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- Nothing much noteworthy happened last week,
especially as pertains to the Federal Reserve, especially
in comparison to something so dramatic that it tells me, beyond
any lingering, vestigial shadow of a doubt, that the price
of gold is, to coin a phrase, a-fixing to go a-booming and
a-fixing to go a-zooming and we'll all be rich, rich, rich,
cha cha cha. The reason for my frivolity is that on Fin24.co.za
we read the headline "Chinese Eye Solid Gold." Of
course, we immediately think, "Duh! Big deal! Who doesn't?
Why are you wasting my time? Are you trying to start something
with me by wasting my precious time, punk? Is that what you
want? You want a piece of The Mogambo? Huh, punk? Is that
what you want? Huh?"
But methinks that maybe we are a little too
hasty, as right off the bat we learn "Chinese banks are
expanding the options they offer rich depositors in the face
of greater competition from foreign banks." And what
is this new option for the Chinese rich? "Next month,"
the article reveals, "the Bank of China plans to launch
its newest product, dollar-denominated certificates linked
to the price of gold."
Hmmm! Suddenly, my brain is going every which
way! This is very, very interesting! On the one hand, this
seems to prove that rich Chinese people are no more sophisticated
than the rest of us clodhopper bozos out here who mess with
dollars. I mean, these rich Chinese people are supposed to
be so dull that they will line up to buy a certificate, denominated
in dollars, a currency that is due to fall in purchasing power
due to massive over-creation by the Federal Reserve over decades,
that is also linked to gold? Huh? Why? Isn't this merely a
bet on gold, which these foreign people will naturally price
in their own currency anyway, which will ALSO trade up and
down against the dollar in the currency exchange markets,
negating the gain made in dollars using these certificates?
What's the point?
Or, much more excitingly, perhaps this is actually
the Chinese equivalent of a new gold Exchange-Traded Fund!
If so, wow! The impact of gold ETFs on the price of gold has
been, so they say, significant in producing the stellar performance
of gold. And if it is, and here is another one, a potentially
enormous one, to add to the impact!
Naturally, I am wondering "Are these Chinese
gold certificates, paid for with dollars, going to be backed
by physical gold, newly bought with the investor's dollars?"
If so, like I said, wow! A Chinese gold ETF! Animated by glee,
with the lithe, sinuous grace of a panther I dance the Forbidden
Mogambo Dance of Love (FMDOL) in celebration that my bullish
stance on gold is apparently vindicated!
But if the certificates are NOT going to be
backed up with physical gold bullion, then who is so incompetent,
or insane, that they would take the other side of that trade,
in essence going naked short? Or is there a derivative hedge
that can be laid on? Is this some kind of government scam?
I scream out in my frustration "What the hell is happening
here?"
And if NOT that, then I fall to my knees, pleading,
pleading, pleading with that pathetic look in my eyes, my
lower lip trembling, hands clenched together as I beg you
to please, please, please tell me what in the hell is the
attraction of these certificates, linked to gold, denominated
in dollars, to rich Chinese people?
As I crumble, blubbering at your feet in what
is probably my greatest dramatic performance ever, I suddenly
think to myself "Wait a minute! Maybe it has something
to do with how Nick Godt, writing about gold at TheStreet.com,
reports 'With all the uncertainty surrounding the dollar,
gold bugs believe that the precious metal will increasingly
act as a hedge for countries, such as China, which seek to
invest a surplus of savings in financial assets.' "
So, energized, I leap to my feet, my bright
Mogambo eyes (BME) shining with excitement, because the way
I figure it, the plan is that if Chinese businessmen will
accept gold for their accumulating dollars (thanks to the
trade deficit and their financing of our budget deficit) instead
of asking for them to be converted into yuan, then the government
does not have to print so many yuan to keep the dollar/yuan
exchange rate from changing! And thus, too, their overheated
economy is somewhat cooled by reducing the expansion of the
money supply! And China also winds up, believe it or not,
with the gold of the United States at a huge discount! My
head is spinning!
On the other hand, this germinates into my new
idea for a great Tom Clancy novel, starring the larger-than-life
hero Mogambo, the popular and handsome head of the Economic
Stupidity Task Force To Wipe Out The Aforesaid Economic Stupidity
(ESTFTWOTAES), bravely tangling with the dark forces of fiat-money
evil, like Congress, the Federal Reserve and the Supreme Court.
