Richard Daughty on the Fiscal and Monetary Insanity of the Whole Freakin' World
by Anthony Wile Recently by Anthony Wile: Perpetual War for Perpetual Employment?
The Daily Bell is pleased to present an exclusive interview with Richard Daughty. Introduction: Richard Daughty, the Mogambo Metals and Money Guru, describes himself as "the angriest guy in economics." No doubt this is because a genuine belief in Austrian hard-money economics leads him to question the moves, rationale and even, sometimes, the sanity of the financial officers, institutional investors and central bankers about whom he writes. In Swahili, Mogambo apparently means "big gorilla" – and Richard is certainly a big gorilla among the hard-money publishing set – providing at least portions of his Mogambo Guru report to many of the 'Net's most prestigious hard-money sites and top magazines and newspapers as well – including Barron's and the Wall Street Journal. He is also a partner and COO for Smith Consultant Group, serving the financial and medical communities. Prior to joining Smith, Richard was a financial adviser to American Express Financial Advisers in Clearwater, Florida. He holds an MBA in operations research from the University of South Florida and has long been a strong advocate for sound fiscal and monetary policy – even when it wasn't fashionable. Daily Bell: We have previously interviewed you and your alter ego, the Mogambo Guru. Now we'll follow up. But please pretend you are addressing an audience that does not know about your fine work or writing. Mogambo Guru: I do fine work or writing? Wow! Who knew? Thanks! Daily Bell: A general question first. When did you get interested in Austrian economics and how? Mogambo Guru: I got interesting in Austrian economics only because I was trying to make a lot of money in a hurry without actually working because I am greedy and lazy. I was using technical analysis to trade index options, and, obviously, market-following technical analysis follows the market.
The problem was that the market had already turned by the time the charts showed it, and so I always missed the first chunk of the rollup/uptrend while still holding my puts, and always missed the first chunk of the rollover/downtrend while still holding my calls! Bummer! I only got the middle part, if any, of any move. So I wondered "How can I make a lot more money without, you know, working? For example, how did the guys who got in first, or got out first, know to get in, or know to get out? What, what, what did they know?" Naturally, I turned to economics, and started with the usual college textbooks and bookstore offerings, all centered around that Keynes crap that they teach almost everywhere, which I found both logically incomprehensible and (my suspicions having been vindicated QED) a Big Stinking Load Of Crap (BSLOC). Then, one happy, lucky day, flailing around as I was, lost in the darkness of modern economic Keynesian econometric stupidity, I stumbled upon the Austrian Business Cycle Theory, I forget how or where, but probably Hazlitt's "Economics in One Easy Lesson," and then it was Rothbard, Hayek and Mises from then on! Daily Bell: For purposes of this interview, give us a short rundown on your background and most important work. Mogambo Guru: A useless college degree in psychology, various post-grad MBA and PhD work ending in disillusionments and disappointments, bored business manager, simplistic computer programmer, low-producing stockbroker, disheartened financial planner, with a sorry streak of "lack of ambition" running through it all. And as for "important work" I have done, I have never done any important work, and very little work that wasn't substandard, now that I think about it. But thanks for asking, anyway! Daily Bell: Is the West in a double-dip recession? Mogambo Guru: It looks like it to me. Or a triple dip! Or more dips! Or the dip before the end of the world! Who knows? Maybe a boom! Never underestimate the government response, and there WILL be a government response!
Daily Bell: What is the real American unemployment rate versus the labor pool? Mogambo Guru: It's odd that you should mention that, because I just looked at it so recently that I can still remember the conclusion, which is that the US economy is so malformed and grotesquely twisted, because the Federal Reserve created the excess money to finance all that idiocy, that nowadays 7 out of 12 workers are employed either by a government, the school system, some other tax-eating agency, or work for a non-profit organization. None of these 7 of 12 people can possibly make a profit with which to pay any taxes, and all are relying on sharing government revenues and/or soliciting the good-hearted citizens to engage in a little self-taxation and cough up some bucks for a nice donation. So, more than half of all work in The Whole Freaking Country (TWFC) will not pay any taxes on any profit? Wow! Half! "What kind of a crazy economic system in that?" I ask with a look of alarm and fear on my ruggedly handsome face, which, I have been told by people, is neither rugged nor handsome, but they were idiots, and it is not about rugged or handsome, anyway, but about how the distorted, bloated, cancerous economic system is causing my face, ruggedly handsome or not, to have a look of alarm and fear, which is undeniable, so who is the "conceited stupid bastard" now, you morons? Daily Bell: What is unemployment worldwide? Mogambo Guru: I have no idea, nor do I have any idea of the effect of unemployment in different cultures, or anything concerning foreigners, who all seem to speak foreign languages and I can't understand a word of what they say, much less making heads or tails out of their cultural norms, although I am sure that they are all talking about me behind my back and plotting things because that is the kind of paranoid weirdo I have become as a result of the world's central banks making so, so, so much money, over so, so, so many years, especially to accommodate the foul Federal Reserve creating so incredibly much money for the biggest economy on earth, and which is going exponential even as we speak! Yikes! Daily Bell: What is the difference between a depression and great recession. Semantics? Mogambo Guru: As far as I can tell without doing any real thinking, which is how I like it. I notice that they rhyme, though, if that helps! Daily Bell: What can government do to make things better? Anything? Mogambo Guru: Hahaha! Do? What can government do, now that it has borrowed itself into bankruptcy and after having encouraged the population to do the same so that everyone faces bankruptcy and ruination unless an inflationary hell created from stimulus spending somehow saves them all? What can they do? Hahaha!
