One of the most interesting news items I've found was on the cover of The Financial Times, where I learned that a guy named Lahde "made tens of millions of dollars from betting against the financial and property sectors during [the] past two years", and he now wanted to thank "the low hanging fruit, i.e. idiots whose parents paid for prep school, Yale, and then the Harvard MBA" who made it all possible for him to find enough suckers.

He noted that "These people who were often truly not worthy of the education they received (or supposedly received) rose to the top of companies such as AIG, Bear Stearns and Lehman Brothers and all levels of our government. All of this behavior supporting the aristocracy," he says, "only ended up making it easier for me to find people stupid enough to take the other side of my trades. God bless America."

This goes along with an article in the St. Petersburg Times about Tom James, chairman and chief executive of Raymond, James Financial, who had "some tough words for the wizards of Washington, DC who oversaw the $700-billion bailout package".

He reports, "The Brave And Wonderful Mogambo (BAWM) was right all along! Those government weenies are the biggest freaking morons you ever saw, and we as a country should be ashamed of ourselves for having elected such corrupt, half-witted, utter failures and congenital idiots!"

As you have probably guessed by now, he did not say those exact words, but he implied every syllable when he said, "Legislators were almost embarrassingly ignorant of how the financial system works", which I figure explains how they don't understand the linkage between their own Bad, Bad Performance (BBP) as legislators and the subsequent Bad, Bad Performance (BBP) of the economy, and he says that only 3 of 16 legislators that he talked to actually understood what was going on in the "credit crisis." Less than 20%! Hahaha! We're doomed!

Well, maybe these Congressional losers will understand the unfolding economic slowdown, as evidenced by the Baltic Dry Index, which is an index of the cost to transport stuff by cargo ship, and which has fallen precipitously, which seems very important to me, and to Junior Mogambo Ranger (JMR) Riccardo, too, who is also alarmed by this like - as I previously said - me.

It's actually beyond scary, in a terrifying kind of "ain't nobody buying nothing in a consumer economy" kind of way, which means that without the consumer buying stuff as his or her contribution to the famous statistic of "the consumer is 70% of the economy", we are, in case you ain't heard, freaking doomed!

Well, maybe not all buying is drying up, as silver market analyst, Ted Butler, reports that in the last 10 months, "some 150 million ounces of silver can easily be documented to have been bought by investors. Undocumented purchases would add tens of millions more ounces."

In fact, when you add it all up, "Investment demand for silver this year is running at a full 25% of world mine production and over 20% of total production (including recycling). This is a remarkable historical turnabout."

Thus, it is easy to see why Mr. Butler is "bullish beyond belief for silver", since this kind of demand means that "In silver, the documented 150 million ounces bought in the first ten months of this year is equal to 15% of all the silver bullion equivalent thought to exist!" Wow!

More than one-seventh of all the silver bullion "thought to exist" in the whole world was suddenly bought up in less than a year, and yet the price of silver has been pounded down to less than 10 bucks an ounce? No wonder I am so bullish on silver!

He also notes that the gold/silver ratio is at more than 80, which is "one of the biggest differences in history."

And not only that, but since there are 4 to 5 billion ounces of gold in the world versus only 1 billion ounces of silver, that means that "the total dollar value of all the gold in the world is worth 300 to 400 times more than all the silver in the world (80 times 4 or 5)".

Talk about undervalued! Hey! This investing stuff is easy! Whee!

Until next time,

The Mogambo Guru
for The Daily Reckoning Australia

• Silver and its Large Short Position
• Gold and Silver!
• Gold and Silver Demand Unprecedented
• Price of Silver Climbing to All Time High of US $1,012
• Silver Stats That Will Make You Salivate

The importance is dependent on your perspective. Those people who are not borrowing money to spend are thus suffering the pangs of a lowering of their lifestyle, which depended on borrowing money to spend; and then they come around, whining about stupid things like, "Daddy, things have gone up so much in price that I need more money, which you would give me if you loved me. Don't you love me? I love you! Won't you please love me, daddy?"

And so I ask, "Can't you love me if I don't give you any money?" and they say, "No. You could borrow the money, and then we would love you", and I reply, "I have been borrowing money and now I can't pay them back" and so the kids say, "Then borrow some more!"

And, in a terrifying revelation, I realized that it is not only my children, but all the rest of the economy that is totally dependent on everybody else borrowing money to spend, too.

So now you see how Chaos Theory was right, and that all things are connected to all things? If not, then pay attention to how they will now commence to all drag each other down into the Nightmarish Hell Of Inflationary Insolvency (NHOII).

And it doesn't take a real genius to see why, but the point is not that the American people were stupid enough to think they could get a perpetual free lunch by borrowing money to pay for it, or even that a smaller subset of those who are suffering the pangs of a lowering of their lifestyle is composed of those who also think that they can call me on the phone and either 1.) Ask to borrow some money from me, or 2.) Ask me to pay them back the money I borrowed from them.

My response is the same, in that I give neither one of them any money because I don't have any money; so to one I laugh in scorn, and to the other I say that I have just put a check in the mail to them, and that they will get their money soon, and if it hasn't arrived in a few months, call me back and I'll write you a new check and get it right into the mail.

