucratic mess, as everyone knows. But it is growing
fast... with a labor pool that is nearly as big as China's
and growing at a faster rate. In terms of mouths to feed
and hands to employ, India is expected to surpass China in
less than 2 decades.

India is a relatively free country. China is relatively
unfree. From the little we can tell, India's growth is
chaotic, but real. China's growth, by contrast, has
developed into a bubble... based largely upon lending to
customers (Americans) who cannot really afford to buy.
China's bubble is destined to blow up... like all
bubbles... and lead to God-knows-what kind of problems -
social, political and economic. India's growth - while less
visible and understandable to the outside world - may
actually be more durable.

*** It is the Christmas holiday season. We have brought the
whole family to the country for a week of conviviality.

Our oldest son, Will, has come from Florida, bringing his
fiancée. Our daughter, Sophia, has returned from her
college in West Virginia. Our mother has come back from her
visit to Virginia. And the rest of the family has come down
from Paris.

Our friend, Michel, has taken a keen interest in India. He
is convinced that China is a giant fraud and compares it,
unfavorably, to India at every opportunity. He has also
become a fan of Bollywood - India's huge film industry -
and is fascinated by all that it produces.

Last night, the family settled down to watch one of
Michel's favorites - Gadar - a movie in some subcontinent
language, with subtitles in some form of English. At first,
we all laughed at the odd translations, stylized acting and
strange song and dance scenes. But gradually the film
engaged us and then finally captivated us.

"It was ridiculous," said film critic, Maria,"but we liked
it anyway."

The theme is a love story, which takes place at the time of
the partition of India and Pakistan in 1947. Despite what
appears to us as an undeveloped or even naïvely
simpleminded view of courtship, the film's presentation of
politics is remarkably sophisticated and cynical. There is
not a single politician, military man, or bureaucrat in the
film who is not a moron or a scoundrel. And every scene of
collective action is a horror of mob violence. The most
'political' character in the movie is a lunatic who has
lost his mind and talks incessantly of liberation from the
British and the glories of the new India. He is, alas, a
Pakistani, mortal enemies of all Indians!

The film's hero, an Indian, almost single-handedly defeats
the entire Pakistani army, wielding a pump that he has
pulled out of the ground.

---------------------

The Daily Reckoning PRESENTS: Mogambo on Monday! In today's
episode, our hero works his way into a frenzy over the op-
ed pages of the Wall Street Journal. [Warning for children:
there may be violent scenes involving Russian-made
automatic weapons in the following drama.]


THE SUNNY OPTIMISM OF YOUTH
by The Mogambo Guru

"Economists expect the economy to grow a healthy 4.4% next
year."

- The Wall Street Journal


Let's do the math.

A 4.4% growth in the economy at the same time that the
government is running a 4.9% (as a percentage of GDP)
budget deficit is NOT healthy by any stretch of the
imagination. And believe me when I say that. My imagination
is so huge (right off the bat, the audience shouts out"How
huge, Mogambo?") that I can imagine women actually spitting
on me, kicking me in the groin, and spraying Mace in my
eyes, are really just flirting with me in the cute way that
they do... (at least as is alleged in official court
documents).

I don't know who these people are that are being called
"economists," but I say that anybody who thinks that the
economy will grow"a healthy" 4.4% is a world-class idiot.
As a world-class idiot myself, I am in a position to know.

These"economists," I assume, are the same lackluster
dimwits as the"they" in this follow-up sentence:"They
also expect inflation excluding food and energy to rise
half a percentage point, to 1.8%." This proves two things
at once, showing a huge increase in productivity, because
most of us can only prove one thing at once. One is that
inflation, which is already higher than 1.8%, cannot"rise"
to 1.8%, by mathematical imperative. And the other follows
naturally, namely that American economists are obviously
numerically illiterate.

"Remember Inflation?" asks John Lipsky, chief economist for
JP Morgan, on the op-ed page of the same edition of the
WSJ."The Fed is going to wait longer than investors
currently anticipate before raising rates. But once
inflation risks begin to rise, the Fed will act quickly to
withdraw the existing stimulus." Hahaha! Every single
indicator of inflation is rising, and HAS been rising, and
yet the Fed is still holding interest rates to absurd lows!

