The Second Coming of the Stock Market?

"...So what is it? Why ARE people buying stocks at these incredible prices? They have driven the P/E of the SP500 back up to 32! I'm standing on my desk waving my arms like an excited and upset orangutan while yelling "32! 32! 32!" over and over at this statistic! After awhile my voice gives out from all the yelling, and then I am finally reduced to making these odd, grunt-like noises, but still three syllables long. Sort of a 'Nuh nuh nuh! Nuh nuh nuh!' We are all hoping it is a temporary side effect of some new anti-psychotic medication that I so desperately needed, but nonetheless 'Nuh nuh nuh!'..."

- The Fed increased pure, raw credit by $8.5 billion last week, but bought up a mere billion dollar's worth of government debt, thus perpetuating the persistent, egregious fraud that is the hallmark of the Greenspan Fed, although neither is quite on the same heroic scale as we have been used to, lo these many long years.

Kinda idly glancing at things over at the banks, we dryly notice that reserves are not moving up along with the increases in assets and the increases in liabilities. This is because, I suppose, that the banks are soaking up so much government debt, and the hotshots in charge say that they don't have to hold any reserves against government debt. I will admit that there is not much chance that the federal government is going to come charging in , waving it's little savings account passbook in the air, and demanding it's money in cash.

But the drop in bond prices, wiping out some plenty big gains, must have had a major impact on the banks. I mean, these weenies have been absorbing government debt by the literal ton for over a year, and now they are showing some sudden capital losses on them. And you don't need a doctorate degree in banking to know that capital losses are not a good thing.

One of the little stupid things that I look at, and actually go to the trouble of keeping data and a graph, is the difference between bank assets and liabilities. This would indicate, by definition, into some broad, rough estimation of how many dollars are earning money to pay the depositors for the use of their money, and make a little something for themselves, too.

Anyway, getting back to the point, from 1998 to June 2001 the difference between the two stayed roughly about $620 billion. Then, in June 2001, it started dropping in a kind of linear manner to $200 billion in August 2002, and it has been wandering around in the vicinity of$240 billion or so since then.

So, the surplus of assets, which make money, over liabilities, which drain money, has been shrinking, for some Unknown Reason, to roughly a third of what was, graphically, kinda stable and boring for a long, long time.

Now, this could be the result of changes in laws or accounting mandates for all I know. But it is weird, and I always tend to go with the sure bet when big, odd-appearing things like this happen. And that particular wager, in case you want to put a few bucks on it, is that it cannot bode well.

- Last week's action in the stock market was very, very, ummm, I don't know how you would describe it! I mean, look at the chart of the thing! Does this look normal to YOU? You think that these gigantic moves, coming out of seemingly nowhere, don't portend something terrible? Well, if I described the vibrations you feel, and the perfect ten on the Richter scale, as evidenced in the squiggle of the stock averages, as "The thundering hooves of the blood-crazed horses of the murderous Horsemen of the Apocalypse as they roar down upon us," THEN would you think it portends something terrible?

As usual, I look for the dark cloud. But when the cloud is this big and that dark, and heavy, threatening clouds cover the earth like a death shroud from pole to pole, lightning bolts and flash floods everywhere, the silver lining that I am instructed to be on the lookout for may be, truly, be out there, beyond the horizon, but I can't see it.

Perhaps the biggest dark cloud for me was the needle on the Paranoid Panic-o-Meter going to redline, caused by the exquisite timing of the whole episode, coming as it did at the very end of the first quarter, precisely on a triple witching in the options and futures markets, accompanied by oddly uniform growth rate in the SP500 futures open interest the entire quarter, just as the Japanese banks are finishing up their year, just as the CPI registered more gains in inflation, just as a war started, etc.

Being naturally suspicious and distrustful, and as a direct result fearful and paranoid of damn near everything and everybody, and getting worse every damn day it seems, this is more than enough to make me consider things even MORE carefully through the lens of my patented jaundiced eye, if you define "jaundiced" as screaming incoherently about filthy, lying, corrupt and criminal manipulations by greedy, self-absorbed yahoos who have no inkling of the powerful and horrific economic forces that they are, and have been, unleashing, like demons from hell. Ooooh! I like that! And how quotable! The article writes itself! "Economic demons from Hell are what you got in the Old Days!" says Richard Daughty, local raving lunatic and economic gadfly. "These new demons are actually even worse! These economic demons are the ones that the regular demons in Hell are afraid of!"

That it will all end badly is the only constant in history. Taking that to the next step, I advise panic! Run! Run for your lives! Help! Help! SOS!

