Unfortunately, it’s too late to reverse course for America. President Obama’s spending program is speeding up the collapse, not slowing it down. Right now, 21 cents out of every $1 paid over to the feds in income tax goes to paying off the interest on the national debt. Soon, it will be almost double that amount. It doesn’t take a genius to work out that this is unsustainable.

It doesn’t take a genius, either, to figure out that higher spending and higher debt mean higher taxes and a weaker dollar. Here are just some of the shocking forecasts James makes in this explosive report:

• No matter who you are, your taxes will go up. The government will continue to raise taxes in an attempt to keep its spending programs alive. The Obama administration is already planning to raise corporate taxes, already the second highest in the world. The costs of this will be passed on to you whenever you buy something.
• The US dollar is already being undermined as the world’s reserve currency as US debt holders led by China, Russia, India and Brazil move to protect themselves against dollar depreciation. Soon the dollar will lose its reserve currency status.
• The Social Security Ponzi scheme will collapse. The government will be unable to borrow the funds it needs to replace all the money it has already spent from the Social Security trust fund.
• Interest rates in the U.S. will rise to 6% plus as the government needs to raise the rate to stimulate foreign demand.
• Excessive government borrowing will push up mortgage rates and trigger another leg down in the housing market. Huge numbers of prime borrowers have already begun to default on their mortgages, triggering what is destined to become another wave of toxic asset writedowns at banks.
• The government will default on Social Security payments and Medicare and Medicaid obligations. It will not do so in an open way. Instead, it will fail to accurately index-link Social Security benefits to the cost of living… it will ration hospital stays and doctors visits… and it will deny expensive treatments and medication to state-insured patients (beginning with the elderly)
• The US will enter a long period of economic stagnation coupled with inflation.
• In years to come, the period between 2008 and 2018 will be known as America’s “lost decade.”
• Oil prices fall to $25 a barrel before breaking through their July 11 2008 high of $147.90 a barrel.
• Unemployment rates will rise to 20%.

James is a personal friend. And he’s one of the best thinkers about the global economy we know. Back in 1993, James sent out a similar warning to investors. His forecasts, 14 years before the subprime collapse was ever heard of, were scarily accurate…

· I see at millions unemployed or in make-work public assistance jobs.

· I see millions more homeowners “upside down” – with a mortgage bigger than the value of the home.

· Banking industry problems will prove too big for the government to paper over.

We strongly urge you to read James’s latest report. Of course, he could be wrong. The nearly $12 trillion national debt could just keep on growing to infinity with no serious repercussions for America’s economic standing in the world. The breakneck increase in the money supply since the outbreak of the economic crisis may not trigger a dangerous inflationary cycle. And President Obama might pull a white rabbit out of a top hat instead of increasing taxes to pay for his bloated budget. But we doubt it. As we like to say here at Notes, “Smart investors hope for the best, but they prepare for the worst.”

The Congressional Budget Office (CBO), the non-partisan federal agency responsible for providing economic data to Congress, knows the game is up, too. This from the CBO’s director’s blog:

Under current law, the federal budget is on an unsustainable path, because federal debt will continue to grow much faster than the economy over the long run. Although great uncertainty surrounds long-term fiscal projections, rising costs for health care and the aging of the population will cause federal spending to increase rapidly under any plausible scenario for current law. Unless revenues increase just as rapidly, the rise in spending will produce growing budget deficits. Large budget deficits would reduce national saving, leading to more borrowing from abroad and less domestic investment, which in turn would depress economic growth in the United States. Over time, accumulating debt would cause substantial harm to the economy. […]

Keeping deficits and debt from reaching these levels would require increasing revenues significantly as a share of GDP, decreasing projected spending sharply, or some combination of the two.

We believed in Santa as a kid. But we don’t believe that Team Obama is going to decrease spending “sharply” or otherwise. So “revenues” (aka taxes) will have to rise.  And to soften the blow, you can count on the administration reneging on its Social Security and Medicare obligations.