The point is that a much larger subset of those who are suffering the pangs of a lowering of their lifestyle is composed of those people who think that they can elect government representatives who legislate all problems out of existence, that will tax me and then give the money to them, or the Federal Reserve will create more money to loan to investors with which to buy government debt so that the government can spend, spend, spend us into blessed Utopia. Either way, it's Bad, Bad News (BBN).

And, alas, one way or the other, they are right. Unfortunately. And that is one reason that I weep, alone, in the Mogambo Bunker Of Bunkers (MBOB), doors locked, radio blaring, machine guns cocked and loaded, mostly drunk or nearly so, soon to be blissfully comatose.

Another reason that I cry so piteously and drink so abusively is that all this new government borrowing will create so much new money that it will destroy the dollar's buying power, taking my own country down with it.

The only reason that I stop bawling like a little crybaby is the knowledge that the people who own gold, silver and oil will get rich, rich, rich, and since I own gold, then people will want me to loan them a few bucks out of my huge stacks of money because they are starving, and their children are starving, and I will say, "No!" and it will be thin gruel indeed for them to hear my mocking voice again echoing in their heads, "Buy gold, silver and oil, you morons, because your stupid government is letting a private bank (that misleadingly calls itself the Federal Reserve when it is, in fact, neither) to create so damned much fiat money that it will produce catastrophic inflation in consumer prices that will destroy the country, just like it has done to every other stupid country in the last 4,000 years that let its stupid government increase a fiat money supply at its whim! Hahahaha! Now you see why I always said you were freaking doomed! Hahaha!"

But I feel terrible, as this constant infliction of inflationary pain by heedless expansion of the money supply is so unnecessary, and that is why I was pleasantly surprised to read in The Wall Street Journal the headline "Central Banks Consider Gold" in its Commodities Reports column.

The reason is easy to see if you read the article backwards, in that there was a question about central bank buying "last week, when gold saw a record single-day gain", especially Chinese central bank buying of gold, which is already the ninth-largest holder of gold in the world but which holds only 1% of its foreign-exchange reserves in gold, although it actually said it would like to hold more. And Mark O'Byrne at Gold & Silver Investments says that he would "be surprised if the Chinese hadn't been nibbling at the gold market," which leads to the news that Asian banks "are seen as keen buyers" of gold, which leads to the news that "other central banks are now far more likely to be holders of gold", which leads us back to the second paragraph that "Turbulence in the financial markets and recent US dollar weakness are helping the precious metal claw back its reputation as the central monetary anchor within the international monetary framework", which leads to the opening paragraph of "Central banks may be starting to turn one of the few assets in which they can invest; gold."

In short, those crafty Chinese, a fifth of the world's population, may be getting ready to issue a gold-standard money, which will instantly make their currency the strongest in the world, which is just what a country needs if it wants to import a lot of things cheaply so as to respond to demand for internal economic growth without stoking inflation in prices!

And, fortunately for those of us who both love to have large profits handed to us and who also own gold, a Chinese gold-standard may soon make a dream come true as gold would skyrocket when priced in suddenly depreciated dollars.

Whee! This investing stuff is easy!

Until next time,

The Mogambo Guru
for The Daily Reckoning Australia

• Borrowing Money is no Longer in Fashion
• Does This Mean You Should Sell Your Gold?
• Why Do Men and Women Want Money and Power?
• Millions of Zimbabweans Face Starvation due to Nationalisation caused by Hyperinflation
• The Return of the Cattle Market

One of the reasons for my bullishness and bullheadedness about silver is the large short position, which is the number of ounces already sold (opening the short position) but which have not been bought yet (closing out the position), which means these shorts are going to get clobbered if they have to cover their short position by buying silver at a higher price than they sold it.

So I was very interested when Ed Steer's Gold and Silver Daily reports says that the commodity futures market report shows that bullion banks' "silver net short position now stands at 213.6 million ounces...about a third of world silver mining production...all held by 'four or less' bullion banks."

He characterizes this as "grotesque beyond description", which I guess it is, since it is hard to even imagine such a thing, which implies that these "four or less" banks are so stupid that they would be short silver when the fundamentals are so compelling that my throat is bloody and raw from screaming, "The fundamentals of silver are compelling!"

And this is even ignoring the headline "Gold & Silver Market Alert - Buy before the Breakout!" from Julian Phillips at Goldforescaster.com, which reflects my sentiments exactly.

In gold, the situation is similar, in that Mr. Steer says, "The bullion banks' net short position now stands at 211,342 contracts... 21.1 million ounces. This is well over 25% of world gold production. This is also grotesque beyond description".

Suddenly I see an opportunity to hide my rising excitement and get a quick laugh! So I said, "This means it is NOT 'beyond description' when it is perfectly described by silver, which is also 'grotesque beyond description' and which can be described as 'like gold'! Hahahaha!"

Well, I am laughing at my own joke and having a wonderful time when I looked around and noticed that nobody else appreciated my little joke about circular reasoning, which, upon reflection, I admit is pretty bad, and I am pretty embarrassed about it.