- I marvel at how easily we bandy huge sums of money about nowadays. It used to be that a few million bucks was quite remarkable. Then we got more and more jaded, and it then took a few hundred million to turn heads. Then it was over a billion, and then tens of billions, and then hundreds of billions and then trillions and then tens of trillions and then, in terms of the derivative market, over a hundred trillion dollars.

How does one relate to such things? I look at it in terms of people working. Therefore, since there are only about a hundred stinking million of us proletariat slobs out here in the USA, our blood being drained to lubricate the grinding machinery of capitalist commerce and suffocating government taxation, who have jobs that are NOT government jobs or whose income does NOT come from government. So, how much would we, the few, the brave, the working, the sweating, the unworthy, the filthy taxpaying scum who richly deserve the boot of governmental tyranny on our scrawny necks, have to pay to let somebody get a billion dollars?

Well, a billion dollars is each of us hundred million guys paying ten bucks. Not too bad.

A hundred billion is a thousand bucks each. Certainly do-able, but as the payer I'm starting to get a little edgy about how this is going.

A trillion dollars is each of us guys in that pitiful small pool of private-sector workers paying $10,000. I'm not sure what kind of circles YOU run around in, but around these parts ten grand is a real nice chunk of change, and I cannot even begin to tell you how many weeks go by around here when nobody gives me ten grand.

Relentlessly continuing on, ten trillion bucks is $100,000 per private sector worker. The interest on ten trillion bucks is, at even four percent, is four thousand bucks! That's the interest expense that us working bozos in the private sector have to pay, either in direct taxation, in higher prices through indirect taxation, or by printing money, which also shows up as higher prices down the road.

Of course, I would be remiss if I did not mention that a significant chunk of everyone's income is money than can be traced ultimately back to me. Oops, sorry. I mean "us." Oops again, I mean "government." Third time oops, I mean "taxpayers."

The reason I bring this up, and I am as surprised as you are that I remembered what in the hell I was talking about, is that the latest estimates for the budget deficit have risen dramatically, and is now a question of how, and you better sit down for this, how MANY trillions over the next decade! Trillions! Decade! I say again, trillions! And I say again, decade! Hello? Is anybody home?

Looking out into the future, and I do strike an inspiring pose when I look out into the future like this, leaning into the wind, scarf blowing picturesquely, hand shielding my twinkling blue eyes from the bright, illuminating sun, if government spending constitutes a greater and greater fraction of everyone's income, then one is led inescapably to ask, "Is there a viable economic system wherein everyone works for the government? Is there some theoretical construct, where nobody in the whole system makes a profit, and everybody's income is a government check?" I'm not sure if there is or not, and I prefer not to look under the bed for monsters but instead to empty a few clips of automatic weapons fire on the whole bed area, but we are obviously heading in that doleful direction, so maybe we ought to spend a little time contemplating how such a thing can be possible. (Insert scene of clocks ticking and calendar pages being torn off, to indicate the passage of time). I look up and, with a gaunt and drawn face desperately in need of a shave and a comb, say "Nope. You can't have an economic system like that."

In the meantime, of course, we believe the direct opposite, and this is also why nobody can ever allow a real decline in government spending. If there was, that goodly chunk of everyone's income would be instantly felt, depressing incomes, depressing spending power, depressing, depressing, depressing.

And having less money is a bad thing, not only because it is depressing. And you don't have to believe me, but perhaps you WILL listen to the immortal Ray Charles, who perhaps said it best when he sung, "Now look here buddy it's understood, if you got no money, you ain't no good. Hit the road, Jack." Well, to be accurate it was the back-up singers who uttered that timeless line, but you can be sure Ray was thinking it while they did.

- There are, believe it or not, many people who still believe in the Second Coming of the stock market.

Can the stock market, as measured by, say, the Dow Jones Industrials, go to 50,000? Sure! And it probably will! Not now or this week, of course, or during anytime in the next couple-three decades, but one day it will.

But the question that should be falling from your trembling lips should be, "50,000 what? Are you talking American dollars? Then, what is the dollar worth?" Ah, grasshopper! My heart is lifted on wings of soaring sparrows to hear you ask the question! You are now so attuned to the laws of the universe that flow like a river through everything that your inner-eye instantly recognizes that if the stock market goes to 50,000, but the average income of part-time assistant school janitors is $600,000 because the dollar has so little purchasing power, how much is the Dow at 50,000 really worth to you?

- Is the economy doomed? Your very question betrays the eternal optimist in you, you little rascal! Perhaps that upbeat attitude is why we all love you so much! Now, tell me, daddy's little darling, does this coat make my butt look big? No? Great!