What Barack Obama and Joe Biden just don’t get is that too much taxation drove the American Revolution. And with the federal government now consuming about 28% of GDP and state and local governments another 15%, tax hikes are inevitable. In fact, they are already here. This from well-known fiscal conservative Pat Buchanan:

Obama plans to repeal the Bush tax cuts and take the income tax rate to near 40%. Combined state and local income tax rates can run to 10%. For the self-employed, payroll taxes add up to 15.2% on the first $106,800 for all wages of all workers. Medicare takes 2.9% of all wages above that. Then there are the state sales taxes that can run to 8%, property taxes, gas taxes, excise taxes and “sin taxes” on booze, cigarettes and, soon, hot dogs and soft drinks.

Comes now national health insurance from Nancy Pelosi’s House. A surtax that runs to 5.4% of all earnings of the top 1% of Americans, who already pay 40% of all federal income taxes, has been sent to the Senate. Included also is an 8% tax on the entire payroll of small businesses that fail to provide health insurance for employees.

One thing you can be sure of is that the world’s economic mandarins are slow to learn from the mistakes of history. This from the Daily Reckoning:

After the expansion comes the contraction. After the bubble comes the clean-

up. After the storm comes the sun.

But what is going on in China? What comes after the biggest export-led
bubble ever? Another bubble?

It doesn’t seem possible. China’s number one customer is broke. It has far too
many factories for those that are left. It should be closing up shop…and
waiting out the bad weather. And yet, China is growing. A combination of hot
money…and hot financial policy…is falling on everyone’s favorite green shoot
like Miracle-Gro. Its trade surplus and foreign direct investment – the usual
source of reserves of foreign currencies – are only half what they were last
year. But the speculators are coming in…and they are bringing cash. This has
boosted Chinese reserves past the $2 trillion mark…and provided the liquidity
for another round of bubble-like conditions. Trading volumes in Chinese
stocks, for example, are running three times last year’s.

The world’s investors and economists think they are looking at the Second
Coming. Chinese growth will power the world out of its slump.
Hallelujah…we’re saved! Things will be ‘back to normal,’ soon. Stocks rose
yesterday in anticipation – with the Dow up.

Daily Reckoning readers are warned: this too shall pop.

Gold’s stellar run up to $850 per ounce, rising more than 24 times over, also came in the ’70s. So gold, therefore, must deliver its strongest returns when the cost of living shoots higher. Right?

Wrong. “In the long run, stocks have thrashed gold as great long-term hedges against inflation,” says Jeremy Siegel, professor of finance at Wharton University, Pennsylvania. What’s more, the eight-year bull run in Gold Prices so far this decade has come against the lowest average consumer-price inflation since the early 1960s.

In short, the common opinion of gold as first and foremost a defense from inflation is wildly amiss. Just look at the last 30 years.

Consumer prices in the United States, even on Washington’s data, have pretty much trebled since 1980. But starting at what was then an all-time high of $850 per ounce, gold simply failed to keep pace. In fact, it dropped half of its purchasing power (monthly data) over that time.

At its lowest point, back in 2001, gold’s loss of purchasing power for US investors reached beyond 85%. The broad S&P index, on the other hand, stood more than eleven times higher, even as the Tech Crash pushed US equities into a nosedive.

Sure, things have reversed a little since then. But not enough to reverse the cold fact of gold’s losses during the long inflation of the late 20th century. How can we square it with gold’s huge returns amid the inflationary ’70s?

“Well,” you might guess, “perhaps gold only responds to rapid inflation – the nasty kind we got 30 years ago, rather than the ‘mild’ case our money has suffered ever since?”

But again, you’d be wrong – or very close to it. Between 1980 and ‘81, consumer price inflation in the US destroyed 17 cents of the Dollar’s purchasing power, a severe depreciation by any reckoning. Yet the Dollar price of gold dropped 40% during that same period. Longer term over the 1980s and ’90s – a truly horrific period of sustained inflation, then averaging 4.6% per year and vicious by any historical comparison – the real value of gold sank by more than four-fifths.

