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Gorilla Investor Mogambo - Richard Daughty - on central banking schemes, the Internet effect, silver, gold, and more
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. With precious metals beginning an approximately 15-year bull run, Richard seems to show less and less patience for financial business as usual. He urgently wants everyone to understand that a sea change has taken place in the investing climate and that the 2000s are apt to be more like the 1970s than the 1990s. 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: Thanks for spending some time with us. Mogambo: Thanks for inviting me, as it is an honor to be here, but I thought there was going to be an open bar. Daily Bell: Why are you shaking like that? You need a drink, or are you just upset? Mogambo: Thanks for asking, but it's probably nothing. Maybe the open-bar thing. I dunno. Or maybe it's because the Federal Reserve is creating so impossibly-much money and credit, which is a Frighteningly Bad, Bad Thing (FBBT), because inflation in the money supply leads to inflation in consumer prices, and I, like everyone I know, am already sick to death of paying the constantly higher prices of the Fed's previous monetary excesses, and I am sick of listening to my wife and kids always whining and complaining, yammer yammer yammer, about how they need more money, more money, more money, always more and more money, because things cost more money, and deep down in my writhing, churning guts I can feel a big showdown coming, sort of like in the movie "High Noon" when everybody is nervously waiting around for the train to arrive. Daily Bell: Is it true you grew up in Africa, raised in the wild and nursed on the teat of a great gorilla? Is this why you find the ways of Western governments so incomprehensible? Mogambo: Well, it could be true, I am not sure. It would certainly explain why I am very attracted to Maureen O' Sullivan in the early Tarzan movies, though! The truth is, I'm afraid, much more prosaic; I was always told that we crashed our Galax-O-Cruiser flying saucer, with the snazzy twin hyper-drive anti-matter plasma injector engines, in Roswell, New Mexico in 1947, and have been waiting for the Mother Ship to rescue us ever since. As for the incomprehensibility of governments, the only thing that I find Totally Freaking Incomprehensible (TFI) is the willingness of voters to persistently elect ignorant, stupid, blowhard, corrupt, self-aggrandizing, vindictive, scheming little dirtbags to government, over and over and over, who predictably require the over-issuance of a fiat money by the Federal Reserve to keep interest rates from rising thanks to all of the massive, unbelievable government borrowing and deficit-spending otherwise sucking up all few remaining dollars in savings, which always ruins everything with the inflation of consumer prices that always follows an excessive issuance of money and credit. Now THAT'S incomprehensible! Daily Bell: Why is that you were able to see the crash of 2007 as far back as the beginning of the decade when the greatest of economic minds, such as Ben Bernanke's, drew a blank? Mogambo: Because we follow two different theories. I have the Austrian school of economics, and they have some bizarre theory I call neo-Keynesian econometric trash. And whereas I have the Austrian school of economics and the entire economic history of mankind as indisputable proof of it, the Federal Reserve has only computers, equations and total failure. Thus, it was child's play to see disaster coming if an idiot like me saw calamity coming since at least 1997, which is when the horrid Alan Greenspan, then chairman of the loathsome Federal Reserve, really started creating money and credit in whole giant multiples of what he had the Fed dribble out in the previous decade. From 1997 on, it was a relentless $10 billion-per-month increase in Fed Credit (the stuff that appears as if by magic, but actually by pushing buttons on a computer) on the books of the banks, which is "money available for lending", which then becomes huge multiples of that money (thanks to the fraud of unrestrained fractional-reserve banking) when someone borrows it from the banks. It was a constant "money from thin air" scenario! How could one NOT see disaster ahead when the entire history of economics is this same story, over and over! I mean, it was beyond incredible! And every week I expected to start seeing reversals, but I never did! Instead, it went on and on, week after week, month after month, year after year, fostering unbelievable, incomprehensible amounts of debt to create monstrous, unbelievable bubbles in the stock market, bubbles in the bond market, bubbles the housing market, bubbles in the derivatives market and bubbles in the size of governments as everything just kept on growing bigger