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| Like Paul Revere only more comfortably dressed
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- I hope you don't mind talking to me through
the mail slot in the door, but I am not in the mood to open
the damned door right now, as I am being driven crazy crazy
crazy by alarm bells and alarm buzzers going clang clang clang
and buzz buzz buzz respectively, and the Mogambo Economic
Seismograph (SES) is literally flopping (plop plop plop) on
the table from the financial tremors being detected.
It wasn't always this way. Why, I sort of remember
this morning when I got up, smiling as the sun was coming
up and little birds were singing sweetly to me from the treetops.
And this morning the wife was still asleep so she wasn't already
yelling at me, "Are you going to get up off your lazy
butt and do something around here today?" (No).
But then my idyllic morning was shattered when
the alarms starting going off after I learned that Total Fed
Credit shot up by $3.955 billion dollars last week, which
is scary enough in itself, because this means that all of
this instant increase in credit was used to create more debt
for somebody, and with the reserve multiplier of almost 100!
I notice that you did not say "Yikes!" at that,
so you are probably very hungover and thinking only of how
your head hurts, and your stomach hurts, and your hair hurts,
and there is a bad taste in your mouth, and somebody has peed
in your pants, and you are therefore blissfully unaware of
what this means. So, showing off my mathematical and calculator
wizardry, I finally manage to turn the calculator on. With
a self-satisfied smugness, I key in the number $3.955 billion
with surgical precision, and then multiply that by 100, and
after a few tries, I announce that most of the answers I got
were $395.5 billion. That is how much potential new debt was
created LAST FREAKING WEEK! In one week!
So the next thing I know, I am trying to explain
to this stupid policeman that the obvious reason that I am
riding my bicycle down the road this early in the morning,
wearing nothing but an adult diaper and a wedding veil while
screaming "It's time for stupid Americans to wake up
and prepare to be economically killed, you morons!",
is that all this torrent of new debt means we are even MORE
freaking doomed! And especially since all this new debt means
all this new money in the system, and all this new money means
all this new inflation in the money supply, and all this new
inflation in the money supply means price inflation is coming
to kill our money, our economy and us. To make sure that he
comprehended the crucial importance of this basic fact, I
even helpfully pointed out to him, as tactfully as The Mogambo
can, that if he can't get it through his thick Neanderthal
skull that my heroic actions, sort of like Paul Revere only
more comfortably dressed, are fully justified, then he was
just another stupid fascist pig cop. The next thing I said
was, "Before you hit me with that nightstick again, are
you telling me that you agree with the stupid idea that a
nation can go into so much debt, and then print the money
to pay the debts, that we will all end up rich?"
A few more whacks to the head with that damn baton of his
finally convinced me that my original assessment was right;
he WAS a another stupid fascist pig cop, and yes, he DID believe
a country could borrow its way to prosperity and wealth, because
he works for the government, and the government said so, and
so that was good enough for him.
Fortunately, he also believed that he was going to have to
change my diaper before throwing me into his squad car, because
being knocked senseless like this makes me poop, a lot, and
he could see the evil gleam in my eyes that I was going to
make this just as messy and unpleasant as I possibly could.
So he let me go home if I promised to be a good boy from now
on, and I said I would. But I lied.
And I was justified in my lying, as I did not even bring up
the fact that the Fed bought up, for itself, a big glopping
handful of government debt last week, too. If you run to look
up the exact definition of "handful, glopping, big"
in your copy of the Big Mogambo Dictionary Of Economic And
Financial Stuff (BMDOEAFS), you will see it equals $2.243
billion, which is precisely the amount of government debt
that the Fed monetized last week alone. So that is why I used
the precise term "big glopping handful."
This is the part that really bothers me, in that we taxpayers
now owe the banks, which is a bunch of private banks with
owners and insiders and stockholders who all agree that I
always have to use the drive-up window because I am not allowed
in the bank lobby ever again since, well, perhaps I'd better
not to dredge up painful old memories. But this is not about
how I screamed at some halfwit teller about how she and the
stupid banks, as part of the Federal Reserve system, are destroying
our money, and our country, and how the bankers are going
to Hell, and how she is going to Hell, too, and how her ugly,
stupid little children are going to Hell right along with
her, and how if I had children as ugly as hers I would not
put their photograph on my stupid desk, but it did not matter
because they are all going to burn in Hell for their crime
of destroying our money and our economy and our country and
us by creating so much money for their own damned profit!
Like I said, I don't want to bring it up, but here they are
again, doing the same damned thing!
So the banks created, at their whim, another
$2.243 billion dollars which they used to buy government debt,
so that we stupid taxpayers can stand around drooling down
the front of our shirts as we now owe the banks another $2.243
billion. And we not only owe them the sum total of 740 freaking
billion dollars of government debt that the damned banks have
amassed, but also the interest on every dime of it! And for
the rest of our lives! And the banks bought the asset for
themselves by literally creating the money out of thin air
and then giving it to themselves? My God! We are THAT stupid,
and yet we have nuclear weapons? No wonder everyone is against
us!