I don't know why I thought it was funny, except for maybe it's these new pills that are supposed to keep me from screaming my guts out in fear about the coming collapse of the dollar and the attendant horrific rise in consumer prices that destroys America and plunges us into a post-Apocalyptic nightmare. And, parenthetically, they work pretty well, too, except for the catatonia and the, you know, drooling.

Mr. Steer sees my embarrassment and starts talking about how many of the owners of futures contracts in gold and silver said, "We want our metals!"

People with inquiring minds want to know, "How much gold and silver was delivered so that we can maybe see if the Mogambo Who Thinks He's So Hot (MWTHSH) is actually turning out to be right about gold and silver going so much higher in price because the despicable Federal Reserve is creating so much money and credit that inflation in consumer prices is guaranteed, which would be indicated by a rising price for silver!"

Well, it turn out that "The final totals for August are as follows... gold 5,728 contracts [572,800 ounces] and silver 91 contracts [455,000 ounces]", which doesn't seem like a lot, but what in the hell do I know?

So, I report these things without knowing what they mean because I am pretty stupid and I am just in it for the money, so all I can ever see is the obvious, especially when it is pointed out to me, which he apparently does when he says it means, "August was a big month for gold deliveries...but not for silver. September is a big month for silver deliveries...but not for gold."

I still don't know what it means, but a big buying of gold and silver every other month is plenty enough to keep their prices rising and demand growing, which is Another Good Reason (AGR) to buy gold and silver beyond the obvious good reason that they always soar in value and price when the government is acting so irresponsibly, or when the Federal Reserve is acting so irresponsibly, but especially when both of them are acting irresponsibly, like now!

It's enough to make you squeal with delight, "Whee! This investing stuff is easy!"

Until next time,

The Mogambo Guru
for The Daily Reckoning Australia

• Bullish On Silver
• Gold and Silver Demand Unprecedented
• Price of Silver Climbing to All Time High of US $1,012
• Silver Stats That Will Make You Salivate
• Gold and Silver!

Thanks, Roger! I always had a hard time believing in the unbelievable "Cash for Clunkers" program, where the government astonishingly gives up to $4,500 to people who buy a new car!

This is a subject which is very interesting to me because I happen to be a guy who owned a whole series of clunker cars and trucks over the years because I couldn't justify the expense of a new vehicle/a good vehicle/a better vehicle/a vehicle that wasn't rusted/a vehicle where parts and pieces didn't fall off/a vehicle that usually started because they were completely paid for, thus costing me exactly nothing per month in principal and interest payments, and which needed only the legally-required minimum of liability insurance.

In short, the cost of driving those old cars and trucks was almost zilch, which fitted my budget perfectly, as I thought I would need the extra money for dating, but which turned out not to be the case. In fact, I found that women usually disdained both me and my cars, and they would say hurtful things like, "Hey! It stinks in here! Or is that you?" and, "At least clean out the old, moldy pizza boxes and chicken bones so I won't be more disgusted than I am just sitting next to you!" and yammer yammer yammer.

That is, however, when I learned one of the Immortal Lessons Of The Mogambo (ILOTM), which is that as long as you had a good set of brakes on your ratty old car, a case of cheap oil in the trunk, a long siphon hose and a girlfriend who had a nice car in which to ride around, you could get along pretty good!

Not "getting along" as good as the federal government, however, which can (and did) just decide on a plan to sell a couple of trillions of dollars in new debt, whereupon the Federal Reserve will create the money, like when the Fed bought $30 billion of US government securities, directly increasing the money supply by the amount of the new debt! Now THAT'S what I call "getting along pretty good!" Hahaha!

Now, suddenly, sad sack people like me, whose incomes are so low that we have to drive rusted-out, beat-up old clunkers that cost almost nothing to own or operate, that nobody would steal, which were completely paid for, for which you only needed the minimum of liability insurance, would suddenly decide to buy a very expensive, shiny new car and begin paying upwards of $400-$500 a month for the new car and the big new premiums for the required higher insurance coverage? Hmmmm!

Perhaps this is why Bloomberg reports that "Consumer spending in the US rose in July as Americans jammed auto showrooms to take advantage of the 'cash for clunkers' program while avoiding other purchases"! Yikes! Avoiding other purchases! This is NOT the kind of thing from which economic recoveries are made!

And to suddenly start paying all of that money, every month for the next seven years or so, is not to even mention the effort of always having to wash and wax the new car, which is hard, disagreeable work that you don't get paid for, which is like being punished for having a new car!

So, the only explanation that makes sense is that since people can stop paying on their house but still live in it because the bank doesn't want to evict them, people will start living in their cars and stop paying on them, too! What are the car companies going to do? Evict a family onto the street by repossessing the snazzy new car in which they are living? Hahahaha!

I say this because I read in The Financial Times that in the UK, "The number of people of working age living in a household where none of the adults work rose by 500,000 to 4.8m for the period April to June", which is a huge number of people which is now "close to one in five households", which I assume is a rough estimate of what is happening in the USA.