and bigger as a result of all of this outpouring of money from the Federal Reserve! And that is when I really started buying gold and urging everyone else to, too, but did they listen to me? NoooOOooo! Instead of saying "Thank you, Wise And Wonderful Mogambo (WAWM) for the fabulous advice!", it was always something negative like "Mogambo is a big fat stupid head!", or the incessant "Mogambo is a creepy weirdo!" or even such classics as "Mogambo is a thieving pig who took my slice of pizza and he's trying to stuff the whole thing in his mouth at once like nobody is going to notice!" Daily Bell: Tell us more about your upbringing and background. Mogambo: Well, beyond the obvious pizza deficiency that I am still trying to correct in the only way I know how, it was pretty normal in that nobody could tell anything was wrong with me just by looking at me. The rest of the Story Of The Mogambo (SOTM) will be in my new book titled "How the Federal Reserve Totally Ruined America (TRA) by their incessant creation of money and credit, especially since they did it so that the ridiculous 'free lunch for everybody' government could borrow it and spend it, and people could borrow and spent it, and businesses could borrow and spend it, and everybody could borrow to spend it to invest in the businesses that borrowed and spent it, all combining into these Huge Freaking Debts (HFD) to finance Huge Freaking Booms (HFB) in stocks, bonds, houses, derivatives and the size and cost of government that are sure to destroy us all when they inevitably, unstoppably collapse, and which all could have been easily avoided completely, and delivering a higher standard of living to everyone, by merely insisting that the money supply be the relatively constant supply of gold and silver coin, like the Constitution of the United States actually requires, but their destroying America with vast, irresponsible expansions of the money supply is why I hate them all and perhaps why I take such perverse glee in buying gold, silver and oil with which to make a lot of money by massively capitalizing on the collective stupidity and ignorance of a nation too stupid and ignorant to follow its own Constitution, learn from history or even use common sense." I can see by your face that you are getting ready to helpfully tell me that the title is too long and unwieldy to attract a publisher willing to give me hundreds of thousands of dollars in "up front money" or even answer my calls, so save your breath, brother. I'm way ahead of you. But thanks for trying to help! Daily Bell: We are sure it will be a screaming success. When did you decide that the mainstream wisdom about the economy was nonsense? Mogambo: In a classic example of "sour grapes", I decided it was mostly a Giant Load Of Crap (GLOC) after long and laborious study of economics textbooks and graduate-level courses in equation-laden macroeconomics, which turned out to be an exercise in frustration and failure for me, as I intended to use macroeconomic insights as a tool to gain a little edge in my speculating in the index options market, which was not going as well as I had, ummm, planned. This new failure naturally reinforced my poor self-image as a creepy, weird, paranoid, gun-nut, lowlife worthless bastard who is, unfortunately, not as smart as he thinks he is and who is going to regret his perpetual arrogance and lazy worthlessness by continuing to fail and lose everything. Just like always. In my gloomy depression at yet another personal and professional failure, offset only by constant denial and a sunny optimism that I failed because unknown people or cosmic forces were "out to get me", I looked elsewhere for kindred spirits who likewise disdained this neo-Keynesian econometric crap, still desperate to find answers to my main, persistent, nagging economic question, which is twofold, with one part being "What in the hell is going on?", which is immediately followed by "How can I use it to make a lot of money by investing so that I do not have to go to work, or actually do work of any kind, hopefully not even expend energy to get up off of my Fat Mogambo Butt (FMB) at all, except to go to the bathroom, if then, depending on how rich I am, so you can see I am talking about making a lot of money!" That is when I finally, fortuitously, and felicitously ran across the Austrian school of economics, and suddenly -- Eureka! --it all made sense at last! Thank you, Ludwig von Mises, Murray Rothbard and Henry Hazlitt! Daily Bell: Are central banks the fundamental issue? Mogambo: By your question, I can see you that understand the Austrian school economics! Congratulations! I am very proud of you! So you know the correct answer is "You bet your sweet butt they are the fundamental issue! Without the Federal Reserve creating the money and credit to finance government deficit-spending stupidities, stupidities