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A Mogambo Economic Fable

"The rancher was, alas, bankrupt, and all the stock went to zero value..."

MY SKIN went clammy and cold when I read that over 140,000 people suddenly disappeared from the "continuing claims" rolls of those receiving US unemployment checks at the same time as we saw rising unemployment last week, writes the Mogambo Guru for The Daily Reckoning.

It made me wonder when I was going to be among them, either as a guy who got fired and could never again find a job – and so he collected unemployment checks until his benefits ran out – or as the guy who just literally disappears one day and everyone thinks that the CIA finally "took him out" or the mother ship finally got here from another galaxy to rescue me and take me back to my home planet where the people are a lot smarter in that they have a currency made of gold so that the government cannot increase the money supply, there are no monetary booms and thus no devastating busts, and everybody is happy and living happily ever after, and the beer gives you a really nice sustained buzz, but you can never drink so much that you throw up all over yourself.

But here on Earth, even the unemployed have a stake in the recent bull run of the stock markets, and that's one of those good news/bad news jokes. The bad news is how the stock market is rising stupidly in defiance of reality and all common sense. Whereas a rising stock market is seemingly good news for all those people who have all their entire financial future invested in paper assets that are already showing losses, and for the unemployed who hope to get a job with some of those same companies or companies catering to them.

I can't remember if there is an Aesop's Fable about the folly of putting all of one's eggs in one basket. But there is, fortunately, a Mogambo Economic Fable (MEF) about it.

It seems that, once upon a time, there was this egg rancher who incorporated his operation and sold a lot of the stock to some investors, keeping enough shares to still give him majority control plus a lot of money which was (as they say), "Mostly spent on liquor, horses and women, and the rest I spent foolishly."

For a while, things were fine, but the rancher soon found himself paying blackmail money to suppress some embarrassing, and probably incriminating, photographs of him and several members of a visiting Albanian folk-dancing troupe who said they were women, and who looked like women too, but were really men.

Anyway, by the time the rancher discovered the deception, it was too late to stop, and it turned out to be the episode that launched years of intense psychotherapy, during which time he discovered to his horror that this folk-dancer fiasco thing was just the tip of a really big cesspool of some really weird psycho crap.

To pay the hush-money as well as the psychiatrist, the rancher finally had to sell his egg-gathering baskets. Then, one day, the baskets were all gone except for one last basket. So he used the one remaining basket to gather all the eggs.

About to leave the chicken coop, he was thinking that he needed to buy some more egg baskets. But the price of the baskets was too high, because the loathsome Federal Reserve was creating staggering quantities of money and credit to keep inflation roaring in the inflated stock market, in the inflated bond market, the inflated housing market, the inflated derivatives market, the inflated basket market, the inflated food and energy markets, and the cancerous growth of inflated government – so that these markets would not collapse, not in nominal terms, thus handing a huge, crippling, crippling, catastrophic loss to everyone who owned the paper assets comprising those markets, the result of which would be even MORE inflation in prices, which had already, to the rancher's initial dismay, affected the price of egg-gathering baskets.

But as fate would have it, he found an egg made of pure gold! Now he could sell the golden egg and buy some baskets! The news was, of course, so exciting that the rancher stumbled and fell, and all the chicken eggs in his last, final basket broke, turning the day into a total loss, which just happened to be the "straw that broke the camel's back" profit-wise, and all as a result of mismanagement by the rancher, an accountant that was a cricket, farm laborers that were ants, and the bankrupting burden of constantly-increasing government regulations and taxes.

The rancher was, alas, bankrupt, and all the stock went to zero value.

Of course, the stockholders all ran down to yell at the rancher with their little Munchkin-like voices and waving their little arms comically in the air about how they were now broke and ruined because they had put all their retirement money into the one stock.

And the rancher yelled back that he was broke too, as all his controlling interest in the business was now worthless, and he had long ago spent all the money he received from the initial stock offering on, for instance, partying with visiting Albanian folk dancers and psychiatrists.

Then they all started screaming and yelling at each other, and there was a big fight, whereupon they all started killing each other, attracting the attention of a big, bad wolf that was nearby, huffing and puffing trying to blow down the brick house of three cowering pigs, but he couldn't blow the house down.

So the wolf came over and ate the rancher, all the investors, all the broken eggs and most of the chickens too, before then using the golden egg as a mighty hammer to beat down the door of the pigs' brick house and eat them, too.

The end.

The angriest guy in economics, the Mogambo Guru is Richard Daughty, general partner and COO for Smith Consultant Group, serving the financial and medical communities. The Mogambo Guru economic newsletter – an avocational exercise to heap disrespect on those who desperately deserve it – has been quoted frequently in Barron's, The Daily Reckoning and other fine publications.

See the full archive of Mogambo Guru articles.

 

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