Golden lifeboats flee the
Titanic By The Mogambo Guru
Ty Andros of Traderview.com says, "The
'Crack up Boom' is unfolding as predicted by von
Mises," but on the other hand, "It's hard to
predict a down stock market when they are printing
money at this rate! Purchasing power is crumbling
in terms of all currencies which provide a natural
buoyancy as the assets re-price higher to reflect
the lower purchasing power of the currencies in
which they are priced! Can you say 'Zimbabwe here
we come'?", which is a sly reference to how
Zimbabwe has been printing money for so long that
inflation there is now approximately 300,000% a
year.
This apparently prompted Junior
Mogambo Ranger (JMR) Phil S to say that with all
the creation of money and credit, we seem intent
on "Chasing Zimbabwe to success!" Hahaha!
And the situation is about as bad in South
Africa, which has sunk
so low from mismanagement, stupidity
and corruption that it can't even keep the
electricity flowing, which caused a wag to
comment, "What's the difference between South
Africa and the Titanic? The Titanic sank with its
lights still on."
And all this economic
misery is due to the pernicious effects of
inflation, which is all due to the central banks
producing too much money and credit. And in that
regard, an interesting article in the Wall Street
Journal titled "Inflation May Be Worse Than We
Think" by David Ransom shows that rising input
costs ALWAYS "filter through" to final prices
(regardless of what Ben Bernanke of the Federal
Reserve perversely thinks), and that "commodity
prices, far from reverting quickly back to the
mean, are early-warning indicators of the future
(Consumer Price Index, ie price inflation)".
Well, the government's "official" figure
of inflation is already a staggering 4.3%, and as
bad as that is, Ransom says, "But worse may be yet
to come, while commodities like energy and food
are leading indicators of the CPI, precious metals
like gold are, in turn, leading indicators of
energy and food," which is really spooky when one
remembers that gold is up over 40% from a year
ago. Yikes!
Even more interesting, his
research shows that, over the past several
decades, "There is a remarkable parallel between
annual CPI inflation and the cumulative change in
the price of gold measured from eight years
before." Hmmm! In fact, he says, to gauge how high
inflation will get, you can simply, "Divide the
percentage change in the gold price from eight
years in the past by 80, and add three."
I
groaned aloud, as the last thing I want in this
world is look up the price of gold eight years
ago, or subtracting it from the price of gold now,
or dividing that by 80, or adding his damned three
at the end, and I was just getting ready to tell
him so when he surprised me by saying that he has
already done the work! He says, "In the last eight
years the price of gold has risen 225%. The rule
therefore comes out with an answer that puts
inflation a lot closer to 6% than 4%."
And
it is not even necessary to look at dry statistics
and analyst reports, as one can merely take the
easy way out and just read the subject line in an
email from (JMR) Azvitt, namely "Let them eat ...
well, not bread or cake". The reason for the
cryptic line is the observation that "There's a
store near me that sells 50-pound bags of wheat.
Months ago they cost $8 on sale. Today, TWENTY
SEVEN DOLLARS!!!" Careful Mogambo Linguistic
Scholars (MLS) will note the use of the double
exclamation point to indicate particular emphasis,
which seems appropriate when looking at 338%
inflation in just a few months!
And even
then, that estimate of inflation may be too low,
as John Williams at shadowstats.com, who does this
kind of thing for a living, figures that inflation
in prices (measured the old fashioned way of
looking at actual prices) is running somewhere
between 10% and 13%, right freaking now!
And what does one do when looking at
inflation that is that high? Buy gold!
And
in that regard, John Rubino at dollarcollapse.com
refers to Shayne McGuire, of the Teacher
Retirement System in Texas, who reveals that he
has acquired an appreciation of gold, and has
actually just written a book that apparently
contains no subtleties or excess verbiage; it is
titled Buy Gold Now.
McGuire says,
"Any MBA holder who has been taught to value
almost any asset hits a stone wall when faced with
gold: it pays no dividend or coupon, and without
deriving a cash flow, the basis of most assets
defined as being financial, there is no
conventional way to determine its dollar value.
Ultimately, it's just a rock, right?"
Yes,
it is! Gold is essentially a rock! So why is it so
valuable? Why do people always turn to gold at the
end? The answer is that there is nothing else to
take its place as a store of wealth that does not
rot, corrode or disappear, is divisible, is
universally accepted as money, is small enough
that you can stash a lot of wealth in a small
place where government tax collectors cannot
assess it (unlike the equivalent amount of land or
buildings), and it is entirely portable, so that
you can take your wealth with you to some other
country where the people and the government are
not so crazy with desperation, where you can start
over with a new name, a new identity, a lot of
money and no family to nag, nag, nag you all the
time just because you are a terrible father and
husband and make absolutely no effort to change.
Now, perhaps, you have a new appreciation
for gold! Although perhaps not so much for The
Mogambo. Ugh.
The Mogambo Sez: Oh, gold!
Oh, silver! Oh, oil! Thank you, thank you, thank
you! A soothing haven in a world gone completely
freaking bonkers!
If this little phrase
means nothing to you now, rest assured that it
will increasingly become more meaningful to you as
time goes on, and on that one special day you will
achieve Complete Mogambo Enlightenment (TME).
The only question then will be, "Is it too
late to finally get off my fat, dead butt and get
gold, silver and oil so as to try and save the
last little bit of my money?"
Again, it's
just a matter of time!
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.
Head
Office: Unit B, 16/F, Li Dong Building, No. 9 Li Yuen Street East,
Central, Hong Kong Thailand Bureau:
11/13 Petchkasem Road, Hua Hin, Prachuab Kirikhan, Thailand 77110