Look further back – even to when physical gold stored in government vaults underpinned the Dollar, just as it underpinned all major currencies – and you’ll find that gold almost always made a poor hedge against rising prices. In the mid-70s, Professor Roy Jastram at the University of California at Berkeley found that gold failed to keep pace with the cost of living during seven inflations in Britain across more than three centuries. In the United States, Jastram spied six inflationary periods between 1808 and 1976. On average, they saw the purchasing power of gold fall by more than one-fifth!

Only the final period in Jastram’s study – beginning in 1951 – saw the metal gain value, and it continued to gain purchasing power for the next 30 years. By the end of 1980, the average annual price of gold had risen more than 17 times over. But right from that top it was downhill for the next twenty years.

How come?

What changed at the start of the ’80s? Two things in short order, which were entirely connected.

First, Paul Volcker – the famously tall cigar-loving chairman of the US Federal Reserve – raised Dollar interest rates to nearly 20%. So secondly, and as a direct result, the rate of inflation sank from that record peace-time spike above 14%.

Volcker’s strong medicine took nearly two years to slow the rate of inflation. But it killed the Gold Price almost instantly. Before Volcker hiked rates – and before he and his successors gained ample room to cut them year after year – “There was a kind of great speculative pressure,” as Volcker since said. The Fed noted how “speculative activity” in the gold market was spilling into other commodities. One official at the US Treasury called the gold rush “a symptom of growing concern about world-wide inflation.”

So yes, people piled into gold as double-digit inflation and collapsing bond prices destroyed their savings at the end of ’70s. And yes, it took a record return paid to cash for the devaluation of money to slow down, allowing a cautious return to risk assets like corporate debt, listed equities and new private ventures – assets whose long-term appeal rests on stable costs and expenses, rather than a speculative guess at how the central bank might set its interest rates from one month to the next.

But now, in contrast, Britain stands on the brink, the United States will likely confirm it on Friday, and Japan’s pretty much there – yet again – suffering the horrors of inflation’s bleak evil twin, deflation.

How come gold just keeps hitting new record highs?

Before the 20th century, short periods of falling prices were as common as scurvy, and just as harmless for the long-term value of money and assets. Indeed, deflation is a good thing, for savers at least. Provided their savings institutions stay solvent. And provided their cost of living actually goes down faster than the value of the assets they’ve saved. Which is not what’s happening today. And that brings gold’s other key feature – the one investors should note if they buy it as a tightly supplied metal that shot higher in price when inflationary panic struck in the late ’70s.

Because fact is, gold also offers a deep, liquid market (if held in its internationally tradable form of large wholesale bars) with no risk of counter-party default (if owned outright, rather than through a trust or a fund or a similar financial structure).

In our debt-deprived world today – where the outstanding value of what retirees and savers are owed is deflating much faster than costs – it’s this attraction of gold…it’s “off risk” advantage…which is fast-gaining appeal amongst large funds and private investors alike.

Inflation and deflation – both a crisis in money – both also force business and growth to give up. What remains, paying zero and promising nothing, is the need to simply store wealth and savings for a better future, whenever it shows.

Source: Gold Amid Inflation & Deflation

Since I think that the stock and bond markets are a big, fat fraud (in that the vast majority of “investors” will get back less buying power than they invested, thanks to the depreciation of the dollar by the despicable Federal Reserve creating so many of them), it is only natural that I buy gold, silver and oil with every nickel I can get my sweaty hands on, and miserly hoard it all until the day when the whole economy falls into the crapper, as it will, because it must.

Up to now, I have bravely and heroically borne the insults and taunts of stupid people in silence (”We insult and taunt you, Mogambo!”), but no more! Now I shall tell them that I am doing this because David Morgan at silver-investor.com says, “precious metals are the only asset class that truly moves opposite to stocks and bonds”!

Well, with the market value of stocks being a zillion dollars, and likewise bonds, how much silver is actually available to move in the opposite direction of these investment losers?

My jaw dropped when he said that “the amount of investment grade silver (bullion and coins) is about one billion ounces. At our $18 per ounce, that is obviously $18 billion to purchase the entire silver supply, including all .999 fine bullion and silver coins!”