The plot is that perhaps there is a lot more going on here
than meets the eye! Economic Warfare kinds of stuff!
The camera pans in to the office of The Mogambo
just as the phone rings. A voice calls out from offstage,
"If that's my wife, tell her I'm not here! And if it
is the police, tell them that I have been here all morning,
and you are willing to testify to it!" But the phone
keeps on ringing and ringing, until finally The Mogambo enters
the room. He reads the note left under the phone, and he recognizes
the handwriting of his own secretary as she scrawled "Dear
Creepy Pervert, I quit! I hate you! Expect a lawsuit! Yours
truly, Yolanda."
Again the phone rings. Distractedly, The Mogambo
picks up the receiver. Immediately, a voice comes over the
phone line saying "Mr. Mogambo, your mission, should
you decide to accept it, is to check this out; perhaps these
sneaky Chinese dudes (SCDs) have realized that the idea is
not to make money (as in 'wealth measured in dollars'), but
in painlessly and effortlessly obtaining astonishing amounts
of US dollars! See, as the purchasing power of the dollar
falls and falls and falls, thanks to the Federal Reserve creating
so many of them, then the price of gold goes up, and as those
dollars wind up in China, thanks to the trade deficit, then
pretty soon any Chinese dude or dudette with a handful of
gold could own whole swaths of everything in America! Welcome
to the future, dudes! Hahaha!"
I slam the phone down, and springing to stage
front, I tear off my disguise (mild-mannered reporter for
the Daily Mogambo Planet newspaper) and begin to sing my first
aria as the orchestra begins playing and the stage fills with
beautiful dancing girls. My voice belies my breaking Mogambo
heart (BMH) as I croon "You thought that the debasement
of the dollar by the over-creation of them was going to be
so painless (chorus sings 'Painless! Painless!') that you
laughed (chorus: 'Ha ha ha!') and scorned (chorus: 'Ho ho
ho!') the Founding Fathers because they deliberately made
it a Constitutional requirement that money would be only-
ONLY! -of silver and gold precisely so the damned government
COULDN'T do that? Hahaha! Morons!" And the chorus melodically
echoes "Morons! Morons!"
And if the audience thought they were going
to get off with that one short aria, they were wrong! I silence
the orchestra with a wave of my hand, and the operatic patrons
were deathly silent in rapt attention as I went on to say,
darkly, like the voice of doom booming from hell, "You
thought the promise of an 'elastic currency', the very antithesis
of gold, was going to be so terrific that you let them create
the Federal Reserve? And then you let FDR and a cowardly,
traitorous Supreme Court rule that the Constitution was wrong,
and that money did NOT have to be gold? Hahaha! Morons!"
And the chorus replied "Morons! Morons!"
The sound of my crazed laugher echoing down
the hall, I majestically went on to bellow the tragedy of
"You thought Jefferson was crazy when he warned that
the use of a fiat currency/debt based economy would cause
us to wake up as slaves in the very country that their fathers
gave to them? Hahaha! Morons!" And the chorus again returned
"Morons! Morons!"
Drawing myself to my full height and repeatedly
adjusting my oversized codpiece so that everybody gets the
point, I gravely intone "I scorn you all!" The curtain
falls, and another lovely evening of grand musical theater
comes to a close.
And regardless of the audience booing and angrily
demanding their money back, in that one power-packed operatic
scene alone are three MORE very good reasons to own gold,
to add to the thousands of other perfectly good reasons to
own gold right now.
- The AP newswire reports that the government
is spending like crazy, and that "Spending during this
six-month period totals $1.34 trillion, up 8.7 percent from
the same period in 2005." 8.7% Police reports and video
evidence (all of it fabricated by lying fascist police-state
goons, vengeful family members and hateful, nosy neighbors)
indicate that this is where I really started losing it, if
by "losing it" you mean running down the street
dressed in combat boots and an adult disposable diaper (it's
going to be a long day, and experience has shown that once
you are in a restroom answering "nature's call",
they have you cornered) yelling "Wake up and kiss it
all goodbye, you gullible morons! You believed them when they
said it was okay to ignore the Constitutional requirement
that money be made of silver and gold to keep the government
from printing up too much of it! Now money is not an intrinsic
store of value, but our money is paper and promises! Hahaha!