But, sit down, because this is the part your mother and I were waiting for you to grow up a little before we told you the truth, but there is no Santa Claus. Really.

Oh, now I know you think that all this printing of money and deficit-spending stuff will work out swell, just like on TV. But it won't. And there is no Easter Bunny, either.

But if you want something to feel good about, consider that maybe a decimation of the dollar and the United States economy, and the monumental deflation in asset prices, with destruction and heart-rending suffering everywhere, might actually be a good thing! For example, since foreigners own so much of US financial assets, they may be willing to sell us our own country back to us for pennies on the dollar! Then we can rebuild, giving the world another demonstration of how good ol' American ingenuity, inventiveness, work ethic and winning attitude, can produce a bounty of American profits for American investors for America, until we rule the world again! We can rule the world! Bugles blare! Drums pound a staccato beat! I'm up and marching around the room, hup hup hup!

- There are still a lot of people who are skeptical of gold, and this is because they are skeptical of inflation. Nevertheless, inflation is going to be the next Huge Freaking Problem, HFP, that is going to be "challenging America" or whatever the buzzwords will be.

Since inflation is the "next HFP," how long before "the next HFP " is "the current HFP"? The current estimate, and these probably come from powerful supercomputers around the globe, and manned by rocket-scientist type hotshots, and whose mathematically-precise conclusions and statistically-relevant results are not only gleaned gratis by me, but appropriated wholesale without attribution or even a damn thank-you card for their hard work, but kind of averaged together in a back-of-the-envelope method but without actually using an envelope and given to you gratis, is, may I have the envelope please, not the envelope that we just told you we didn't use but the other envelope on the desk there with the answer in it, yeah, that one, no the one NEXT to that one, yeah, that one, now hand it here, (sound of ripping open the envelope flap), 12 to 35 months.

Inflation WOULD be the Current HFP, but everybody who is simply anybody agrees with the government that talking about it is so tacky, so nobody is upset. Well, I am obviously NOT anybody, and since nobody in the "in crowd" wants to hang around me, or hang on my every word, or send so much as a birthday card then to hell with them, I say, and I don't want to hang around with them, either.

"It doesn't upset the government, and it doesn't upset the press, and if it doesn't upset the weenies who are mismanaging my retirement money," they say, "why should I, as the average bozo on the street who is a hell of a lot more worried about the little daily dramas that are always on the verge of destroying my pitiful little life, give a rat's fat butt? My 401(k) is down over by half, they are re-possessing my car, I'm late with my mortgage payment again this month, the company is slashing the payroll, my benefits package has been pared back, my son thinks he's gay, my daughter is in love with a biker who is wanted for questioning by the FBI, for crying out loud, and you want me to worry about inflation? Get away from me!"

Okay, I'll get away. But as I am leaving I will say, over my shoulder, that the latest CPI showed inflation at over 7% annually. And this is still being treated as "tame," I guess. Even after this news flash came out, bonds were being bid up! Documented, hot-off-the-presses price inflation at the consumer level is running at over 7%, and at the producer level at more than that, and yet supposedly rational people with money are taking positive action to lock in yields that are at multi-decade lows, and for long periods of time up to thirty years, that are about HALF current inflation? And they are selling gold at the exact same time that inflation is proved to be rising, and at the exact same time that the Fed and all the other central banks are creating more and more Frankenstein money? You're kidding me! You're NOT kidding me? You're serious?

This is such a case of cognitive dissonance that I think I have sprained something in my neck from all the whiplash. I'm looking at a library of books about economics, rubbing my neck, and with a single glance I see that there is nothing in those books, all of which is predicated on some theoretical Rational Economic Man, that corresponds with what is happening in the world of finance and economics right now, right outside the damn window! Get up off your lazy keester and go look! Does any of THAT look like anything YOU ever heard about economics? Huh?

Well, if you are at all familiar with my case, doctor, then you know that this is usually what the other professionals call "a precipitating event," and at this point I usually begin pulling out fistfuls of my hair while running down the middle of the street, screaming "This is insane! This is beyond insane!" at the top of my lungs, but with a strange tremolo action in the higher ranges, and then the police predictably respond to neighborhood complaints, sirens blaring and tires screeching, and then I run back home and hide, whimpering in the closet while my wife pleads with them to give me another chance and promises to get my medications adjusted and how she will keep an eye on me, and then they threaten severe action on the next occurrence and then they all go away.

So, whether or not I am shouting it while running down the middle of the street like a lunatic or merely muttering it under my breath while crouched in a fetal position in the warm, comforting darkness of the hall closet, the message is the same: "This is insane."