In fact, he says, “The total amount of Silver ‘Eagles’ minted since inception (1986) to present is approximately 160 million ounces.”

What is still astounding to me, as James Cook of InvestmentRarities.com says in the introduction to Theodore Butler’s book, Silver in the New Era, is that “Most Americans don’t realize how truly important silver is to industry and how strong the demand is. Nor do they know that the U.S. government, which had over 3 billion ounces of silver in 1942, ran out of silver. Even the national defense stockpile is gone. Over 90% of all the silver that’s been mined in the past 5,000 years has been used up by industry and is gone forever. Today, world silver inventories are at the lowest point in 200 years.”

I naturally have a question; so what in the hell does this mean to me as far as making money? As Theodore Butler himself put it, “Silver’s got it all; worldwide appeal, strong demand and short supply.”

Suddenly I think, “Ahhh! I see! Demand is more than supply, meaning price will go up until demand equals supply!”, at which point I think, “Whee! Investing is easy when you know to avoid stocks and bonds and buy gold, silver and oil instead because you know about the stupidity of the Federal Reserve creating so much money and credit!”

And sure enough, it is! Again with the “Whee!”

And it is not just the Fed that is acting imbecilic, as we learn from the Wall Street Journal, which had a nice editorial piece that included the creepy Democrat trash named Janet Napolitano, who is (so far!) the governor of Arizona. The WSJ writes, “Arizona has been hit hard by the real-estate bust, with the average home value down 17% in a year and a record number of foreclosures. So Democratic Governor Janet Napolitano has devised a clever was to revive the housing market: Raise property taxes”! Hahaha! And people elected this loser? Hahahaha!

And lest you think that this is just a weird little aberration and that people in Arizona are stupid, the editorial goes on “Fairfax County in northern Virginia, Washington state, Chicago and Memphis have announced proposals to increase residential property tax rates to offset declining revenues.”

The bad news is that this will, as if anyone could possibly think different, only make problems worse and houses go down even more in price, as the WSJ goes on to report that The Center for Business and Economic Research at the University of Kentucky found that “between 60% and 70% of property taxes are capitalized into a reduced value of the home”, while Richard Vedder of Ohio University found that increasing state and local taxes also reduces the value of houses, and that “while property tax changes have the biggest impact on housing price changes, other forms of taxation exhibit the same effect.”

Why do these idiot states think that they “must” raise taxes to further punish the citizens? The WSJ sums it up nicely; “State and city government lived well – too well – during the housing boom. From 2000-’07, property tax collections climbed by 62%, two-and-a-half times faster than per capita incomes, according to Census Bureau Data.”

In short, some idiot, conceited, greedy governments had a wonderful time overpaying themselves and starting permanent government programs based on a temporary increase in revenues, all thanks to the horrid Alan Greenspan and the Federal Reserve creating (especially since 1997 when the Fed started really, really, REALLY going el nuts-o) all that excess money and credit to make it temporarily possible, and government parasites want it to continue, even if it kills us!

That tells you everything you need to know about government at any level these days! Hahaha! We’re freaking doomed!

P.S. To get The Daily Reckoning sent directly to your inbox, sign up for our free email newsletter, or if you prefer to use RSS, subscribe to the Daily Reckoning RSS feed.

Editor’s Note: Richard Daughty is general partner and COO for Smith Consultant Group, serving the financial and medical communities, and the editor of The Mogambo Guru economic newsletter – an avocational exercise to heap disrespect on those who desperately deserve it.

Source: Investing Made Simple

Buenos Aires, Argentina June 5, 2008

In 2007, the strong appreciation of the Chilean peso had been the central preoccupation of the Chilean businessmen. In the last few months, active policies initiated by the Central Bank of Chile, coupled with a fall in the international price of copper and a strengthening in the worldwide value of the dollar have noticeably depreciated the value of the Chilean peso. In fact, the Chilean peso is the currency that depreciated the most against the dollar in the month of May.