Instead of laughing in my usual mocking style to indicate the bizarre absurdity of an economic system where the unemployed are given financial incentives to buy new cars, let me instead merely urge you to buy gold, silver and oil with your every waking moment and your every last dime, whichever comes first, which says the same thing but with the "secret bonus feature" of letting you make a Whole Lot Of Money (WLOM) when their prices rise, rise, rise, which is good because you are going to need a WLOM when inflation in consumer prices catches up with the inflation in the money supply that will accommodate the inflation in government spending, thanks to the loathsome Federal Reserve allowing and abetting the inflations by merely creating more money, which makes buying gold, silver and oil such an obvious choice that you say, "Whee! This investing stuff is easy!"

Until next time,

The Mogambo Guru
for The Daily Reckoning Australia

• Cash for Clunkers Widely Thought to Help Revive Economy
• Obama Considers New Job Tax Credit
• Cars Could be Designed by Congress
• Gas Giants Invest AU$16.7b in Coal-Seam Gas
• GDP Number Not an All Clear for Recovery

So how does she quantify "relative peace and security"? Well, one good way is to look at the value of the dollar, which would be strong if the country was a good investment, which it was, and in fact, "It had not only retained one hundred percent of its value, it had gained eleven percent. That's right. The dollar we started with in 1776 bought us eleven percent more after almost seven generations."

Then, on the "quiet 23rd of December in 1913", J.P. Morgan and buddies got Congressional quislings to pass legislation authorizing the creation of the Federal Reserve, and to which I add that the jerk Woodrow Wilson then signed it, thus going down in history as the disastrous guy who set in motion the destruction of the dollar by the Federal Reserve creating excess money and credit.

She doesn't make a point of it, but back then, the dollar was still gold, and thanks to the loathsome Federal Reserve creating the money to finance the bubbles of The Roaring Twenties that resulted in the Great Depression, the despicable Supreme Court infamously ruled in 1933 (and upheld by every traitorous Supreme Court case since then) that, contrary to what the Constitution said, the dollar did not have to be made of silver or gold, and that a paper "fiat" currency could be created, without limit, for any reason, even at a mere whim, anytime, day or night, 24/7, including holidays, not realizing that they were the idiots that REALLY destroyed the dollar! Gaahhh!

With this kind of disastrous stupidity, I dryly and humorlessly ask that you don't talk to me about any "wisdom" emanating from the Supreme Court.

I was hoping that Ms. Lilley would spontaneously pick up on the theme of "heap scorn on the Federal Reserve for creating too much money and credit out of thin air and the despicable Supreme Court for letting them."

I was going to suggest that she could, you know, maybe even put in an endorsement for the Mogambo Mindless Mob (MMM) brand of products, like the popular Mogambo Pitchfork (very effective when brandished threateningly) and the classic Mogambo Flaming Torches that will be so hard to get when the proletariat bozos start forming mindless mobs bent on revenge after so much hurting from the horrifying inflation in consumer prices, the pervasive, lingering economic depression, ruination, bankruptcy and the embarrassment of realizing that it was caused by the people we elected to Congress, who picked the people to run the Federal Reserve, which is the biggest failure one can imagine and should be immediately abolished, how Ben Bernanke, its chairman, should be turned over to me for some sessions at my new Mogambo Re- Education Center, where our muscular, trained technicians will slap the hell out of his stupid face, and the stupid faces of Congresspersons (except Ron Paul), and the stupid faces of anyone who still believes in getting, or giving, a free lunch to, or from, anyone, especially the government, which is so corrupt that it once gave smallpox-infected blankets to the American Indians, which is only marginally worse than destroying the currency of the country and makes you reflexively scream in horror every time you see the money supply go up.

Well, it does me, anyway.

Instead, she goes on that the result was that since then, "the purchasing power of a dollar has plummeted over 95%", which means that "We now pay twenty times more than J.P. Morgan did for any item." Yikes!

Suddenly, my ears pricked up as she said, "Few have written on the mechanics of getting back to sound money", which I immediately noticed makes me a genius, meaning that people should worship my gigantic brain, my wife and kids should stop calling me "idiot" and saying how much they hate me and maybe I should get a Nobel Prize.

The reason I am suddenly so enamored of my intellect is that achieving a "sound money" is the easiest thing in the world! Just stop creating more of it! That's all you need! It's simple! It is my Profound Mogambo Genius (PMG) that has solved the puzzle!

Okay, I am embarrassed that I got carried away there, and I admit that I am not very smart, and that is why I stole the whole idea from the fact that this is all the gold standard did; it prevented increases in the money supply, and the only thing that Congress had to worry about was doing smart things so that gold came into the country (increasing our money supply) and not doing something so stupid that it went someplace else better (decreasing our money supply).

But those days are all over now, and the only people who are buying gold, along with silver and oil, are the people who know what happens to an unsound, fiat currency (like the dollar) in the hands of a government composed of a bunch of socialist, commie-think yahoos (like the US Congress) that willingly deficit-spends insane amounts of money thanks to a central bank (like the Federal Reserve) creating it and a population sitting around saying, "Duh! Okay with us!" Hahaha!

We're freaking doomed!