The hyperinflation has begun! Hahaha! Heil, Weimar America!"
The video evidence from later in the day is
pretty interesting, too, as you can see that that the diaper
is apparently soaking wet and getting pretty full by this
time, and you can tell by looking at the faces of the police
that they are uncharacteristically very reluctant to tackle
me and wrestle me to the ground, kicking and punching and
biting and going "zzzt!" with those damned Tazers
like they usually do, the little cowards! My plan is working
perfectly!
But this is not about how The Mogambo thought
he had beaten them at their own game, or how this government
goon squad decided to escalate to the tranquilizer-gun and
throw-a-net-over-that-idiot stage, which I had not anticipated!
No, this is instead about the government spending 8.7% more
money than last year! And borrowing the money to spend!
And now some banks, somewhere, are going to
create that money, so that someone can borrow it and lend
it to the government, and (to make a long, sad story short,
but still sad, only shorter), price inflation will follow
monetary inflation. With a wail of hopeless despair, I fall
to my knees, and I weep for America.
But before I could even refresh my makeup ("Fuller,
pouting lips!" I demand with a flourish) or adjust the
Mogambo propeller beanie to a rakish angle in preparation
for my big boffo finish of this terrific scene about the horrors
of inflation, here comes Tom Dyson of DailyWealth.com, interrupting
and upstaging me by breathlessly quoting a recent article
in the New York Times, which he calls "a landmark piece
of news."
The article talks about “Persistent labor
shortages at hundreds of Chinese factories. Wage levels throughout
China's manufacturing ranks are rising." This IS bad
news! And not only ARE Chinese wages rising, but they HAVE
been rising, as Mr. Dyson goes on to note that, in China,
"Minimum wages have climbed about 25 percent over the
past three years in big cities. Wages at larger factories
operated on behalf of multinationals are also on the rise."
What makes this a "landmark" is revealed
when he goes on to say "The bottom line is this: If wages
rise in China, then prices rise in China." Yikes! Or,
as is written in the Ancient Mogambo Scrolls (AMS) "Mo
mo yikes a bigga bigga freaking priceum up bigga badda mojo
dude!", which translates more poetically as "Price
inflation is the demonic, devouring dragon of economic death
that springs to life under crushing piles of debt that created
more excess paper money." But Mr. Dyson has never been
to the Metropolitan Mogambo Museum Of Mogambo-Related Crap
(MMMOMRC), and so is probably unaware of the contents of these
sacred scrolls, and so he sticks more to the facts, and merely
adds that we are talking about rising price inflation, as
"The rising price of Chinese goods is bad news for CPI
indices around the world." Everybody suffering inflation?
Yow! Yow! Yow!
I am screaming "We're freaking doomed!"
while frantically trying to get the child-proof cap off of
a bottle of powerful tranquilizers at this horrible news as
he breezily continues "When this news hits the headlines,
investors will find bonds a lot less attractive." And
notice that he did NOT say that investors would merely "find
them less attractive," but instead he is careful to say
that investors will find them a LOT less attractive! So, if
you want a clearly unstoppable trend to start speculating
in, start shorting bonds!
Perhaps this explains why bonds, in a rare bit
of sanity, are sporting rising yields. In fact, the U.S. 10-year
T-Note has finally climbed back to over 5%, which is actually
higher than it has been in four years! This means that all
the morons who bought bonds in the last four years have lost
money on them! Hahaha! Lost money! Everybody in four years!
See what happens to you when you act stupid? Hahaha!
But notice how my insane laughter, likened by
some to "the sound of a diseased weasel gagging up a
dead rat," changes to laughter of stark raving fear,
which is also (strangely enough) likened by some as "the
sound of a diseased weasel gagging up a dead rat", probably
indicating some weird new kind of social trend or something.
Anyway, all that money (thanks to derivatives and insane levels
of lending by the banks) has been leveraged and multiplied,
so that the teensy, tiny gains would have been multiplied
into a nice piece of change if things had worked out.