This depreciation in the rate of exchange must have created a certain level of calm for Chilean businessmen. But while the exchange rate adjusted to the situation, other negative factors attacked the way in which businesses operate. For this reason, businessmen were unable to take full advantage of the improvement in the rate of exchange.

Inflation is perhaps having the worst effect on the Chilean economy at the present time, with a year-on-year rise of 8.3% for the month of April. Meanwhile, the Central Bank of Chile has as its goal an increase of only 3%, with a margin of 1% either direction. While the rate of inflation has been harming the Chilean economy, it has been partially offset by an improvement in the overall competitiveness of the economy.

The issue of inflation is causing Chilean monetary policy to move in a more restrictive direction for the next few months. This is why on May 8, during the last meeting of the Council of the Central Bank of Chile, it was discussed whether to maintain or raise the interest rate from its current level of 6.25%.

Even worse, the price of fuel has continued to rise and it is effecting the costs of production. The price of fuel is continuing to rise, and has already reached its highest level since 2001. Yesterday 120,000 trucks were lined up on a highway in a show of protest over this increase in the price of fuels. The government of Chile had injected $1 billion to create a Stabilization Fund for Fuels. However this has not persuaded the truck drivers to halt their protests.

Chilean businessmen are pessimistic, and with good cause, for they are finding themselves in a time of inflation while at the same time the Central Bank is insinuating that an increase in interest rates would adversely affect internal demand. And to make matters worse, Chile’s problems regarding power have been aggravated in the last few days by the cancellation of gas shipments from Argentina.

It is for that reason that business confidence finds itself at a historical low point in Chile. In fact, according to the Monthly Indicator of Business Confidence (IMCE), the perspective for commerce, construction, industry and mining fell to 53.4 points in May, the lowest level for that month since this registry was created. Logically, the most pessimistic area is the industrial sector for which indicator IMCE showed a value of 47.2.

Nevertheless, in spite of the general pessimism of businessmen, one can still find companies with good prospects for growth. Such is the case with the Empresa Nacional de Electricidad SA, (NYSE: EOC). During the first quarter of this year, ENDESA Chile reported earnings of $77,649 million (U$S 160 million) which represents a year-on-year variation of 44.5% (although principally due to increases that were not the result of operating costs).

Although the operating costs of ENDESA Chile have been affected by the low water levels and the high amount of fuel purchased in Chile, adequate commercial policies and the emergence of highly efficient stock portfolios have created a situation offsetting the effects of those factors somewhat. And all of this allows ENDESA Chile to be in a suitable position not only to face its next challenges, but also to transform them into opportunities for growth.

ENDESA is initiating diverse projects of investment that are mainly in Chile, Colombia and Peru. Also it has planned investment projects in Argentina.

In the middle of January of 2008, ENDESA Chile’s San Isidro II power station closed its combined cycle with a total power load of 353 MW. In 2009, once liquefied natural gas (LNG) is available in Chile, the plant will reach a total production level of 377 MW. The projected figures for the early portion of 2008 serve as an endorsement of Chile’s local electrical production ability. Another important contribution made by ENDESA to Chile’s power supply for the next few years is the installation, this past March, of the N°1 unit of the Taltal power station. This station has a capacity of producing 120 MW of power, using a diesel engine. Additionally, ENDESA is participating in the initiative of the Government to diversify the electrical grid through a project entitled GNL Quintero.

In January of this year, ENDESA signed a contract in Peru with Siemens Power Generation, to install a turbine that produces 183 MW of power in Santa Rosa plant. This project required an investment of approximately U$S 90 million. In Colombia, ENDESA is considering bidding for a public contract for energy and power programs for this year in that market by means of the development of a hydroelectric power station, capable of producing 400 MW, in Quimbo located upstream from the Betania Station. In Argentina, through its branches, Endesa Costanera S.A. and Hidroeléctrica El Chocón S.A., the company has realized an investment of U$S 160 million, that includes a U$S 42 million loan. This means ENDESA has a participation level of 21% of the thermoelectric societies of José de San Martín S.A. and Termoeléctrica Manuel Belgrano S.A. (with each of them producing combined cycles of 800 MW each).