Until next time,

The Mogambo Guru
for The Daily Reckoning Australia

• Gold in the Art of Bread Consumption
• Federal Reserve Has Destroyed the Economy
• A Government of Spendaholics
• Oil Prices Has The Mogambo Guru Sticking His Thumb in His Eye
• Greenspan and His Demented Federal Reserve Chairmanship

But even the unemployed have a stake in the recent bull run of the stock markets, and is one of those good news/bad news jokes, in that the bad news is that it is rising stupidly in defiance of reality and common sense, whereas it is seemingly good news for all of the people who have all their entire financial future invested in paper assets that are already showing losses and for the unemployed who hope to get a job with some of those same companies or companies catering to them.

I can't remember if there is an Aesop's Fable about the folly of putting all of one's eggs in one basket, but there is, fortunately, a Mogambo Economic Fable (MEF) about it.

It seems that, once upon a time, there was this egg rancher who incorporated his operation and sold a lot of the stock to some investors, keeping enough shares to still give him majority control plus a lot of money which was (as they say), "Mostly spent on liquor, horses and women, and the rest I spent foolishly."

For a while, things were fine, but the rancher soon found himself paying blackmail money to suppress some embarrassing, and probably incriminating, photographs of him and several members of a visiting Albanian folk-dancing troupe who said they were women, and who looked like women, too, but were really men.

Anyway, by the time the rancher discovered the deception, it was too late to stop, and it turned out to be the episode that launched years of intense psychotherapy, during which time he discovered to his horror that this folk-dancer fiasco thing was just the tip of a really big cesspool of some really weird psycho crap.

To pay the hush-money and the psychiatrist, the rancher finally had to sell his egg-gathering baskets. Then, one day, the baskets were all gone except for one last basket. So he used the one remaining basket to gather all the eggs.

As fate would have it, one day he found an egg made of pure gold! Upon leaving the chicken coop, he was thinking that he needed to buy some more egg baskets, but the price of the baskets was too high because the loathsome Federal Reserve was creating so staggeringly much money and credit to keep inflation roaring in the inflated stock market, the inflated bond market, the inflated housing market, the inflated derivatives market, the inflated basket market, the inflated food and energy markets and the cancerous growth of government so that these markets would not collapse and hand a huge, crippling, crippling, catastrophic loss to everyone who owns the paper assets comprising those markets, the result of which will be even MORE inflation in prices, which had already, to the rancher's initial dismay, affected the price of egg-gathering baskets.

But now he could sell the golden egg and buy some baskets! The news was, of course, so exciting that the rancher stumbled and fell, and all the real eggs broke, turning the day into a total loss, which just happened to be the "straw that broke the camel's back", profit-wise as a result of mismanagement by the rancher, an accountant that was a cricket, farm laborers that were ants, and the bankrupting burden of constantly-increasing government regulations and taxes.

The rancher was, alas, bankrupt, and all the stock went to zero value.

Of course, the stockholders all ran down to yell at the rancher with their little Munchkin-like voices and waving their little arms comically in the air that that they were now broke and ruined because they had put all their retirement money into the one stock.

And the rancher yelled back that he is broke, too, as all his controlling interest in the business is now worthless, too, and he had long ago spent all the money he received from the initial stock offering on, for instance, partying with visiting Albanian folk dancers and psychiatrists.

Then they all started screaming and yelling at each other, and there was a big fight, whereupon they all started killing each other, attracting the attention of a big, bad wolf that was nearby, huffing and puffing trying to blow down the brick house of three cowering pigs, but he couldn't blow the house down.

So the wolf came over and ate the rancher, all investors, all the broken eggs and most of the chickens, too, before then using the golden egg as a mighty hammer to beat down the door of the pigs' brick house and eat them, too.

The End.

Until next time,

The Mogambo Guru
for The Daily Reckoning Australia

• ETFs Are Now Available in Australia
• Forgetful Bill
• A Nightclub in the Middle of Rural France
• Revolving Credit Commitments Down 19.4% in March
• The Percentage of the U.S. Economy Devoted to Consumer Spending Went Up and Up

I say this with such obvious disrespect because Mr. Krugman is on record has having advised the Bank of Japan to purposely cause inflation, as, "The way to make monetary policy effective is for the central bank to credibly promise to be irresponsible - to make a persuasive case that it will permit inflation to occur, thereby producing the negative real interest rates the economy needs", although he never actually says where he is going to find guys stupid enough to loan money at negative interest rates, or in what bizarre alternate universe he lives where high inflation in consumer prices, particularly sustained high inflation, is anything other than a total disaster, which is why most of economics is concerned with the problem of preventing inflation while fostering growth!

In fact, he thinks that a central bank trying to reflate a collapsing economy should announce a deliberate plan to raise the level of prices (such as the Consumer Price Index) from current low levels to some dramatically higher value (a so-called "price-level gap") that it would have theoretically reached if a "moderate" and constant amount of inflation in prices had, in fact, occurred! Gaaahhhh!

To make it more Theater of the Absurd, he then says to keep creating more inflation in prices! Gaaahhhh! This is insane! This is beyond insane!

This would be bad enough coming from just another egghead academic dork from Princeton, but a terrifying quote from Ben Bernanke, chairman of the Federal Reserve, shows that he agrees with this with nonsense!