But, guess what? They didn't! Work out, that
is! Hahaha! "They tossed the heavenly dice with Fate,
and they came up craps!" Hahaha! And now they are underwater
by some huge multiple of how much they had invested in the
first place, thanks to the insane leveraging by borrowing
heaps and heaps of money! And with the wild swings in things,
the sheer tonnage of it, world-wide, must be shaking the world's
economic foundations to the roots! So with gold and silver
reacting like they should (blasting to the moon), and housing
going down, why aren't the stock and bond markets tanking
and people jumping out of the windows in fear, and the survivors
cursing themselves and saying "Oh, why didn't I listen
to the wise and wonderful Mogambo (WAWM) and get the hell
out of common stocks and into gold?"
The answer is simplicity itself! Because (cue
the blare of trumpets) the Plunge Protection Team and their
counterparts around the world are bravely on the job! So,
rest assured that everybody in any government, and everybody
amenable to coercion by any government, are all on the job,
busily using YOUR money to convey to the present owners of
assets (mostly the rich, making them richer) to cover up the
unfolding monumental mess of monstrous monetary mistakes made
by the central banks in general and our loathsome Federal
Reserve in particular. And not just innocent little mistakes,
either, but the biggest and baddest mistake of them all (BABMOTA);
pure economic insanity (PEI).
And, if there is any comfort in "misery
loves company," then perhaps we should feel better that
it is not just us Americans. Tony Cherniawski at ThePracticalInvestor.com
sent a link to the "Statement by Toshihiko Fukui, Governor
of the Bank of Japan, concerning the Bank's Semiannual Report
on Currency and Monetary Control III. Purchases of Stocks
Held by Commercial Banks," which is a title so dreary
that it makes me sleepy just to read it.
Normally, I would say "Bah!" and take
a nap. But fortunately, for some unexplained reason, I decided
instead to waste some time by skimming through the article,
mostly to see if there were any photos of scandalously underdressed
beautiful young ladies or maybe hotrods or really boss choppers
(there weren't), when my eyes accidentally read that the damned
central bank of Japan, in the ultimate corruption, has been
buying stocks! A virtual arm of the government is buying stocks,
thus owning the companies! Note the exclamation point!
In case it has been a long time since you took
Social Studies in junior high (but you figured you already
knew all the Social Studies you needed to know, namely that
the world is divided into you versus them), the buying of
equities by the government is (horror of horrors!) the very
textbook definition of socialism; the government owns the
means of production!
I knew you would not believe me since you know
what a liar and idiot I am, so I am including the actual quote:
"The Bank started to purchase stocks held by commercial
banks from November 2002 to reduce the risk that stock price
fluctuations might impact negatively upon the business management
of individual financial institutions, potentially resulting
in instability of the financial system as a whole." Hahahaha!
Stock price fluctuations might "impact negatively"
if, I assume, prices go down? Hahaha! How blatant! They even
admit "The total amount of stocks purchased by the Bank
as of May 31, 2004 was 1,979.9 billion yen," which I
admit ain't a whole lot. But still!
Their conclusion was equally as chilling, as
this is, apparently, just the opening salvo of the weird economic
crap they have planned: "To ensure that this recovery
will become sustainable and to overcome deflation, the Bank
considers it essential that a wide range of economic entities
continue to make efforts to revitalize the economy."
Yow!
In short, the message is that every Tom, Dick
and Hari Kari can buy Japanese equities with confidence that
they will go up in price, because the government is going
to be buying them relentlessly, too, and together they will
swamp supply! And not only that, but you can also borrow the
money from the banks with which to buy them, because the banks
are continuing their zero-interest rate policy! So it's free
money to bet on a guaranteed winner in a manipulated market!
Hahahaha! How corrupt can a government get?
Well, to tell the truth, they don't actually
say that in so many words, but they do say that the money
will be made instantly available because "The Bank is
determined to firmly support Japan's economy by continuing
with monetary easing even as the economy continues to recover,
in order to realize sustainable growth and overcome deflation."
And how do you overcome deflation? With inflation!
Hahahaha! Suicide!
But this is the same slimy, corrupt thing that
is almost certainly happening here in America, too, as we
already have the Plunge Protection Team, by virtue of Presidential
Executive Order 12631, which creates a secretive, omnipotent
group made up of the chairman of the Federal Reserve, plus
other assorted riffraff like the Secretaries of the Treasury
and the SEC and the honchos of the Commodity Futures Trading
Commission. They have the power, literally conferred on them
by the President, to literally intervene in the markets!
