Friday, October 17, 2008

Mogambo Guru on Barron's

"I got a big Mogambo Laugh (BML) out of the cover of Barron's this week, which proclaimed 'How Taxpayers Can Profit On The Bailout", with the subhead 'The $700 billion rescue plan could do more than stabilize markets and ease the credit crunch. It may turn a tidy profit too.' Hahahaha! 'Tidy profit'! Hahaha! ... I naturally tell [the Barron's receptionist] 'I want to speak to the top dog in charge of Barron's, because your newspaper is full of idiots! ... The place is full of morons, and I want to tell the halfwit publisher to get his or her stupid butt in gear! That's what I want!' ... I wonder what $700 billion is worth in loaves of bread at $2 per loaf of bread, and I calculate that the bailout is equivalent to 350 billion loaves. ... Junior Mogambo Ranger (JMR) Steve F noted that 'the monetary base expanded by 7.65%!! In 2 weeks!! ... That's 15.3% inflation in the money supply per month, without compounding!!!! ... I quickly calculated the price of bread four years into the future after suffering a 15.3% monthly inflation, and found that, in four years, a loaf of bread that costs $2 today will then cost $1,857.11! ... That means that a house today would be worth $538 at $2 per loaf. Hahaha! [T]here is no freaking way that the taxpayer will show a real, inflation-adjusted profit from this bailout crap", Mogambo Guru at, 2 October 2008.

I think of a University of Chicago economist joke. There are such things? Yes. Two U of C economists are walking down a street and one sees a $100 bill. They look at it and leave it there. Why? If it was a $100 bill someone would already have picked it up! Laugh. Now. Or else. Suppose one had a real profit opportunity here, what would have happened? Bill Gross (Pimco), quoted in the article, would have called Lloyd Blankfein (Goldman Sachs) and said, "Lloyd old buddy, there's billions for us here. All we have to do is grab it". "How's that Bill"? "There's $700 billion in undervalued assets here. You raise the gelt with your sterling reputation, we manage the asset pool". "Go on Bill". "Sure, we split a 2% syndication fee, $7 billion for your mob, $7 billion for mine. Then we split 50 basis points a year to manage the assets, $1.75 billion a year for each of us". "Sounds good Bill, let's do it". Alternatively, Lloyd would have called. Gross may be a communist. Why? He made the same error Stalin's economists made in the 1930s, he assumed capital is a "free good" with no alternative uses. Stalin eventually realized even in his worker's paradise, capital has alternative uses and therefore "costs". When I read the article, I thought this is one of the stupidest things I've read in a while. The quality of thought in Dow Jones's publications has deteriorated in recent years. The monetary base was 843,841 million on 10 September and 985,899 million on 8 October 2008 a 16.83% increase in four weeks. Who now doubts the Fed is running a highly inflationary policy? 16.83% every four weeks compounds to a 656% money stock increase in 52 weeks. Do the arithmetic. Does anyone remember the "Lost in Space", 1965-68, robot, who said, "Warning Will Robinson ... ". I say warning to anyone holding US dollar paper. You will be lost in space.

Note to reader TVOH: you win, it's Zimbabwe, and only Zimbabwe Ben from now on!

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