- I'm suddenly not in favor of invading Iraq. My reason is that the Arabs are watching the dollar go down in purchasing power, and yet they are not increasing the price of oil priced in those dollars! If we invade Iraq, see, then that may have the consequence that the current bunch of economically-illiterate OPEC jackasses who are selling cheaper oil, and cutting their own throats by doing so, may be replaced with some other guys who are NOT so laughably stupid. Retreat! Retreat!

- The action in the options market is one of the weird little indicators that I watch with more than detached curiosity. And lately the derived little metric that I developed, which is pretty good at predicting what happened yesterday, as does most of my work in that area to my everlasting sorrow, has gotten pretty damn weird.

Which, of course, mirrors exactly the weirdness in the markets. The strength in the stock market is to be so surprising that I cannot even believe my own eyes. There is not one good, historical reason to own stocks at anywhere NEAR these prices.

So what is it? Why ARE people buying stocks at these incredible prices? They have driven the P/E of the SP500 back up to 32! I'm standing on my desk waving my arms like an excited and upset orangutan while yelling "32! 32! 32!" over and over at this statistic! After awhile my voice gives out from all the yelling, and then I am finally reduced to making these odd, grunt-like noises, but still three syllables long. Sort of a "Nuh nuh nuh! Nuh nuh nuh!" We are all hoping it is a temporary side effect of some new anti-psychotic medication that I so desperately needed, but nonetheless "Nuh nuh nuh!"

People who think they deserve fawning respect for their education and stratospheric IQs, and who have money to prove how smart they are, are buying stocks that have a P/E of 32? Wasn't I just babbling, with more than the usual amount of foamy spittle on my lips, about how this is insane?

But Martin Weiss, he of the Safe Money Report, gives five, count 'em five, very cogent reasons why they should NOT be buying stocks. He calls them "time bombs" that are tick, tick, ticking away in some corner of the financial universe, and late at night, as you lay there in your bed unable to sleep, and if you are very, very quiet, you can almost hear the almost imperceptible - click - of a detonator.

The first on the list is, as always, the inevitable Number One. In Mr. Weiss's list, this top dog honor on the list of horrors is the Debt Disaster of 2003. The rest of the list, horrors two through five, are the Debt Disaster, the Banking Crisis, The Real Estate Bust of 2003, the Derivatives Time Bomb and lastly, the Japan and Asian Meltdown.

In looking over this list, and although I see that I have a smudge of something in the corner of the page, and as cognizant as I am of the deleterious effect this will have on my billable hours, I rise to my feet and declare "I have no questions of this witness, your Honor."

However, I have a suspicion that it has something to do with the futures market. The abrupt rise in open interest was so fast, one could almost say meteoric, and went to so many contracts, that I am highly suspicious of Dark Forces At Work. I stroke my chin, I raise an eyebrow, and I casually remark, "How curious!"

Try this on for size. The Fed buys SP500 futures, and the maker and seller of the futures buys stocks in that index to cover the derivative bet. They go to the banks for money that is selling at the lowest rates in decades. If the stocks rise, then the futures rise, the banks get a little interest money, and everybody wins. The Fed buys more futures. The sellers buy more stocks to cover, using more money from the banks. The Fed buys more futures. The sellers buy more stocks to cover.

Meanwhile, the shorts are getting whacked with this artifice, and they also buy to cover their shorts and keep from losing any more money, thereby driving the price higher yet!

And why would the government, because in my demented, Orwellian little world the government is behind everything bad, using the Fed as the goon squad, be so manipulative, so sleazy, so deceptive as to rig the stock market? Because shares of companies, and the stock market that deals in them, and the commissions and the fees that are paid on them, and the river of taxes that are levied on them, and the people who own them fund a huge chunk of all governments, and the hordes of people that derive their livings from buying and selling them, and the hordes of people who make a living from managing them and accounting for them, and the retirement of damn near everybody that has been bet on them, and the insurance companies that invest in them to make the money to pay claims, and governments and people around the freaking globe have money riding on them, and, and...

Well, let's sum up by saying that the economy of the USA could not exist without a rising stock market, because so much money, so damn much money, so damned unbelievably, impossibly much money, is riding on stocks. And that is why the stock market is being jiggered to keep share prices high as possible for as long as possible, hoping against hope that some miracle will appear. And don't get me started on that whole $128 trillion in derivatives thing because these new tranquilizers are not quite living up to the promises of the brochure, if you get my drift, and you know how I'll get.