In his own words, at a Jan. 14, 1997 speech
in Leuven, Belgium, Greenspan said: “We have the responsibility
to prevent major financial market disruptions through development
and enforcement of prudent regulatory standards and, if necessary
in rare circumstance, through direct intervention in market
events.”
Notice, with horror in your heart and your
blood freezing in your veins, that he says that not only do
they have the power, but they also have the "responsibility"
to use it! They are compelled, they think, to intervene, and
thus corrupt the free markets and the whole pricing structure!
- George Ure at UrbanSurvival.com took a look
at the "good news" that the trade deficit fell in
February as compared to January's deficit of $68.6 billion,
which was $2.2129 billion per day. And where did this big
monthly improvement in the trade balance come from? Instead
of me telling you the punch line and screwing it up ("That
was no lady; that was a duck under my arm!") let's have
him tell you. He says "There were also only 28 days"
in the month! Hahahaha! I'm busting a gut here! Hahaha! Only
28 days! What a card! They say that the secret of humor is
in the delivery!
Wiping the tears of laughter from my eyes,
as the straight man in the piece I point to January's daily
trade deficit of $2.2129 billion per day as he goes on to
say that in February "the daily plunder was $2.3464 billion
per day. My simple conclusion: Trade Worsened." Hahaha!
The obvious solution to the monthly trade deficit
is thus: Declare that, from now on, every year will contain
more months than the year before, and each month will have
decreasingly fewer days in them. Thus, since we have more
months in the year, and every month would be progressively
shorter, we would, magically, produce a smaller "monthly"
trade deficit, although the actual daily deficit could continue
to go up and up and up! That way, we would have a fall in
the trade deficit every month, and everything would seem to
be fine!
- The world is, judging by the sheer amount
of press it got, agog that Massachusetts, the same weird little
state that perpetually sends overt communists like Ted Kennedy
and John Kerry to the United States Senate, has, somehow,
solved the healthcare crisis and saved the world. Mirthlessly
I laugh hahaha!
I laugh (as I said) mirthlessly because nothing
has changed the basic problem, which is that the government
has still required that the healthcare industry or government
pay for everything for everybody, from real life-or-death
emergency care to everything you can name, all the way to
acupuncture, chiropractic, and (for all I know) healing crystals,
magic amulets and voodoo spells.
But regardless of the actual efficacy of any
or all of these medical treatments, the fact is that somebody
has to pay for it all. It's as simple as that. That's the
ugly, ugly side of stark reality, and all the good intentions,
sheer compassion and endless hours of debate and compromise
will never, ever change that fact in the least. In fact, government
interventions always make EVERYTHING cost more and get worse.
And so, with virtually unlimited rising demand
for an ever-increasing menu of treatment options paid for
by requiring insurance companies and providers to pay for
them, then, by virtue of the very basic, "What You Learned
On Day One" rudiments of basic finance AND economics,
the price must rise right along with it! Popular uprisings
ensure, as a horde of morons, many of them from Massachusetts,
scream that "something must be done" about the rising
cost of healthcare and health insurance!
And sure enough, I note that the new Massachusetts
plan merely makes more people pay more money, and more businesses
pay more money, and everyone collectively paying more money.
How special.
- I get a real kick of out people saying things
like how they are concerned that central banks may "over-react"
to signs of inflation by raising interest rates to the point
where they kill off growth. To paraphrase the great David
Bowie tune, I loudly sing "Major Mogambo to Ground Control!
Major Mogambo to ground control! Killing off growth is how
you stop inflation, you imbeciles! Look it up!"
And sure enough, rising interest rates may be
killing off growth in the housing bubble! Robert Prechter
of Elliott Wave reports that "February was another bad
month for the housing industry, as sales of new homes plunged
10.5%, the biggest drop in nearly nine years, while prices
fell and the number of homes on the market hit a record high."
Nine years! Yikes! We are truly doomed! Ugh.
****Mogambo sez: It sure looks like history
is repeating itself, as gold always zooms when government
economic stupidities get to this end-stage. And if history
DOES actually repeat, like it always has for thousands and
thousands of years, then the startling rises in the price
of gold and silver today are only the beginning. Whoopee!
Richard Daughty, the angriest guy in economics
9241 54th Street North
Pinellas Park, FL 33782
727 546 5568
e-mail: RichardSmithGroup@Verizon.net
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