In fact, Bernanke said, "A successful effort to eliminate the price- level gap would proceed, roughly, in two stages. During the first stage, the inflation rate would exceed the long-term desired inflation rate, as the price-level gap was eliminated and the effects of previous deflation undone. Call this the reflationary phase of policy. Second, once the price-level target was reached, or nearly so, the objective for policy would become a conventional inflation target or a price- level target that increases over time at the average desired rate of inflation."

This is so dangerously preposterous that one's hands shake in fear and paranoia at the calamity that awaits a nation that takes such ridiculous advice, and there is nothing to be done except to buy more gold, silver and oil, as the last 4,500 years of history have proven that these are the things that have lasting value, unlike the bitter disappointment and dismay of paper money and "true love."

Obviously, people do not have to be around me very long before they learn that I am perpetually scared, to one degree or another, of inflation in prices, such as the other day, for example, when I had saved up enough money to have dinner alone at a restaurant so that I could eat one lousy meal without the wife and kids all the time whining and complaining about how they need more money, and want more money, and how they want me to give it to them, and how I am a terrible person for not giving them more money, how I am too stupid to get a better job to make more money and how I am too lazy to get a second job with which to earn more money.

So instead of having to listen to them talk about how much they hate me, I am enjoying the peaceful qualities of the restaurant when a guy seated at the next table sees me eating my steak and asks me how I liked it.

So I told him, "I like it fine, except I wanted lobster! Rich, flakey lobster to dip into real melted butter so wickedly delicious that you can actually hear your arteries hardening from just looking at it; but I can't order lobster because inflation in prices caused by the Federal Reserve creating so much money and credit all these years has resulted in the ugly news that they now charge too much for lobster, and inflation is so bad that some crappy, weak iced tea is almost two bucks a lousy glassful, most of which is ice!"

Out of the corner of my eye, I can see the other people in the restaurant have stopped eating and they are all looking at me. Figuring that they want me to further enlighten them, I go on, "So don't you ask to me about how I like my steak, when you should be asking me how I like inflation in prices, which I don't! Not one little bit! And if you weren't so stupid, you would realize that inflation in prices is the worst thing that can happen to us, and which is exactly what is going to happen to us because the damnable Federal Reserve is creating unbelievable, staggering amounts of money and credit so that the federal government can borrow and spend it in an orgy of deficit- spending that will end badly!"

Well, pretty soon the manager comes over and tries to censor the Heroic And Brave Mogambo (HABM) by telling me to shut up and sit down, although he might have been interested in the actual inflation figures, which are pretty bad!

For instance, producer price inflation shot up 1.8% in June, and it seems especially interesting that the Labor Department figures that the Consumer Price Index rose 0.7% in June, and although 0.7% does not seem like that much in one month, it adds up to a lot over the course of time; like for instance, in a year, when this 0.7% per month inflation compounds to 8.7% per year inflation! Yow!

Until next time,

The Mogambo Guru
for The Daily Reckoning Australia

• The Destruction of the Dollar by the Federal Reserve
• Central Bank Creates Excessive Amounts of Money to Expand Government Spending
• Bank’s Inflation Projections Will Not Return to the 2 Per Cent Target Figure Until Early 2010
• Bad News if You Are Afraid of Inflation in Consumer Prices
• Everyone We Know Expects a Fairly Quick Up-move in Inflation

By this time I am losing interest, as I suspected as much, and would have been surprised if things had turned out otherwise. I say this with a certain haughty-yet-snotty attitude because the Austrian school of economics is so easy to grasp, so intuitively correct and now so provably correct, that it is easy to anticipate the long-term when a central bank is creating excessive amounts of money and credit, especially when the majority of it is used to expand government spending. Child's play!

So seeing the future clearly in economics is easy, unlike forecasting other social institutions, like marriage, which I thought meant that I would be happy for the rest of my life, but which meant that I did not remotely understand the full ramifications of such an arrangement that was not, and I emphasize NOT, even hinted at when we were dating, which should be grounds for some kind of legal action so that I can get my life back, instead of having it wasted by her, and the stupid kids, and the stupid relatives, and the stupid neighbors, and the stupid job, and all the stupid stuff you have to do as a result of being so stupid as to say "Goodbye!" to a life of mindless, selfish hedonism in the first place where, with any luck, you would be dead by now, lying in some gutter with a big smile on your stupid face, instead of putting up with spouses, children, neighbors, et al who are all so stupid that they don't buy gold, silver and oil even after I always deliberately end the "Happy Birthday" song with, "And if you're not buying gold, silver and oil, then you are not going to get your wish because the Wish Fairy knows that you are too stupid to know what to do with that kinky stuff for which you are secretly wishing."

But this is not about any of that, but about the way that the government has now "changed the way it accounts for natural disasters, such as Hurricane Katrina," which ought to make you suspicious, especially as it was done for "eliminating much of the prior volatility in income calculations", whatever in the hell that means.

I imagine that the government could use it as an excuse to "find" more money to spend by reducing accrued costs or disguise the fact that government is incompetent. Either one.