Additionally, ENDESA Chile is a company that has a strong commitment regarding the environment through its development of projects using non-conventional renewable energies (ERNC) through its ENDESA branch Echo. It has a wind power-generating park named Canela that has been in commercial operation since December of 2007 that contributes 18.15 MW to the Central Interconnected System (SIC), Chile’s national energy grid. Also, ENDESA is committed to the acquisition of adjacent lands for the development of an immediate extension of around 60 additional MW to the park.

ENDESA Chile is a good company to bet on as an investment as a medium to long-term addition to one’s investment portfolio.

We will meet again tomorrow,

Horacio Pozzo

Editor’s Note: in Chile, businessmen seem to have been infected by the same mood as their Argentine colleagues. Although the reasons that affect the growth of both countries are almost the same, the origin of the problems and the search for solutions vary. The recommendation of the week. You can send your comments to me at: paola@latinforme.com

I am not the only guy who knows that it is impossible for the vast majority of people to make a long-term profit in the stock market, and in fact the majority of people must show a loss, which I infer from Howard S. Katz of thegoldbug.net, who handily calculates the proof, in that “From 1966 to 1982, the DJI dropped 22% in nominal terms, but correcting for the depreciation of the currency, this was a drop of 74%.” Yikes!

In fact, he says that “if you took the establishment’s advice and bought ‘good, sound stocks for the long pull’ in February 1966, then you had to wait until 1995 to get back even in real terms, and today you have a miniscule average annual profit.” Hahaha!

It took 29 years, and all that inflation, before you broke even? And this does not even account for the expenses or taxes you have to pay? Hahaha! So, tell me: How many people financed their retirement on that that kind of gain? Hahahaha!

Mr. Katz’s title was, “Why I Am a GoldBug”, and towards that he writes, “The 10 year commodity upswing of the 1970s was preceded by a (much milder) easing of money and credit from 1963 to 1971″, which comes out to 8 years, but now “the current commodity pendulum was preceded by a 20+ year easing of money and credit”!

He concludes that the new commodity bull market “therefore has the power to go twice as long. If we date it from 2001, then we can be looking for the ultimate commodity top around 2021.” That’s 13 years from now! A 13-year bull market! Whee!

I can sense that you are wondering “What does this have to do with gold and how I can make a lot of money in gold?”, which is what I was wondering, too. It turns out to be easy; since gold is expected to again be the numero uno commodity in a commodity bull market of 13 more years, he says, “So I plan to be a gold bug until approximately that date”!

Junior Mogambo Ranger (JMR) Jeffrey M. says that since we are talking about gold, in a manner of speaking, the U.S. economy has been in a recession since 2002, since “GDP as measured in gold has dropped from 33.8 billion ounces of gold in 2002 to 19.9 billion ounces of gold in 2007,” which is about a 41% decline! Yikes! That’s a big drop in GDP!

But this makes perfect sense if you are unlucky enough to listen to The Loudly Irritating Mogambo (TLIM) droning on and on, relentlessly pounding, pounding, pounding the same belabored point, which is that “gold rises in value to the extent of the devaluation of the currency in which it is priced,” which has a big, fat QED at the end because this rise in gold that produced the 41% drop in GDP when measured in gold, is perfectly reflected by the 40% drop in the exchange value of the dollar (as measured by the dollar index), which has recently broken below the 72 level, down a similar 40% from about 120 in 2002!

It’s almost magical! I waited and waited for the applause that never, alas, came, and everyone else in class was looking at me with this look of ill-concealed contempt on their stupid faces, which is distinguished from their usual disrespect for me and my Fabulous Mogambo Ideas (FMI), which in turn explains my self-righteous vengeful hostility to them all, which is another, more disturbing, subject entirely, so let’s not go there

I soon learned why they were so unusually antagonistic to me; I had not read the homework assignment like I was supposed to, and they had. Big deal! They did not know that I had to spend a lot of time last night arguing with the wife and kids about the financial benefits of them eating what appears to be a really, really cheap canned dog food imported from some weird country, with a label written in a language nobody even recognizes, thus generating real savings in the food budget! It seemed like a no-brainer to me!