As I write, the Reuters CRB Index, an indicator that tracks
17 different commodities, from live cattle to crude oil,
has risen 11 percent this year. Gold is $407 an ounce, up
17 percent over the past year. Copper is up 39 percent, oil
31 percent, and natural gas prices are 51 percent higher
than at the end of October. In addition, the dollar has
dropped to record after record low against the euro and has
fallen to its lowest in more than a decade versus the
British pound."The fall of the dollar," adds Bloomberg,
"helps boosts the price of gold and other dollar-priced
commodities on international markets and also makes
imported goods more costly."

So... what kind of jerk does this Lipsky character think I
am that I would believe that the Fed would act with any
haste, at ANY level of inflation, when they are already
proving that they have absolutely no interest in inflation,
OR its deleterious effects, whatsoever, and in fact, and
this is the important point, they are doing everything they
can to create MORE inflation?

At that I abruptly stop laughing.

"Central bankers became convinced that maintaining low and
stable inflation produces the best possible outcomes," Mr.
Lipsky writes. Huh? I mean, what planet am I on? Is this
still early twenty-first century Earth or not? If so, then
the damnable Fed is on record, Greenspan is on record,
Bernanke is on record, and I assume that even the mailroom
clerks at the Fed are on record as saying that they WANT
higher inflation! They are screaming loud and clear that
they do NOT want, as Mr. Lipsky says,"low and stable
inflation!" That is the whole freaking point of their
monetary insanity!

And yet, here is this Lipsky fella telling me the exact
opposite? The mind reels, and I stagger and collapse into a
chair, clutching my chest and gasping for air! I sense the
world fading to black, as black as my mood, and as I mouth
the words"Goodbye, cruel world!" I suddenly remember, and
am cheered, that I don't have any money under management at
JP Morgan.

While us bozos out here in the real world still live in our
fantasy world, where rising prices are evidence of
inflation, the Fed says"no". They figure that
productivity, output per hour of labor, is rising,
offsetting the rise in raw materials."While the supply of
some commodities may be temporarily scarce, raising their
price," writes Lipsky,"the supply - and price - of workers
is not. That enables companies to absorb the commodity
price increases without passing price increases on to
consumers."

To which I say, hahahahaha! You crack me up! Hahahaha!

I am already laughing like a hyena, when I spy, right there
below Lipsky's effluence, on the same page, another piece
of ridiculous fluff, this time by Joshua B. Bolten, who is
the director the Office of Management and Budget, which is
apparently an office of government wonks that employs
mental defectives as another affirmative action-type thing.
His asinine screed is entitled,"We Can Cut the Deficit in
Half."

First off, Mr. Bolten traces the"roots of today's
deficits" to the economic slowdown as Bush took office,
three freaking years ago. Next, he implies that deficits
are not as important as Bush's policies, namely national
security. Wow! Talk about your government-speak! Fiscal
rectitude is not as important as policy!

Mr. Bolten is clearly a government spin-meister. Of course,
deficits don't matter as long as they pay for something
nifty and wonderful. We are doofuses for sure, if we can't
see that. Mr. Bolten goes on to explain how three-quarters
of the deficits are directly related to the post 9/11
"enhanced homeland security and the global war on terror"
as if, somehow this justifies immense budget deficits. As
if this bottomless pit of spending madness will somehow
metamorphose into healthy economic growth... or something.

Then Bolten, and notice that I have dropped the"Mr."
because I am obviously working myself into one of my foul
moods and I am this far away (let the record show that I am
holding up my thumb and forefinger, and that they are
almost touching each other) from calling him a lowlife
insect, probably something that crawls around in sewers,
then says that the budget deficit is"entirely manageable,
if we continue the president's strong pro-growth economic
policies and sound fiscal restraint."

The audience spontaneously laughs at my exaggerated double-
take, my head snapping around comically and my hair
standing straight up into the air - fweep! - as I perfectly
portray a man who cannot believe what he just heard.

"Restraint"?!?

This is the same guy who has run up the national debt by
$1.3 trillion dollars in three short years! This is the
same guy who is running a budget deficit of 4.9% of GDP!
This is the same guy who has not vetoed a single spending
bill in the entire three years of his administration!"Not
one?" you ask in that darling and delightful way that melts
my heart."Not one lousy veto of any spending bill?" Nope!