I personally think it is the latter, and not just because I am a suspicious and paranoid little rat who thinks that the government is an expensive, disastrous, giant dead-weight loss that is out to get me, but because another interesting change is that "Personal income was revised up over the last decade, after the government boosted its adjustments for the underreporting and non-reporting of income using more recent data from the Internal Revenue Service."

Of course, I think this is so the government can now say, "Hey! Income was up over the last decade, so shut up about how we are a bunch of incompetent and dangerous bunch of arrogant pinheads who actually believe the stupid stuff we say, like how we say that continual government deficit-spending and continual expansions of money and credit by the Federal Reserve are some kind of blessing and not the most stupid things that we could have possibly done!"

The "found money", in case you were wondering, apparently comes from income increases as a result of the housing boom, and "in the most recent years reflect gains from rents, interest and proprietors' income", as if that distorted boost to income is now "the new norm" or something! Hahaha!

Finally, the Commerce Department "shifted food services, which include meals purchased at restaurants or served in schools, out of the food category."

Paradoxically, "As a result, the Fed's preferred inflation gauge - which tracks consumer spending and excludes food and fuel - was pushed up by 0.2 percentage points for the three-year period from 2006 to 2008."

Later, they explained that "The reason for this is that costs of meals away from home are not as volatile as fresh food, the government said, and therefore services should be included in the measure commonly known as the core index."

They now compute inflation in "meals away from home" by disregarding the cost of the food, which is going up, and look only at the cost of the labor in preparing the food, which is going up, but not by as much right now because unemployed people are willing to work for peanuts? Hahaha!

If blatant corruption to disguise inflation and incompetence is not enough to convince you to buy gold, then there is nothing I can say to change your mind.

Fortunately, that means more for me, and at lower costs, until the day when you say "Oops! Oh, woe is me for not having listened to the Wonderful And Wise Mogambo (WAWM) when he said to buy gold, silver and oil, and now I rue that fateful day, just as he said I would, and I see that he was right when he said to buy gold, silver and oil, which would have made me, too, say, 'Whee! This investing stuff is easy!'"

Until next time,

The Mogambo Guru
for The Daily Reckoning Australia

• Bullish On Silver
• Silver and its Large Short Position
• An Edifice of Pure Economic Crapola
• Gold is the Only Place to Turn in Times of Inflation
• Two Good Reasons to Own Gold

"So, from now on, no exchanging dollars for gold for you either! Hahaha! You believed us when we guaranteed our promise about the value of the dollar in terms of gold, and then let us keep the gold at our house? Hahaha! Morons! So just come and try to get it, chumps!"

The problem was that the government was being bankrupted by maintaining the foolish Leftist stupidities of Johnson's "Great Society" and the sheer stupidity of the Vietnam war (among other governmental stupidities), and lots of dollars were being created by the Federal Reserve and multiplied by technology increasing the velocity of money through the banking system, resulting in a lot of inflation and a lot of dollars piling up overseas.

Fortunately, it was France making all the noise, and real Americans - who hate the French for their snotty attitudes - were smart enough to be alarmed, since the French knew that the buying power of the dollars that they held - and would be getting in the future - would all be losing valuable purchasing power. Naturally, they wanted to exercise their option to exchange the dollars for gold!

This was okay for a while, but pretty soon there was a torrent of gold leaving the country, causing Nixon to reveal just what kind of country does this kind of lowlife deal breaking.

Then Nixon said, "No more exchanging stupid paper dollars for real gold!" The reason Nixon was forced to act like a lying, thieving little creep is partly because he WAS a lying, thieving little creep, but mostly because he mirrored America perfectly since Congress allowed it, nobody at the Federal Reserve was hung, imprisoned or even received a stern lecture, and there were no street riots at the sheer shame of it all.

This is not about how I am glad that Roy Rogers and Hopalong Cassidy are dead so that they would not see the kind of embarrassing, black- hat, bad-boy bunch of dad-burn, sidewinding, backstabbing, ornery, polecat bushwhackers we have become, but to show you how good the French were in predicting the fall in the value of the dollar.

And for that we only have to look at the essay titled "The Day the Dollar Died - and the Day Gold was Reborn" by Bill Downey of technicalcommoditytrader.com, who has researched a handy comparison between then and now.

He compares "How Much things cost on Aug 15th, 1971" to what they cost today.

Dow Jones Industrial Average 890 or 25 oz. gold in 1971, versus 9,000 or 10 oz. gold today.

Average Cost of new house $25,250 or 721 oz. gold in 1971, versus 250,000 or 277 oz. gold today.

Average Income per year $10,600 or 302 oz. gold in 1971, versus $70,000 or 77 oz. gold today.

Average Monthly Rent $150 or 4.3 oz. of gold in 1971, versus $824 or 1 oz. of gold today.

Datsun 1200 Sports Coupe $1,866 or 53 oz. gold in 1971, versus $28,400 or 31 oz. gold today.

Naturally, I am looking over this little chart with some puzzlement, and I am thinking to myself, "It seems that there should be a message in there somewhere, but what?"

Fortunately, before I could think about it some more, and wonder some more about what the "message" was, and then get a headache from all the thinking and the frustrations of failure, and then decide to go out for a drink to clear my head, or maybe take an afternoon off to play a round of golf, both of which get me in trouble with my boss, Mr. Downey reveals it as, "Conclusion: If your money is dollars, you live in an inflationary world. If your money is denominated in gold, you live in a deflationary world."