But it is not just a lot of money today. It is tomorrow's money, too. And the day after that! And the week after that! And the month after that! And the year after that! And the decade after that! The number of assumptions that demand an always-rising stock market, and the current spending that is predicated by them, are not working out because it cannot work out, because the very idea that shares would always rise in price and if everybody bought them then everybody would be rich makes me laugh so hard that I can't go on!

Switching to sarcasm, let me just say that it will probably work out just peachy! After all, this is part of the Japanese model, and look how well it has worked for them!

- Speaking of the Japanese, well, let's not speak of the Japanese. Their over-investment in the USA is going to bite them again, poor bastards. But at least they have a trade surplus and a huge savings rate that their government can literally appropriate for their own use, for crying out loud, to fall back on.

- I was planning on doing my part to help the good old USA by spending a little cash on some things that I don't really need, maybe a few things I don't really want, but will admit to not minding if I have one or two of the damn things.

The bad news is that preliminary reports indicate the latest hikes in my bills are apparently eating up all of that planned extravagance, and more. My health insurance hike alone is another twenty bucks a week. And don't get me started on homeowner insurance, gasoline and energy costs rises, and miscellaneous increases in miscellaneous prices of miscellaneous things.

The downside is, of course, that I am not making any more money than I used to, and in fact things seem to be slowing down rather dramatically for me and everybody I know. Except for the government employee crowd, who are complaining how their recent raises were so tiny! And how they deserved, and that was the actual word they used, deserved, more than that. Boo hoo.

So, how does being at the end of a long, bizarre boom financed by irresponsible creation of money by a criminally incompetent Federal Reserve, resulting in pandemic high debts, falling income, a rising cost of a cripplingly-large government, and rising prices translate into a reason to buy stocks? And at prices appropriate to the top of a long and misspent boom? Am I somehow, thanks to fairies and angels, going to take that toxic mix of rotting financial ingredients, whip them into a puree, and, after baking at 250 degrees for an hour, end up with delicious, gooey gobs of extra money with which to buy more stuff, which come from companies, which makes their profits go up, which makes their share prices go up because I will also buy shares, more shares, always more and more shares, with the stack of wonderful, wonderful money? And the government will be rolling in fountains of tax revenue from a re-vitalized economy! Is that the plan, Binky?

And, again, and I feel silly always bringing up this point, belaboring to the point where the words seem to lose all meaning, but where is all of the money to force stocks up like this coming from?

Didn't I just get through a boring litany of my personal financial situation and the implied situation of you and your hoodlum friends? The conclusion that I am drawn to draw, as odd as "drawn to draw" sounds and I think that there is a name for that literary gem, THERE IS NO MONEY TO INVEST.

Look at government tax revenues! They are falling, and have been falling for more than two years!

- Down Argentine way, which I think was also a title of a song or a movie and it seems like it starred, ummm, maybe Bob Hope or Bing Crosby, things are in pretty bad shape.

Over the last year, the currency lost 70% of its value, inflation is running north of 40%, and an estimated 60% of the people are now poor. They also defaulted on their debt and the banks are under state control, which means out of your control, which means that the government has impounded everyone's money.

Pop Quiz For The Day: what is the difference between Argentina and America? Yes, they both begin and end with the letter "A," so you would think that they may have other things in common. For example, they both went into deeper and deeper debt decade after decade. They both grew large governments. They both committed a lot of the same sins.

Now, we get back to my original question: what is the difference between Argentina and America? Basically, nothing, except that most of them speak English with a funny accent like most all them ol' foreigners do. The only real difference is fact that America has not defaulted on it's debts, inflation is not running north of 40% and the currency has not lost 70% of its value. Yet.

This proves that "size DOES matter," and if Argentina had had the foresight to first become the world's largest economy and superpower BEFORE it went weird with it's economy, then everything would be peachy today! Look at us! We are the world champion in Weird Economies, and just look at us!

Mightiness can sustain weird economies for long periods of time. History proves that. But history also proves that mightiness cannot indefinitely sustain weirdness, especially increasing weirdness. Sooner or later the system completely breaks down.

But in the meantime, here's a lesson for all you countries out there who want to have a big, glorious, weird economy without risk; apparently all it takes is to first become a huge superpower, and glut the world with your currency and your assets, and then you can do anything you want, and there is nothing anybody can do about it! Hahahaha! Man, this economics stuff is sooooo cool!

- I read some stuff recently about the ugly demographic trends that are looming, and how us old-timers will be so numerous forty or fifty years hence. Right. Like we thought that it is possible that a smaller crop of young workers to support a growing crop of us old workers in the grand manner.

