"And if the yuan is 40% undervalued…this means that if oil were to miraculously stay at $80 a barrel while the yuan strengthens by 40% against the dollar, then the price of imported oil will go down for the Chinese by 40%!"

I am becoming quite unnerved by the fall in the value of the dollar, as I know that it is only a matter of time before the falling buck affects the price of imports, and especially imported oil when priced in dollars, and in an energy-dependent economy like we have, oil going up in price means energy costs going up, which means business costs going up, which means retail prices going up, which means inflation in prices, which means that a heap of big misery is in store for us.

And all of that graciously assumes that global demand for oil will not increase, which is a stupid thing to think because China's General Administration of Customs reported that China alone imported 39.3% more crude oil in July than it did this time last year! Not only that, but Liquefied Natural Gas (LNG) imports soared five-fold, too! 500%!

My God! These are unbelievable increases in consumption! And if the yuan (CNY) is 40% undervalued - as is commonly read in the popular press - this means that if oil were to miraculously stay at $80 a barrel while the yuan strengthens by 40% against the dollar, then the price of imported oil will go down for the Chinese by 40%! Wow! The cost of oil would be almost cut in half for the Chinese! Wow! Talk about an economic stimulus and an inflation-fighter rolled into one!

And even if it were possible to hold the price of oil at $80 per barrel through some kind of magic, an editorial in last Tuesday's Wall Street Journal reports that "Energy bills moving through Congress tax oil companies", so that about $25 billion more is going to be wrested from them, which will be given to "wind, solar and Midwestern biofuels companies", which means that the oil companies are going to raise the prices of their oil and oil products enough to recoup this new $25 billion tax! We're freaking doomed!

So how much was the actual increase in China's use of oil? A lot! China's crude oil imports in July hit a record monthly high of 3.5 million barrels per day, which means that another 40% increase in oil imports would have them importing 4.9 million barrels a day next year, and 6.8 million the year after that!

The importance of this is that we Americans are no longer exporting inflation with our strong dollar, and the tide has just started turning. The "tide" imagery is intentional, as this is not only an apt description of the inflation that is starting to swoop down upon us, but I am happy to report that this also describes part of the script of my next film, which is going to be XXX-rated. The working title is, "The Sins Of The Flesh And The Pain Of Inflation!"

The gist of this groundbreaking cinematic masterpiece is that The Mogambo is being slowly carried down the beach to the water's edge by a whole crowd of naked, writhing, beautiful demons, leisurely following the retreating tide, as the water's edge moves gently farther out into the warm, blue sea. Each actor and actress has, beyond a complete lack of shame, a small weight of debt chained to them at the ankle.

The movie is the story of how along the way, all kinds of weird, sensational XXX-rated stuff happens concerning The Mogambo getting kinky while being pleasured with a whole wicked cornucopia of goods and services by the attentive demons, individually or in concert with slavering, panting others, for which The Mogambo pays by taking some of their weight and adding it to his own.

On and on it goes, each scene more gratuitously obscene than the last, salacious debauchery piled upon fresh fleshly outrage, the crowd of sordid revelers inexorably traveling outward towards the beckoning retreating tide, until finally the crucial moment when I calculate that the excesses of raw degradation will finally cause the mind of the average theatergoer to rebel in horror.

The audience members, finally overcome with revulsion, involuntarily think to themselves, "Bah! This is sick and twisted, filthy garbage! This filthy-minded man should be in prison! I cannot watch another minute of this disgusting trash!"

It is at this precise point that the movie draws to its exciting climactic moment, which is that the ball of debt fastened to my leg has now grown so big that I cannot move it alone, and (with a soundtrack of a distant gong tolling out a dirge of death in a deep rumbling tone) the tide of inflation starts turning! The water stops going out, and is now coming in! And I am alone because my heretofore slavishly attentive demons, who have condemned me by granting my every wish so that I might assume a weighty debt, are running away!

My big dramatic scene is when the camera pans in for a slow-motion shot of my big, lazy, lopsided grin of extreme satisfaction as it is replaced by a look of profound horror when I see the oncoming tide rushing towards me, and the waves begin to lap around my ankles! I frantically spin around to see the beach a long way off in the distance, with the high-water line above my head, and the shot zooms into a close-up of my terror-stricken face! The soundtrack has big, booming gong sound! Gooonnnngggggg! I scream in horror! Another gong! Another scream! Gong. Scream. Gong. Scream. Slowly fade to black and silence.

I wait for the applause, but Byron King of Outstanding Investments is apparently not a movie fan, and apparently cannot appreciate the staggering genius of my new film, and merely says, "Many news reports attribute the recent rising prices for oil and gold to tensions in the Middle East. This may, in fact, be the immediate reason why the prices for oil and gold are rising. But this reason is far too facile, if not convenient. The root cause is the declining value of the dollar."

I look to Goldmau.com, but they, too, are unimpressed with my new movie, and say that the decline in the dollar means that "Gold and the RMB's rise will be the final chapter to the dollar's status as the world's reserve currency, and the end to an era of low priced Wal-Mart goods made in China. Welcome to the American Peso."

So I took their own words, added some gong sounds and some screaming, and then faded to black. I don't think they liked it any better. But then, drowning in inflation is never going to be popular. Ugh.

Mogambo sez: Tonight's homework assignment is to take two lousy minutes of your wasted, dissolute life to devise two easy trading methodologies to capitalize on the proposition that "The dollar will keep falling long-term, and that means that gold and oil (and commodities) should keep rising long-term as an inverse function of the dollar", which is so easy that you ought to be able to do it no matter how stoned or drunk you are, which I assume will be plenty, given how easy the homework is.

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