Well, the short answer is, of course, that "Nothing can be done!" and for the very good reason that if something COULD be done, there would be no such thing as economics! "Borrow and spend as much as you like, and then when you are drowning in debt, we economics hotshots will just use a Powerful Magic Move (PMM) that will solve all financial problems!" Hahahaha! Daily Bell: What are the worst US government statistics in your estimation – or are they all OK? Mogambo Guru: The only thing that scares me, because it is the only thing that CAN really scare anybody that fears hordes of poor people rioting in the streets because prices are so high that they are starving, is inflation in consumer prices. And inflation in prices comes from an increase in debt, and thus a corresponding increase in the money supply, and all that springs from an increase in Fed Credit. So inflation's the one thing that scares me the most, and the increase in Fed Credit is where it begins! Daily Bell: Is the housing market beginning to bottom out? Mogambo Guru: I doubt it, since I don't think general incomes are rising, nor do incomes seem high enough to pass the tighter mortgage standards at the banks. But who knows? At the risk of repeating myself, it's always a mistake to underestimate the government! For example, what would happen to house prices if the government reimbursed homebuyers, via a fat, luscious tax credit (payable in cash!), for what the homebuyer spent on the mortgage payment? I mean, what is the top price someone would pay for a house that will always be, "after taxes," free? Daily Bell: What is the real inflation level – or is there deflation? Mogambo Guru: I think it depends on what you are looking at! Food and energy are a lot higher in price, and almost certainly going higher, but other things are not higher, and some are lower in price. And with the cost of housing being 40% of the Consumer Price Index and housing going down in price, the rate of inflation you experience will not be indicated in that index, if all your money is spent on higher prices for food and energy, but it will if not! Daily Bell: How are retail sales doing?
Mogambo Guru: Well, retail-wise, I was going to buy a new putter at this golf store, but my wife said "No dice" because I already have so many putters in the garage that turned out to be pieces of expensive-yet-useless crap, their sheer number statistically eliminating the club itself as the key variable that is my freaking problem with getting that damned little white ball into that damned little hole in the damned ground. Other than that, I don't know anything about retail sales. Sorry. Daily Bell: We have a theory that the controlling monetary elite is basically Anglo-American, not French, German, etc. Is that simplistic? Mogambo Guru: With a phony philosophy that flows like profound poetry, I say "Those that have the money call the shots. It is always thus." Daily Bell: You tend in your public speaking to concentrate more on the Federal Reserve than the income tax when it comes to identifying what is the most damaging financial and economic mechanism. Why do you think central banking is more of a menace than graduated income taxes? Or do you? Mogambo Guru: Changing taxes merely rearranges who, government or non-government, gets what proportion of the money supply. When the economic stagnation of an over-reaching government starts to hurt the economy, political things, like taxes, usually reverse over the next couple of elections. The Federal Reserve, on the other hand, constantly increases the money supply, and now at astounding rates, without anyone's permission or input! And all this money makes consumer prices rise in horrible inflation, which, unless drastic measures are taken, always leads to economic catastrophe, unstoppable starvation, riots in the streets, and that sort of thing, which is the "good news" part. The "bad news" part is much more nightmarish, and, thus, I think the Federal Reserve is a bigger danger, by far, than taxes! Daily Bell: How come the Federal Reserve did not predict the crisis with all its trained economists, researchers etc? Mogambo Guru: Because Austrian economics, which DID predict the crisis, is so simple and elegant that it is not conducive to playing "mind games" with computers and equations and econometric models to show everyone how smart you are, while proving how disastrously and utterly wrong you are, and surprisingly showing that they are too stupid to even see their obvious failure, year after year after year, and stop doing whatever in hell that it was doing to the Serious, Serious Detriment (SSD) of all, like the foul Federal Reserve. Daily Bell: How is it possible that the Federal Reserve is going to receive yet more regulatory power given its track record? Mogambo Guru: It is part of everyone clutching at straws in panicked desperation due to the dawning realization that "We're Freaking Doomed (WFD)!" Daily Bell: Is it possible given current resistance to the Fed that it is on its way out? Something else will have to replace it. Perhaps the IMF? Mogambo Guru: Is it possible to replace the Fed? Sure! But with what? The American economy cannot now exist without the Federal Reserve, or something just like it, constantly creating money in insane multiples, gradually increasing exponentially, accomplished by unrestricted fractional-reserve banking and insane levels of credit and money creation!