That's not the way Nature works. The way that Nature works is that a growing population of old, vulnerable, weakened people is actually just a larger food source for things like viruses and bacteria, especially a large population taking lots of medicines that kill the weak viral and bacterial strains, but leaves the stronger strains alive and multiplying.

And that's not the way economics works, either. A rising number of retirees and a falling proportionate number of younger workers is an actuarial nightmare. And let's not forget government as predator! You think Soylent Green as just some far-fetched science-fiction story? Hahahaha!

So, if that that's not the way Nature works and that's not the way economics works, then the future will not work that way, either. So, don't worry. Something will happen. It always does.

The only thing you can be sure of is that it will end badly, because it always does. And that is the way with all things when a government gets involved. Sometimes it ends badly for somebody. Sometimes it ends badly for everybody. Sometimes it ends well for some. But it never ends well for everybody.

- If you have ever read even one paragraph of anything that I have ever written, then you know I abhor and despise anybody who advocates taxation for the purposes of social welfare and redistribution. Such as socialists and communists and Democrats. And, for you history buffs out there, my official story is that I wrote my first scathing denunciation of the U.N. in the fourth grade, which is a laughably obvious lie to anybody who REALLY knows me, but I'm sticking to it because they say that if you tell a lie loud enough, and often enough, then it becomes the truth, and I would like to have something in my obituary other than noting that most people remember me for walking around in a kind of daze and talking to invisible people.

And the reason I heap scorn and derision on these people, often involving rude hand gestures and muttered obscenities, is simple and inescapable, in that government-distributed welfare actually hurts the very people, namely somebody considered to be poor and/or deserving at the time, than it originally helped. And, to add insult to injury, it ends up hurting everyone else, too

But taking money away from somebody's income decreases their desired level for pleasure or power, in Buddhist terms. This usually results in the owner of that income to demand higher prices or wages to compensate. Maybe not this year, but a little more taxation next year increases this pressure a little more. Then the next year, a little more. Then the next year, a little more and a little more and a little more. In a very short time, price inflation eats away any net gain for the poor, and the general population will suffer until all wages and prices rise enough compensate them. And I am here to tell you that the big problem facing the poor is that they don't have enough money. Their pathetic little bit of cash income becomes increasingly insufficient to afford rising prices.

And then when the Federal Reserve makes the whole thing worse, literally debasing the currency by buying up the debt of the profligate Congress that necessitates the issuance of so much debt, then you get big inflation, not just ordinary inflation, but headline-caliber inflation, in something, because all that money has to go somewhere. For a decade up to 2000, the money had gone into financing inflation in stocks and bonds, and redundant production capacity, and a bigger government in both real and nominal terms. More recently the inflation has been showing up as inflation in housing prices and debt creation and, of course, bigger government in both real and nominal terms, proving that some things never change. Fabulous. Just freaking fabulous.

This is nothing new. This is not, I repeat not, new. So it takes a nation of real geniuses like us, strutting around in our smug complacency and showing off our universities and colleges on every corner, to come up with a national philosophy that encompasses the very antithesis of well-established fact and direct, never-fails human history! And then we act so surprised - Gosh! What went wrong? - when it fails again. I maintain, with all the incessant, shrill screeching that has come to replace nails scratching on blackboards as the most detested sound that I can muster up using my hands, feet and orifices, that the poor of today are poorer than at any time in United States history, thanks to the Democrats, and starting with FDR. A pox on all their houses.

I don't fault them for wanting to do good. We all do. But it is the deliberate denial to even look at the overwhelming, evidence that it cannot work, sort of an O.J. Simpson-jury thing on a national scale, that I find indefensible and unforgivable.

And, to make matters worse, they ignore what WILL make the lives of the poor better, which is free markets and free enterprise.

Fortunately, and not only because I am a real stupid guy, but also because I live in Florida, that I have had my vote enshrined in the national conscience as the ballot of a moron. In defense, I am ever-alert to things that smack of taxation for social welfare, to prove to the world, by my condemnation of those that dare utter such words in my presence, that at least one damn person in Florida is NOT a complete moron. About economics, at least.

So a 3/23/03 editorial by Martin Dyckman, the Associate Editor, in the St. Petersburg Times newspaper, my local broadsheet, gives me, perhaps, my nomination for the Year's Best Example of the Leftist Media Showing A Studied Ignorance of Economics. The article is even entitled "Time for a Robin Hood tax remedy." Exquisite! I mean, how perfect! Right off bat we know we are onto something really, really good, by which I mean so entertaining.