Their ears were, unfortunately, rudely deaf to my helpfully translating the label to prove to them that it will provide adequate nutrition to their stupid lives, especially considering that they don’t need a whole lot of energy to just sit around on their fat butts all day, watching TV and playing video games, talking on the phone with their stupid friends, yak yak yak, about (I suspect) what a horrible father I am, and how much they hate me, and how they are going to kill me by putting poison in my food. You know – the usual.

But I did not have to read the stupid assignment to know that BEA.gov says that in 2002, GDP was $10.5 trillion, while in 2007 it was $13.8 trillion, for an economic gain of 31%, but the punch line is “But you’re a big fat loser (BFL) because the dollar’s buying power went down by 40%! Hahahaha! Loser!”

The class is quiet, too stunned and bewildered to respond. Seizing the initiative, I explain, “Okay. Putting your petty little Earthling grievances and stupid ideas aside for one moment, if you can, imagine that you invested one hundred dollars in the stock market in 2002.”

Most of the class was already bored and confused, and I hated them all the more for it, but I relentlessly droned on, “Now, fast forward 5 years, and I laugh when I notice that the passage of time has not been kind to you! Hahahaha!

“But I laugh even harder to see that you are still stupid, as you happily drool on your brokerage account statement when you notice that you ‘made’ a $32 gain on that original $100 investment, notwithstanding all the money which you had to pay in expenses (of at least 2% a year on ALL the money you have invested, in order to have your account ‘managed’), for a total of about 3.2% of your money, but you also have to pay 15% of the long-term capital gain as a deduction from the $32 ‘gain’, or $4.80!”

By this time, even I was getting pretty confused, but I managed to bluff my way through a little more by saying, “And it doesn’t take a smart-mouth accountant rudely telling you that your records are a ‘mess’, because you are an incompetent boob about accounting, to make you realize that you netted, after all is said and done, a lousy $27.20 on the original $100 investment after five years!”

There were a few impatient calls from the audience to “Shut the hell up! A 27% gain is pretty good!” and “Is there a point to any of this, you Revolting Mogambo Halfwit (RMH)?” To this kind of rude audience response I rudely say, “I laugh uproariously, ‘Hahahahaha!’, at you and your stupidity! But I already knew you were all stupid, or else you would have realized what a warm, charming, and perfectly delightful person I am, a real peach of a guy, a ‘darling’ some would say, but none of you did! Proving that you are all stupid, stupid, stupid! Hahahaha! Stupid!”

Judging by an onslaught of spit and obscenities hurled at me, I knew I had hit a nerve with them, so I helpfully went on, “And to show you the price of your stupidity, the buying power of the whole $127.20 wad, including both the original $100 investment and the $27.20 net gain, has lost 40% of it’s buying power! This leaves you, the idiot ‘investor’, with a measly, pathetic $76.32 in real, inflation-adjusted 2002 buying power! Less than you invested!”

They all inexplicably shut up, obviously confused, which made me laugh all the louder. I patiently explained, “You invested $100 in 2002 buying power to get back, after five years, $76 in 2002 buying power! Hahaha! Your ‘fabulous’ investment made a paper gain, but produced a real, inflation-adjusted loss of 25% of your money! Hahaha!”

My voice dripping with acid and sarcasm, I smile and say, “Nice investing there, Mister and Ms. America! You can fund a REALLY nice retirement by losing 25% of your buying power every 5 years! Hahaha!”

Well, JMR Jeffrey was apparently not ready for my scathing criticism, biting humor, witty asides, clever rejoinder, or Raw, Seething Mogambo Hatred (RSMH). Trying to quickly defuse the situation, he adds that “The situation is even worse in terms of silver”, in that GDP measured in ounces of silver went from 2276.5 in 2002 to 1034.2 in 2007. A 54% fall in GDP in 5 years! GDP declined by over half!

I howl in fear! I howl in dismay! I howl in outrage! OwwwWWWWWwwww!

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Source: Howling at the Moon