Government and Economy Decline In Tandem


I did not hear it, but I read that Ben Bernanke, chairman of the satanic Federal Reserve, admitted that “Our nation’s fiscal position has deteriorated appreciably since the onset of the financial crisis and the recession.”

Well, neither he nor the Federal Reserve are going to take any of the blame, even though they are solely responsible, and he says that the problem is the government’s fiscal position, as “The exceptional increase in the deficit has in large part reflected the effects of the weak economy on tax revenues and spending, along with the necessary policy actions taken to ease the recession and steady financial markets.”

No mention, of course, of the crucial role of the Federal Reserve, which was to create the money to create the boom, which created the bust, and now to create the money to bail everybody out so that we, as a nation, would have time to leisurely wait for some miracle to happen, sort of like at the end of old Grecian dramas where the plot has become so impossibly and hopelessly tangled up that the only solution was to resort to a “deus ex machina,” which is when a supernatural power comes roaring in and magically fixes everything, applause, applause, applause, curtain comes down, the actors take a bow and everybody goes home happy.

As if waiting for a deus ex machina was not enough, Bernanke then contradicts himself. In the first paragraph when he said that the fiscal position of the nation has “appreciably deteriorated,” which is code for “We’re Freaking Doomed In Spades (WFDIS)” because the American system of governments IS the economy!

In fact, the incestuous conglomeration of local, county, state and federal government is now so large that it, literally, is the economy when you combine local government spending and county government spending and state government spending and federal government spending, which collectively now spends slightly more than half of GDP! Half! And taxpayers pay them to employ 1-out-of-6 workers! And government supports half of the population consisting of the old, young, infirm and needy or greedy in some way or another.

Therefore, I postulate that since government, and those who depend on government spending, is the majority of the population, if the government is not doing well, then the economy is not doing well.

This is like when you were a kid and you learned that when mom isn’t happy, then nobody is going to be happy, or, if you are an adult, when the boss isn’t happy, then nobody is going to be happy, which happened to me just last week when my boss was waiting for me, in my office, when I dragged myself back from lunch two hours late, stinking of beer and pizza, mostly because I had dribbled a lot of each down the front of my shirt and pants.

For some strange reason, probably indicating drunkenness and/or mental illness, I decided, on the spot, that a good offense was preferable to a good defense. So I said to her, “What in the hell are YOU looking at?”

Well, it made her unhappy, and she subsequently made me unhappy. And while I am always ready to use things like this to prove, as if any more proof is needed, that people are naturally hateful to me and they are all out to get me, in this case I will merely use the point to prove that when the government is not happy, the economy is not happy, although this is immediately contradicted by that moron Ben Bernanke, of the Federal Reserve, who says that the economy is recovering! Hahaha!

In fact, he said that not only is the economy recovering, but it will continue to recover! Just listen to this: He actually said, “As the economy and financial markets continue to recover, and as the actions taken to provide economic stimulus and promote financial stability are phased out, the budget deficit should narrow over the next few years”! Hahahaha!

This makes me laugh out loud – hahahaha! – at the humorous, “Theater of the Absurd” quality of saying such a thing, sort of like Pollyanna on steroids and antidepressants! Hahaha!

Then he goes on “Even after economic and financial conditions have returned to normal,” which is a point in his remarks where I just couldn’t take any more of that crap, and my mind leapt to add “In your freaking dreams, Bernanke! Show me one time in all of history where some dirtbag government and its half-witted populace bankrupted themselves with printing, and then borrowing and spending, too much fiat money, for too long, and how printing, and then borrowing, more fiat money fixed everything! Just one! Hahahaha!”

Naturally, he does not acknowledge my rude interruption, and goes on, as if I was not even there, ignoring my rude taunting, by saying that it is still the government’s fault for borrowing and spending all the money that the Federal Reserve created, and that “in the absence of further policy actions, the federal budget appears to be on an unsustainable path. A variety of projections that extrapolate current policies and make plausible assumptions about the future evolution of the economy show a structural budget gap that is both large relative to the size of the economy and increasing over time.”

And what he will do is print the money the government needs, which will cause terrifying, bankrupting inflation in consumer prices, which should lead me to say that buying gold, silver and oil are the only things that will let you keep up, and probably make you a fortune in the process.

And sure enough, it did lead me there! Whee! This investing stuff is easy!

The Mogambo Guru
For Money Morning Australia


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64 Responses to “Government and Economy Decline In Tandem”

  1. Abby

    sorry – that should be “sensible” alternative…

  2. cb

    hahahaa, Abby, now you are provoking me to shoot from the hip, as it were, but so be it:
    – 1. No, I agree with you that property should be valued in terms of actual, or equivalent imputed cashflow it is able to generate. I say that it should be in the sense of it being a good idea.
    – 2. But the fact that it is often not is ignored at one’s own peril.
    -3. As for the question of how in fact it is being valued, in terms of the things that people, and especially the buyers, factor in when determining a market price that they are willing to pay for a property is probably very complex, and in many cases rather idiosyncretic, particular to the individual’s tastes and unfathomable quirks. But I will think about it a little more, as the subject is indeed most interesting and well worth pursuit.

  3. cb

    hahaha, lol, Abby, I have just finished reading the rest of your post. You make me chuckle, … it sounds as though we are nearly there, and only one more step to win you over completeley, ON HOUSING!!!! ahahahhaaaa

    I am only kidding, of course, but allow me to have a hearty go at it, anyhow. But the first step has to be a disappointment to you. I am not a housing bull, and I agree that our housing prices are bordering on the insane. So there you go, I cannot win you over, because I am already sitting in your camp on that one.

    Where we might still have a chance of a meaningful debate concerns the question of bubbles, and whether Australian housing is or is not in a bubble that is on the verge of an imminent POP, and whether in fact it is going to go POP.

    I am not quite sure where you stand on these questions, but I, for one, remain a sceptic, and a self-declared ignoramus who does not know. There are many things that could collapse our insane prices, and goodness knows that they would have a very long way to fall. But at the same time, I do not see any of those clearly identifiable factors kicking into high gear here, all but making a massive fall inevitable.

    You mention Steve Keen, and the example is indeed highly relevant. Keen’s model is becoming shinier by the day, and his faith in it remains unshaken, notwithstanding lost bets and other glaring evidence that it does not work. He sees no room for such doubts about an inevitable crash as I happen to harbour.

    His approach is very typical of what you find in academia, and it used to drive me to distraction. Clever academics develop their neat theories and polish, defend, and nurture them like their very own dear little babies, and it phases them little that observable facts and reality pronounced them dead and retarded upon arrival. But such is the human psyche that we tend to hate with a passion being wrong, and we would more readily declare reality to be wrong than face that reality and admit that, we, in fact, were wrong. It does happen, of course, but it sure is an uphill battle.

  4. cb

    But I should also say about Keen, that I largely agree with the relevance and importance of his work, and the contribution it makes to understanding why and how debt deflation does, and can happen. My only questins concern its reliability in terms of predictive power. At which point a bubble will pop is a mystery, and part of the reason for this is theoretical, in that the very notion of a bubble-, as opposed to fundamentals-based asset appreciation and depreciation is problematic.

    This is what I have been arguing of late, and insofar as my doubts about the bubble- versus fundamentals-based money flows are warranted, any theory employing and relying on this dubious distinction will itself prove problematic. But telling that to an academic in love with his own theory, his own baby, is next to useless. Not that they will mind you telling them such things, as they love debating ideas, and nothing more than defending what they regard their own.

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