The newspaper itself is famous, I suppose, for being laughably Leftist, as I have seen it ridiculed in other Right-wing magazines, probably an issue of the Enraged White Aryan Tyrant Capitalist Warmonger Exploiter Weekly, among others. For example, they hired a black guy named Elijah Gosier, and gave him his own column, to write about, I suppose, the black perspective, which is sometimes lapses to order of whitey keeping the noble black man down. Well, I reading along one day, and I see where the guy boasts in his column that he feels no remorse for smashing in the heads of elderly white people with concrete blocks, simply because they were white. This was several years ago, mind you, and the guy is still there, and they now put his picture of him in the heading of this column, for which I, as an elderly white guy, say "Thanks! Now I'll know who to beware of!", so we have a pretty good idea where these St. Petersburg Times guys lay on the Left-Right Continuum. I mention it because it bothers me and it scares me.

Well, getting back to the point, which was the column with the Robin Hood tax theme, the problem behind the headline is that the state of Florida is feeling a budget pinch, same as everywhere. Hand-wringing ensues. What do we do? Well, for their part, the House of Representatives in Tallahassee is against raising taxes. Now we tune in to Mr. Dyckman's response: "The House line, like the governor's, is that raising taxes would choke off economic recovery. In their view, of course, there is never a right time to raise taxes." Mr. Dyckman's view, by logical extension, is that sometimes the time is right to raise taxes? Or that anytime is the right time to raise taxes? Or, more likely in line with the usual Leftist proclivities, to be as uncharitable as possible, that all the time is the right time to raise taxes? Notice how I am already attacking him mercilessly with sneering sarcasm.

Next he states one of those weird little things that Leftists are prone to say, "But, in fact, the right kind of tax increases could be the best medicine for hard times like now." Intrigued, we stop in our tracks, stunned by the revelation. My ears perk up remarkably like those of a Golden retriever on point. I told you at the beginning how I knew that this was going to be good! The brain reels, and we are anxious to learn at the Master's knee! We mentally cleanse ourselves of impure thoughts in preparation to receiving Great Wisdom, namely, exactly what IS a "right kind of tax increase." Man! Imagine! This is the priceless stuff! This is the stuff that never shows up in economics texts, but only through holy writ, and we are gonna get some right now! Hot dog!

Beyond that, waiting for this kernel of eternal truth to be dropped into my lap, I am bolted upright when I realize that although I have read a lot of economics in my time, and as a result have absolutely no personality, or any inkling about how to interact with real, live people, I am also now rocked to the core with the profound insight that I should have devoted more time to probability theory, as I am overwhelmed by the startling revelation that I have spent thousands and tens of thousands of hours reading economics stuff and not once, never, have I ever read anything that alluded to anything that even vaguely hinted at the barest possibility of the existence, either here or on sub-atomic, quantum levels where even the ordinary, basic laws of physics don't work, of "the right kind of tax increase." I never heard of that! What are the chances? How could I have possibly missed it? What calculator does one use to figure the odds that in all that time, and in all those books, and in all those words, graphs and text all swirling around in some confusing vortex, that I would have completely missed "the right kind of tax"? How does one even start to begin to calculate the probability that I would have missed, out of sheer chance, every reference to "the right kind of tax increases" in all that time? Not only that, but end today, right now, sitting here, I do not have even a clue as to what in the hell "the right kind of tax increase" could possibly be! I am staggered by my own incompetence!

Well, I shall not torture you a moment further, and Mr. Dyckman provides the answer that mere reading of whole libraries could not uncover, and it turns out that the "right kind of tax increase," and be sure and write this down for later reference, is to tax the intangible assets, like stocks and bonds, of the citizens, at two bucks per thousand. These rich people, tainted and vile as they are with the evil hex of money, are the target that the Robin Hood government is, umm, targeting. People that have stocks and bonds are rich, and the poor are justified in robbing them. Or, in more realistic terms, the poor are justified in electing people who will enact legislation that will rob them.

And, in a joyous bounty of theoretical economics riches, sort of a "free gift," we are revealed yet another "right kind of taxes!" This one is to tax services, such as charter fishing trips, which are not taxed here. The essence of the suggestion is to now tax something that was not previously taxed.

This next line is immortal, "No tourist is going to pass up a fishing trip over a 6 percent increase." Oh? I'm willing to bet that fishing trips have been cancelled over less than that! And why didn't the captain of the boat raise his prices himself, saying to himself, "Nobody is going to cancel a fishing trip over a six percent rise in price!" But we will let that just pass, and say, okay, maybe not. But that six percent increase is now the same chunk of change that the fisherman was going to use to get a hamburger and cup of coffee, but no longer has in his wallet. So, no hamburger and coffee for the fisherman, no sale of a hamburger and coffee for the restaurateur, no tip for the waitress, no sales tax on the food, which IS taxed already, blah blah blah.