Daily Bell: Will we see a truly international non-dollar reserve currency in your lifetime? Mogambo Guru: Just tell me: Who would trust who, and why, unless it was gold? Daily Bell: Could we then perhaps see a reversion to a gold and silver market-elected money standard? Mogambo Guru: Perhaps, but only if we are willing to withstand a lot of pain installing it, and willingly suffer more pain as things adjust so far downward that the standard of living is just a mere fraction of what it is now, which does not sound like anybody I know! Daily Bell: If we did see such a standard, would it emerge as a free-banking standard? Mogambo Guru: It depends on who makes the rules, I'd say! Hahaha! Daily Bell: Where do you stand in the free-banking controversy? Do you see private (competition-based) fractional reserve banking as fraudulent, even criminal, or would you consider it to be an appropriate market evolution if it emerged out of a return to honest money? Mogambo Guru: The problem with fractional-banking is that it is always carried to excess, such as the situation Right Freaking Now (RFN), where "reserves" in the banks is a laughable $67 billion, held against something like $7 trillion in loans and leases! A tiny little fraction of one lousy percent counts as "reserves" against losses? And this does not count covering the risk of another $7 trillion or so in deposits and liabilities, too! Reserves? With a miniscule $67 billion? Hahahaha! Daily Bell: We've pointed out that everyone is piling on the Fed these days. There may even be an audit. Is it possible that the monetary elite has decided to sacrifice the Fed – and in doing so create an alternative structure? Mogambo Guru: Never underestimate a truly desperate person with links to other truly desperate persons that have the power to enact laws to change your whole universe. Daily Bell: Does gold remain undervalued? Mogambo Guru: Most definitely! And by a long, long shot, too! Daily Bell: How about silver? Mogambo Guru: Even more so! Wow! I could drone on for hours and hours, one fact after another, about silver being such a screaming value that it would easily rate Number One With A Bullet (NOWAB) recommendation on the Mogambo Can't-Miss, Sure-Fire Investment List (MCMSFIL), if there were such things as a NOWAB or MCMSFIL, which there aren't because I just made them up, but both sound like wonderful ideas for someone not as lazy as I am. Daily Bell: Are both manipulated? Mogambo Guru: Isn't everything? Daily Bell: Is the world headed back to a gold standard? What kind of money would you like to see? Mogambo Guru: Yes, the world is ALWAYS headed back to a gold standard because of the guaranteed degradation all monetary systems based on a fiat currency, but usually only achieved after suffering a lot of misery caused by inflation in prices for generations until the currency finally devalues to literal worthlessness. Daily Bell: Where is China headed? Will price inflation bring China down?
Mogambo Guru: We all know where China is headed, because with that much pent-up demand, comprising almost a third of the world's population, it is just a matter of increasing consumer credit and building retail systems to sell all that crap! And even better for them, what will bring China's inflation down is a strong yuan so that imports of consumer items and industrial goods will fall in price for years! Growth without inflation! Daily Bell: What is inflation? Mises believed it was a monetary aggregate plus the willingness of society to CIRCULATE the money. Your view? Mogambo Guru: Mises has it right. Would YOU want to hold onto a currency that was losing value with every tick of the clock, and then lose more purchasing power at every tock of the clock, and then lose more value with each tick, and then each tock, then each tick tock, tick tock, ticktockticktockticktock? Me, neither! Daily Bell: Why is the velocity of money a false paradigm? Mogambo Guru: I don't know how FALSE it is, but regarding velocity, just plug the dependent variable to balance Fisher's equation PQ=MV. Therefore, all changes in velocity (V) can only be the result of changes in prices (P), and/or quantity sold (Q), and/or the money supply (M). Daily Bell: What is deflation? Is it a monetary phenomenon? Is there such a thing as price deflation versus monetary deflation? Mogambo Guru: Monetary deflation is when the money supply goes down because the guy who borrowed the money won't, or can't, pay you back, and you have to just forget about getting your money back. And since money is created at the instant the loan is made, money literally disappears when the loan disappears! Price deflation, on the other hand, is what happens AFTER monetary deflation: Since there is a smaller money supply being used to bid on goods and services in the free-market auction-place known as "real life," prices cannot all be bid as high as when there was a bigger money supply, and in fact some, or all, prices must be bid lower so that the market is cleared of the same goods but less money! Daily Bell: Can you have REAL deflation in a fiat money economy? Mogambo Guru: You sure as hell can! And in fact, you cannot stop it unless somebody