wouldn't get financed at all!" Daily Bell: What do you think of the current economic crisis. Are Western countries handling it well? Mogambo: How do I like the crisis? In the immortal phrase of Native Americans, formerly known as Indians, in their native language that I learned from watching a lot of TV, the crisis is "Heap bad medicine!" And are countries handling it well? Hahaha! Sure they are! Similarly, you laugh and crack jokes the entire time that you are sinking in quicksand, too! And to use this opportunity to satisfy some bizarre psychotic compulsion to demonstrate a smug arrogance that knows no bounds and which typifies The Way Of The Mogambo (TWOTM), I will say that this "quicksand" analogy is particularly apropos to the situation at hand, and that in years to come, perhaps decades from now, you will remember this interview and you will say to yourself "Wasn't there some guy I interviewed one time who compared the economic catastrophe befalling us at the time to drowning in quicksand? Wasn't his name Mo, or Moga something? Well, it doesn't matter who said it, but it turns out that it was the perfect analogy, and he deserves a prize of some kind!" Daily Bell: Prize? How about a few rounds of Mass Bier at the Zueghauskeller? But you must finish the interview first. Towards that end, do you believe in the bailouts taking place in America? Mogambo: Believe? Hahaha! Was it not Mister Spock, of the Starship Enterprise, who said "I believe because I see the evidence"? But do I believe the bailouts will work? Well, one cannot easily dismiss the effects of a one year's federal budget deficit of a gigantic $1.8 trillion, and projected total federal spending of almost a whopping $5 trillion when inclusive of all future Supplemental Appropriations that Congress habitually sneaks in through the fiscal year. And one cannot easily dismiss the effects of all of those trillions of dollars of government spending in a $14 trillion economy being accommodated by a Federal Reserve willing to create as much money as anyone, or any government, needs or wants, which will balloon the money supply, which is what caused the problems in the first place! So, if you are asking "Do you believe the bailouts will it make the problems worse?" the answer is "Yes!" Daily Bell: Can you explain the genesis of the financial crisis? How can it be ameliorated? Mogambo: Sure I can explain it! That's the easy part! It's because it's all the fault of the demonic Federal Reserve creating the massive amounts of new money and credit to accommodate massively increased private, business and governmental deficit-spending over the last few decades! Without the money to pay for everything, and without the insane borrowing at the Fed's rock-bottom, less-than-the-rate-of-inflation rates that compelled people to borrow, which created the money out of bank credit, you can't have crazy booms that later bust and destroy everything! And as for amelioration, excuse me while I laugh the scornful laugh that has become known as the Loud And Sardonic Laugh Of The Mogambo (LASLOTM), because there is no way to painlessly reverse the bust that follows an inflationary boom, especially a boom caused by a big expansion of fiat currency. And this goes doubly-especially for an inflationary boom that came from a government's constant deficit-spending of a big expansion of a fiat currency, because if there was a way, in all of the thousands of years of the sordid history of dirtbag governments borrowing and spending too much and then desperately seeking this same "solution", someone before this would have thought of it! And since there is no cure, the only solution is to prevent getting the disease of "government borrowing and spending too much" and which, in the case of a deadly economic collapse caused by massive over-creations of money and credit, a gold standard provides the only vaccine that has been proven to work. Now you see why I am distrustful of government and their attempts to fix things by expanding a fiat currency to pay for the solution to the problems caused by expanding a fiat currency! Hahaha! Daily Bell: You speak often about gold. Where does silver go from here? What are the best investments to make throughout the business cycle, and do they change over time? Mogambo: Silver? I am glad that you brought up the subject of silver! I consider silver to be one of the most undervalued assets in the world. It has unique, indispensable properties in things electrical, a persistent fundamental excess of world demand over supply being met by dwindling dis-hoarding of previous "strategic stockpile" stores of physical silver, and which is not to mention a surprising-yet-stupid acceptance of "paper silver" by investors, which are only promises of silver and which in total is equivalent to a gigantic short position that is whole multiples of all