And this is, and you would laugh if you saw me because I am
comically rubbing my bloodshot eyes in stunned disbelief at
what I am hearing, what the author calls"fiscal
restraint?"

Huh? Did he say"fiscal restraint?" Did he really say
"fiscal restraint?" And right around in here someplace is
where court-appointed experts figure that I was overcome
with emotion, and, compelled by forces that I could neither
comprehend nor control, was propelled to action. I grab a
fully loaded AK-47 that just, you know, happened to be
leaning against the desk, and jump up on that selfsame desk
and scream at the top of my lungs,"Did he say fiscal
freaking RESTRAINT? I can't believe my ears! But I thought
he said that the President of the United States is showing
fiscal freaking restraint! RESTRAINT? You want restraint?
I'll show you a little dang-blang restraint!" I proceed to
throw that rifle into full-automatic mode and, holding it
down low against my hip like John Wayne storming a machine-
gun nest on some God-forsaken Pacific island in WWII,
proceed to empty an entire banana clip of full-metal
jacketed mayhem, shooting out all the lights in the place,
plaster exploding off the walls and ceiling, framed
pictures shattering in a hail of glass splinters, passersby
and process servers ducking for cover, a cascade of smoking
empty shell casings beating a tattoo of tinkling sounds as
they hit the floor.

Well, at last, the fusillade of gunfire is finished, and
the silence that follows is punctuated only by the ringing
in my ears and the sound of approaching sirens, and I sink
to the floor, spent and exhausted, too weary to even reach
for another full clip of ammo. But it isn't really needed,
as I am sure that you get my point, which is to demonstrate
"restraint."

But the next day, Friday, the Wall Street Journal had an
op-ed piece by Brian S. Weebury, entitled"Keeping the Bush
Boom Alive." In it, he owns up to the horrific state of the
economic world, and says,"Nonetheless, beneath the surface
problems are brewing. Government spending is soaring,
business regulation is on the rise, and protectionism is
gathering some momentum. At the same time, excessively
accommodative monetary policy threatens an increase in
inflation." Later he reprises that with"Big government and
easy money is the perfect recipe for inflation."

And he has some suggestions on how to make this all work
out, as if there is anything anyone can do to make it all
work out, and I am charmed by his brave self-confidence,
and the Mogambo smiles to himself, as if to say,"Ahh,
little grasshopper! The sunny optimism of youth! To hear
you is to make me remember my own youth, and I smile."


Sincerely,

The Mogambo Guru
for The Daily Reckoning


--- Mogambo Sez: We are getting to the end of the portfolio
fraud season, where the accounts are totaled up, losers are
sold and the winners accumulated, and blame and losses are
shifted to somebody else, and things are done and mistakes
are made, and all of the other slimy things that occur
whenever huge amounts of money are involved, because if
there are huge amounts of money involved, then the
government is not far away, and that is the path to utter
ruin, QED.

But soon it will be the new year and a new game, and it
will get worse and worse in every material respect, day
after day, until some unforeseen event causes the whole
thing to just, one day out of the blue, go"bang!" And
that, and I am talking about at that exact moment, when you
fully comprehend, in a flash of incandescent, total
enlightenment, the real value of gold.

And soon after that you will have another epiphany, in
which you will comprehend the great value of cannons, and
guns, and bows and arrows, and knives, and pitchforks, and
machetes, and axes, and slingshots, and clubs, and sharp
sticks with which to fend off the mobs of suddenly
impoverished people who ALSO have suddenly comprehended the
real value of gold, and they don't have any, and in fact
they don't have anything anymore, except debts and
creditors hounding them day and night, and then after a
while you get tired of answering the phone and trying to
explain to one collection agency after another that if I
had any money then I would certainly be happy to send it to
them, but as it turns out I don't have any money and so why
don't they just stop calling, but they never do, and then I
finally just stop answering the phone, and turn off the
lights and cower in the corner behind the sofa and use some
throw pillows to cover my ears to try and muffle the sound
of the phone as it rings and rings and rings and rings...

Thread gesperrt

 

gesamter Thread:

• The Daily Reckoning - The Sunny Optimism Of Youth (Mogambo Guru) - Firmian, 25.12.2003, 16:55
  • dt. Fassung - Firmian, 25.12.2003, 17:10