Until next time,

The Mogambo Guru
for The Daily Reckoning Australia

• An Edifice of Pure Economic Crapola
• Price of Silver Climbing to All Time High of US $1,012
• California Has Run Out of Money
• Don’t Pay Your Debt: A Page from the Fed’s Playbook
• Gold Standard: The Long-Run Value

The artist in me is attracted to the cover of the magazine this week, and I loved the clever way that the artist had the book melting into something runny-yet-yummy that looked like puddles of chocolate and vanilla ice creams, which wordlessly explains why Modern Economic Theory was so popular in the first place.

My refined artistic instinct, however, would have had the book rotting at the bottom and melting into millions of disgusting cockroaches all swarming out, which is a lot more repulsive and thus artistically descriptive of the results of the monetary ministrations of the loathsome Federal Reserve, lo these last several decades, which created a constant deluge of money which, single-handedly, made all the weird Congressional insanities possible, all the economy-distorting government spending possible, all the crushing debts public and private possible, and our "We're freaking doomed!" future so pathetically predictable and indeed inevitable that, just as predictably and inevitably, gets me started on how this "predictable and inevitable" thing is the Exact Freaking Reason (EFR) why it is imperative that you buy gold, silver and oil! It's all so easy!

The Economist magazine, also predictably and inevitably, does not comment on this Gem Of Mogambo Economic Wisdom (GOMEW), which is to buy gold, silver and oil on the advice of the last 4,500 continuous years of the world's economic history, particularly as it pertains to fiat currencies and the trustworthiness of governments.

Instead, they admit that "There are three main critiques; that macro and financial economists helped cause the crisis, that they failed to spot it, and that they have no idea how to fix it," which are all only true in the broadest sense, although because The Economist magazine is filled with these same kinds of neo-Keynesian of guys, they are completely unaware that there are lots and lots and lots of economics people out here who did NOT cause the crisis and, in fact, the Austrian school of economics (see: Mises.org to learn the only true economic theory!) has been insistent all along that the whole Federal Reserve modus operandi of creating excess money and credit was (to paraphrase into Mogambo-ese, which is to heap scathing disdain and utter contempt upon a wide range of people and things), a big, stinking load of bankrupting inflationary stupidity.

And since you mentioned it, these same Austrian school of economics guys had it spotted with laser-like precision the Whole Freaking Time (WFT), too!

And this does not even get into the unbelievable $2 trillion Congressional budgeted deficit-spending thing, which is enough to make you poop in your pants and exclaim "Yikes!" which is not as comical in real life as it seems when you simply read it on the page like this.

So you can see how I am predictably nervous and trigger-happy, and when The Economist article said that "macroeconomists also had a blind spot: their standard models assumed that capital markets work perfectly," you can actually hear me in the background as I immediately jumped to my feet and exclaimed, "No! No, you blockheads! Their blind spot WAS their stupid Keynesian models! The whole thing was one stupidity piled on top of another one! Hahaha!"

You have to pay particular attention, but if you look really close at the video surveillance tapes, that's me in the lower left corner in the background, demonically waving a pair of silk women's bikini underwear (which I did to attract attention, which it did, but not, unfortunately, in a "good way") and if you turn the volume up, you can hear me yelling, "How in the hell can you manage monetary policy on such pillars as, for example, 'the consumption function,' which is just the notion that you get some money, you spend some money, you have some money left, but each expressed, in percentages of total income, to three decimal-place precision? And which are then used as inputs to myriad subsequent equations of equal worthlessness, compounding and compounding the inherent errors with each iteration? Hahahaha! Morons! You're all morons to believe any of this silly crap!"

Suddenly, the security tape goes blank, and thus my summation was lost to history, although I fortunately remember what I said. I continued, in my usual sarcastic way, "In fact, people are morons if they expect that this time, after all the times in history when it has been tried and failed, the government will - for the first time in history! - finally be able to buy its way out of bankruptcy by printing a lot of fiat money and, through some Absolute Freaking Miracle (AFM), a ruinous hyperinflation will miraculously not destroy the economy, the people will surprisingly not riot in the streets, and you won't hear The Fabulous Mogambo (TFM) predictably laughing and saying, 'I told you to buy gold, silver and oil because - Whee! - this investing stuff is easy when the government is acting so irresponsibly, ya morons!' and instead everything will be just fine after a gigantic deus ex machina occurs where some omnipotent supernatural being presses some kind of Cosmic Reset Button (CRB) to set everything aright, where everybody's losses are made up, everybody gets rich and everybody finds true love and lives happily ever after. Hahahaha!"

Or, for the less optimistic, buy gold, silver and oil, which WILL come true, unlike that "true love" thing! Hahaha!

Until next time,

The Mogambo Guru
for The Daily Reckoning Australia

• SOS: Suffocating On Spending
• An Edifice of Pure Economic Crapola
• Gold and Silver!
• Silver and Gold Will Make You More Attractive
• Roasting G-20 Weenies on a Golden Spit