I always get a real kick out of hearing that "the consumer is 70% of the
economy", mostly because it gives me a chance to heap ridicule and scorn on
whoever said it, and I say that the consumer is 100% of the economy!
One CAN say that, with or without the heaping of ridicule and/or scorn, but at
least with an arrogant and smug authority that comes from 100% certitude, that
"The Mogambo is 100% certain that the consumer is 100 Freaking per cent (100FP)
of the economy!"
I make this Bold Mogambo Assertion (BMA) for two reasons. First, I hope that by
debunking this silly "the consumer is 70% of the economy" crapola, I will win a
Nobel Prize or some other
award that has a cash-award component of the prize winnings, perhaps one that
has a LARGE cash-award component.
My argument is that the ultimate consumer pays the price for everything by
buying and consuming, for instance, a frozen pizza or delicious candy bars, and
maybe something nice to drink, knowing that a slice of the purchase price is
used to pay back creditors and producers for the use of capital, labor and land
invested in producing these - and more! - delicious "ready-to-eat" snacks and
treats of high caloric content, of which the sugary, chocolate and salty
varieties I find particularly good. Yum!
And speaking of spending, I was surprised to see that the current-account
balance of the US of A has collapsed to US$673.3 billion in the last 12 months,
down from its high of over $800 billion, and the trade balance has fallen to
$730.4 billion in the last year, which is down about 20% from its high of a
couple of years ago, too.
And while the 12.8% fall in industrial production in the last year seems like
bad news for us Americans, it is worse by whole orders of magnitude other
places. Japan has industrial production down 34.2% over the last 12 months, and
in the euro area it is down by 20.2%.
Just when I thought I would go berserk at such horrific economic news, I see
John Stepek at Money Morning newsletter had a subhead that caught my eye, which
was "Three sound reasons to own gold."
I admit that I did not read the article, but as far as I know, there are only
two good reasons to own gold; to preserve wealth when prices are stable, and to
make a lot of fiat wealth when your government acts so stupid as to create, or
allow to be created, excess money and credit that eventually destroys the
currency, especially when undertaken so as to enlarge the size of government,
like now, which makes the problem of inflation worse because those more
government weenies have a bigger incentive to save their own phony-baloney
jobs, but can only make things worse.
Like, I said, I did not read the article because I am lazy, but the advice to
buy gold is the lesson of the last 4,500 years of governments acting
irresponsibly when given control of a fiat currency with which they could
create as much money as they wished; inflation in prices inevitably caused
chaos, misery, starvation and revolution.
I tried to explain to the employees that inflation in prices was essentially
just a mismatch between gains in income, if any, versus gains in prices that
must be paid with that income, which I hoped would prove to be a valuable
insight when I then told them how I was slashing their salaries by a lousy 5%,
and if they did not like it, then they could all go to hell because we are on
our way to bankruptcy anyway.
I was going to suggest that the lesson, which they would immediately grasp if
they were not so stupid, is to immediately buy as much gold, silver and oil as
they could, but they were not in the mood to hear good advice gleaned from
history, and instead wanted to whine about their puny pay cuts.
If they were not so stupid, they would see that buying gold now would easily
make up for their meager income reductions, and if they had been buying gold,
silver and oil all along, they would be miles ahead!
Whee! This investing stuff is easy!
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 2009, The Daily Reckoning.)
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