stops borrowing and spending so much money that it produces inflationary bubbles in stocks, bubbles in bonds, bubbles in houses, bubbles in derivatives, and bubbles, bubbles, bubbles in the size and expense of government, which doesn't even count as an "expense," measured in suffering, of the horrific inflation in consumer prices that people must pay thanks to monstrous amounts of deficit-spending by the federal government! Daily Bell: Is fiat money collapsing worldwide? Mogambo Guru: As it always does, as the disappearance of literally thousands of now-worthless and forgotten fiat currencies, and the losses suffered by those unfortunates holding fiat currencies, through history so richly attest. Daily Bell: Will the EU survive? Mogambo Guru: I'm surprised it lasted this long! A unified monetary policy but 18 separate fiscal policies, and they thought it would last? Hahaha! Daily Bell: What is the role of government if any? Mogambo Guru: Interesting question! The 18 powers granted to Congress, enumerated in the Constitution, is a good place to start, I suppose. Daily Bell: What are your feelings about the war on terror? Mogambo Guru: I assume that it's all a big convoluted web of lies and corruptions at this point, providing good diversion for all kinds of corrupt activities and increased defense spending, as always! Daily Bell: What is your take on Ron Paul? On the Tea Party? Mogambo Guru: A wish come true, but arrived, alas, too, too late, but in time to take the blame.
Daily Bell: How complicated is economics really? Human action tells us that individuals will create solutions for themselves and their families and communities as necessary. What else does one need to know but "let the market decide?" What are the other mysteries that need to be delved? Is it analysis of HOW the process works that is important? Or does this over-complicate things? Mogambo Guru: I'm glad you asked that question, because not only do I agree with you that economics is simple, but that Austrian economics, the Only True Economic Theory (OTET) is like, I figure, sort of like chess. The basic moves can be easily taught to children, but the subtleties take a lot to master. Daily Bell: Any books or articles you would recommend to our readers? Mogambo Guru: I would say Hazlitt's Economics in One Lesson would do the trick! Daily Bell: Thank you for your time and graciousness in conducting another interview with us. Mogambo Guru: Thanks for interviewing me without leading me into a trap where I foolishly confide the fact that we're freaking doomed to die of catastrophic inflation because the Federal Reserve is creating so much money, which it does so that the Obama administration can deficit-spend so much money, a trajectory of borrowing putting us as a nation further in debt to the tune of almost $2 trillion this year – 14% of GDP! – and bringing the total outstanding national debt to more than 100% of GDP, so that to talk of investing in anything other than gold, silver, oil stocks and high-caliber weapons, with or without bunkers and reinforced defensive positions, is to laugh the famous Mogambo Laugh Of Scorn (MLOS) at such lunacy! Hahahaha! Daily Bell After Thoughts Interviewing the Great Mogambo always makes us happy. He's a funny fellow, and he's also been right about most everything he's written for the past ten years or so. Of course you've seen him on TV – wait a minute. He's not on TV. Not even on radio so far as we can tell. This is a primary law of American finance. The more correct you are, the less you will appear on mainstream, Western media. Fortunately, there is the Internet. The Great Mogambo has thrived on the Internet and his many grateful fans are grateful for his always-pertinent analyses. To write with humor about what is occurring today is no easy feat. In fact, to write about finance and economics at all with such wit is something that only a very few can do. To do so with his level of honesty and accuracy is astonishing. Those who follow the Great Mogambo will no doubt have been enriched by his musings in numerous ways. It is a sad commentary on American letters – and on the mainstream media in general – that inaccurate mediocrities have acquired vast electronic platforms from which to bore us. But reading Mogambo is always a treat. Long may he write, and thrive. Reprinted with permission from The Daily Bell. January 31, 2011 Anthony Wile is an author, columnist and entrepreneur focused on developing projects that promote the general advancement of free-market thinking concepts. He is the Chairman and CEO of the Swiss-based publishing firm Appenzeller Business Press AG (ARBP). He is a senior editor of ARBP's flagship news site, TheDailyBell.com. In 2010, ARBP founded and appointed Mr. Wile as the Executive Director of The Foundation for the Advancement of Free-Market Thinking – a non-profit Liechtenstein-based foundation. His most popular book, High Alert, is now in its third edition and available in several languages. Other notable books written by Mr. Wile include The Liberation of Flockhead (2002) and The Value of Gold (2002). Copyright © 2011 The Daily Bell
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