Of, sure, the recipients of the taxed-away money will be able to buy a hamburger and a cup of coffee, and maybe some of them will take a fishing trip! But are you SURE you want to hang your economic model on that?

So our hungry fisherman climbs back into his business suit, goes home in a huff and raises his prices so that NEXT year he will have enough money to pay for the fishing trip, the new tax, AND still have enough left over for a lousy hamburger and a cup of coffee.

So the poor, who buy the products of the businessman, will pay higher prices. Fabulous. Just freaking fabulous. And, of course the poor are also now priced even further out of the charter-boat fishing experience, due to the higher prices. No birthday present for dad this year! But that is just more of the price you pay for being poor, I suppose.

Mr. Dyckman was, I assume, to embarrassed to say the next words himself, so he quotes a guy named Ed Montanaro, who is, we learn, "until recently was the Legislature's chief economist." Well, we read a quote from the estimable Mr. Montanaro, "The dead worst thing you could do, if you really wanted to wreak havoc in the economy, is to put out of work the people who spend more than they make. And that's exactly what Governor Bush proposes to do."

Now, and you can tell that I am surprised by the way my mouth is hanging open in stunned disbelief, and I am shaking my head in utter loss for words, this guy was the former chief economist for the Florida Legislature? This guy? The guy who just said those words? THAT guy? And he believes that helping people who spend more than they earn is a good thing, even though it raises taxes?

Apparently so! Because we next learn that the phrase "Robin Hood kind tax increase" also came out of Mr. Montanaro's mouth! And whokm are these poor deserving people, you ask. To add a little levity, imagine that Gomer on the Andy of Mayberry TV show jumps up and says "Surprise surprise surprise! It's state workers, contractors and vendors who are poor, Andy! The state is being exhorted to rob the rich on the behalf of state workers, suppliers and vendors!" I'm not sure what our state motto is, but I am pretty sure it is NOT "The people must pay so the state may live!"

And, lest we forget, what about the rich that Robin Hood is robbing? Well, let's just say that an examination of the land registry records in Sherwood Forest would show that the rich up and moved out of Sherwood, as they always do, and they took their money with them, as they always do, the velocity of money through the local economy slowed, as it always does, and incomes fell, as they always do, because the rich did not get rich by being so stupid that they would stand there and let wolves gnaw their legs off.

But, and this is apparently the important part, apparently the residents of Sherwood thought it was all OK because everyone agreed that it was "the right kind of tax."

And just to make absolutely sure that you get my point, in case you could not detect the poisonous, toxic level of bitter sarcasm, nor infer it from the complete disrespect and loathing contempt I have for the tax policies and economic know-how of Mr. Dyckman and his pea-brained and inept ilk, which is such a low-brow slur that I am almost ashamed of myself for stooping that low, is that there is not, not now or ever, never a good time to impose or raise taxes, and there is not, not now or ever, anything that can be called "the right kind of tax increase." All taxes are bad, and always have very bad eventual consequences for every member of the economy, and thus should only be imposed as a last-ditch, all-else-has-failed, emergency measure concerning public safety, and only in those cases where failure to fund another deadweight burden of more government activity would result in death and devastation over a large segment of the population.

And since I am busily heaping disrespect on Mr. Dyckman, the St. Petersburg Times, Leftist trash everywhere, and the whole idiocy known as the Democrat Party and the brain-dead rank-and-file morons who infest that puerile pustule of a political party, which started out as a short alliteration but wound up with something sounding oddly stupid and ridiculous, that would unbelievably hew to such transparently stupid philosophies.

And since I am on the subject, I show that it is part of whatever mental illness syndrome that I suffer from when I cannot, will not, pass up the opportunity to throw in a little gratuitous disrespect for the embarrassing and loathsome Bill Clinton, and anyone who voted for him, to serve as a sort of coda to round out the whole stinking pile of rude, festering goo. Ugh.

--- Mogambo Sez: The recent fall in the price of gold is a gift to you. Walk over and pick it up. One day soon you'll be glad you did.

Richard Daughty is general partner and C.O.O. for Smith Consultant Group, serving the financial and medical communities, and the writer/publisher of the Mogambo Guru economic newsletter, an avocational exercise the better to heap disrespect on those who desperately deserve it. The Mogambo Guru is quoted frequently in Barron's, The Daily Reckoning, and other fine publications.


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