above-ground silver in existence in the Whole Freaking World (WFW)! And then there is the compelling case of a staggering gold/silver ratio of 68, which is so out-of-whack to the historical ratio of about 16 that silver would have to rise from its current $14 an ounce to $60 an ounce just to get back to the historical average of the ratio! And all of this completely disregards the growing need of silver by China, comprising a third of the world's population, which is rapidly expanding and whose workers and growing middle class are going to want electricity and all the wonderful electronic things like televisions and computers and stereos and washing machines and central air and heat and refrigerators and dishwashers like all the stuff we have which used up all the silver, all of which require silver in their manufacture. And all of this together is what makes silver such a fabulous, fantabulous, flabjabjabulous "Buy! Buy! Buy!" Daily Bell: We believe central banking as we know it is over. The Internet has blown it up. Mogambo: Well, you may be right! And I hope you are, but there is too much money, too much debt, too much power and too many catastrophic ramifications weighing on the political side of keeping everything going along smoothly, smoothly, smoothly by having the Federal Reserve continue to create all the money anybody thinks necessary, which is the money that the government desperately now needs to spend as part of its bizarre Keynesian mandate to "replace private spending" now that nobody can afford to buy anything since everyone and everything are up to their ears in debt. So, the end of central banking? Not to be rude, since you have been so nice to me except for, you know, redeeming yourself by offering the Zueghauskeller for the mis-step on the open bar thing, but who is going to stop them? You? Hahahaha! By doing what? Shooting your mouth off? I tried to do that, and I raised the hue and cry for Austrian economics and Constitutional sanity in my Mogambo Guru newsletter at DailyReckoning.com for years and years. And what happened? Nothing! The Federal Reserve is still there, but you should see what happened to my lawn mower (it mysteriously stopped running after only twelve years!) and two -- count 'em, two! -- garbage cans ruined by someone running over them with their car! And since the police won't do anything, and there are no clues, evidence or eyewitnesses making it all too convenient, this shows it's all a government hit job. They'll get you, too. I rest my case. Daily Bell: Thanks for the heads up! We believe the Internet is as powerful as the Gutenberg press, and will have as much impact. Agree? Mogambo: The Internet is far, far, FAR more powerful than some dorky Gutenberg press! Why? Because, as you yourself imply, of the difference in impact in the short few years it's been around! I mean, what did Guttenberg and his clumsy moveable type accomplish in 20 years? Mostly squat! A few books scattered here and there. Now look at the impact of Internet over the last 20 years! Almost infinitely greater! Daily Bell: What are the most important - seminal - articles of yours that you would encourage everyone to read? Where can they be found? Mogambo: Well, thanks for asking, but the most memorable Mogambo Guru article would be the one with a lot of almost-homicidal hatred and vengeful animosity towards the Federal Reserve for creating the excess of a fiat money because it produces inflation in consumer prices, plus a disgust with the White House and Congress for taking advantage of a stupid fiat currency and amassing monstrous, un-payable debts to grow a huge, cancerous government apparatus, plus a nasty contempt for the Supreme Court for infamously ruling in 1933, a ruling upheld by every Supreme Court since then, that money did not, contrary to what the Constitution requires, have to be silver and gold coin, and instead could be a filthy fiat, "paper and bookkeeping entry" currency that could be expanded literally at will and without limit, and a profound loathing disrespect for the American electorate, the schools and the news media whose shocking ignorance, incompetence, stupidity and sloth actually encouraged this stupidity to continue unabated down the road to the economic hell that we so richly deserve. Now that I think about it, this is the only theme in all my stuff! Hahaha! Daily Bell: On behalf of all of our readers we thank you for sharing your views with us - and for your courageous and important work. Mogambo: And thank you! It was wonderful to be here except for, you know, the open bar thing. But I may take you up on the Zueghauskeller thing! |
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The editors of The Daily Bell are pleased to present this exclusive interview conducted by Scott Smith with Gorilla Investor Richard Daughty, the "Great Mogambo Metals and Money Guru."