In my darker moments, usually just before I go freaking berserk and start
yelling and screaming about how "We’re freaking doomed!" from the idiotic
Barack Obama administration deficit-spending So Freaking Much (SFM) money and
the idiocy of the Federal Reserve creating So Freaking Much (SFM) money, all of
which is guaranteed - guaranteed! - to make consumer prices rise in a
terrifying, catastrophic, ruinous inflationary spiral that will destroy us all,
I sometimes get myself in the mood for a nice, long, loud Mogambo Banshee Wail
Of Outrage (MBWOO) by merely mulling over the term "dynamic stochastic general
equilibrium".
This incomprehensible term reveals itself, as the term itself
implies, as laughably worthless, but, even worse, it is the name of the stupid
economic theory to which the moronic Federal Reserve hews so strongly and which
has failed so, so miserably.
But if the Fed did not create the money that creates inflation in prices, then
the Obama administration's insane deficit-spending would mean that the
government would have to borrow the money in the private market, sucking up a
huge US$2 trillion a year out of the accounts of people and agents who saved
money, which is impossible because all of the savings accounts in the whole USA
amount to a lot less than that!
How things have gotten to this point is made clear in The Free Market
newsletter from the Ludwig von Mises Institute, where Jonathan M Finegold
Catalan writes, "The current situation is not unprecedented. High public and
private debt has been the bane of large governments for the entirety of written
history."
It is, he notes, what Ludwig von Mises described as the "crisis of
interventionism", which Mr. Mises himself describes as "Intervention aims at
confiscating the 'surplus' of one part of the population and giving it to the
other part. Once this surplus is exhausted by total confiscation, a further
continuation of the policy is impossible", which Mr Catalan notes is made
simpler with the immortal quote, "The problem with socialism is that eventually
you run out of other people's money."
Of course, I had many, many questions, like, "Is your name really Finegold, or
is that some kind of coded message signifying that The Marvelous Mogambo (TMM)
was right when he said to buy gold, silver and oil?" and I wanted to know, "Are
you saying, that we ought to run out and buy gold right now?" and, of course,
"What does the 'M' stand for in your name?"
But of course Mr Mises was writing when money was gold and gold was money, and
thus they did not realized that with a fiat currency, the government can never
run out of money because they can always just print more.
More correctly, the problem with socialism is that eventually the money runs
out of buying power, which is another whole problem, but one which will not be
a problem to those who have looked at the problem and bought gold, silver and
oil instead of dollar-denominated assets! "Whee!", I say. "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 2010, The Daily Reckoning.)
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