- That the world is now so full of corruption
is beyond doubt. GATA has clearly exposed the grubby manipulation
in the gold market, and Ted Butler has exposed the fraud and
manipulation in the Comex silver market. Now we have it in
the financial markets, as revealed by an essay by Daan Joubert,
who teaches a course in 'Technical Analysis at the Treasury
of a major South African bank', in his "essay of the
week" on the InvestmentRarities.com site. Mr. Joubert
has been taking a look at intervention in US markets and has
decided that our stock market behaves irrationally to external
events.
"There can be only two possible explanations: Americans
are truly irrational, unable to reason logically and easily
swayed by propaganda and the herd instinct, or there are some
powerful forces at work to intervene in and steady US markets."
He then, naturally, introduces us to Executive Order 12631,
signed by Ronald Reagan on March 18, 1988, whose title is
Working Group on Financial Markets, but popularly known as
the Plunge Protection Team, whereby the government, powerful
financial people and institutions work, like termites from
beyond Hell, behind the scenes to prop up the stock market,
or the bond market, or the housing market, or the banking
market, or the antique furniture market, or the comic book
market, and any other market that they think they need to
prop up, to keep those markets from ever, ever, ever going
down.
Sure enough, when you look at the data, every
time there is what is clearly a cascade of selling as people
suddenly realize that the Mogambo was right ("We're freaking
doomed!"), mysterious buyers suddenly enter the markets
out of nowhere, brandishing dumpster-loads of money and buying,
buying, buying everything in sight, and the market goes, miraculously,
back up! The same thing happens in the bond market, to a lesser
degree.
When you stop and think about this, reading
it over and over again, you will see why I have cleverly used
the word "dumpster" when describing a large container
of money used in this manner. I would normally have used the
term "colossal cesspool-load of money", because
that is the kind of giggly, rude childishness so characteristic
of The Mogambo. But the whole "cesspool" concept
is, although highly descriptive and apropos, so yucky and
it puts me off my feed, and being so close to lunch, that
is the last thing I want.
He cautions us that "What is presented
here is not ‘proof’ in the scientific sense that
the government is intervening in US markets through the efforts
of the WGFM and implemented by private sector intermediaries
(but) judging purely on the evidence, with no preconceived
ideas of what can and cannot happen, there can be little doubt
that intervention is taking place - unless, the markets have
become totally irrational."
And this whole corruption and government fraud just gets worse
and worse, as we read in the Oct 31, 2005 Financial Times
that the "Treasury Moves To Alleviate Bond Shortage",
whatever in the hell that is supposed to mean.
The article was written by Jennifer Hughes, and she starts
off by saying "The US Treasury is this week expected
to set out its latest thinking on the creation of a special
securities lending facility to relieve exceptional market
shortages of Treasury bonds." Hahahaha! The whole freaking
world is literally awash in U.S. Treasury debt, and yet I
am supposed to believe that there can be a shortage of it?
Hahahaha! People always think that just because I look like
and idiot, and act like an idiot, and sound like an idiot,
that I am an idiot. And, as much as it embarrasses me to admit
it, I am an idiot, but not so big an idiot that I could possibly
believe, even drunk and half-conscious laying on a barroom
floor, that there could be a shortage of US Government bonds!
Hahahaha!
Perhaps things become clearer when she writes
"The creation of such a backstop facility by the Treasury
would mark a significant shift of the government's role in
the bond market. The Treasury would work towards a proposal
that would, in effect, make it the market's lender of last
resort. Any plan would be aimed at easing strains on the repurchase,
or repo, market - where securities are borrowed in exchange
for cash - by issuing extra securities on some occasions when
the original supply has become scarce."
In case you are not up to speed on the repo
market, she helpfully adds, "In a repo agreement, one
party lends Treasuries to another and agrees to take them
back on a set date. In effect, it helps those selling bonds
short to borrow the notes they need to do so; it also allows
traders to raise short-term loans using bonds as collateral."
So I know what you are thinking. You are thinking that it
is almost lunchtime, and you are not in the mood to hear about
some dumb repo market where rich people and powerful institutions
somehow screw me out of my money. But hold on there! The reason
that this is coming up at all is that "The issue has
arisen following a number of significant 'fails' which have
disrupted the market. A fail occurs when bonds are not delivered
or returned as agreed."
AhhhhHHHHHhhhhh! Now it all becomes clear! Some
of the slimy guys playing the repo market are scumbags who
reneged on a bet, and now the players who are still in the
game are getting more picky about what they are doing, and
asking for higher interest rates to compensate themselves
for the extra risk they are taking on, since so many of these
repo deals are going bad and sticking somebody with losses!
Now, the damned government, and in this case the damned crooked
Treasury department and that arch jackass John Snow, is wanting
to guarantee those bets! Someone gets stuck with a busted
trade, and the damned Treasury Department will make up the
losses!
Not only that, but as Gerald Lucas and George
Goncalves at Bank of America point out, it would lead participants
to "game" the market. "The Street - both dealers
and buyside accounts - knows that, if rates are pushed to
the Treasury's threshold, more supply will hit the market
and cheapen the term rates," they said.
I will not go into the idea that this cheapening
of short rates puts the yield curve back in, um, steepness,
so that players (and banks) can borrow short and lend long
and make a big ol' huge profit, which is politely known as
the "carry trade", and which has the effect of (they
hope) lowering long rates and, as I already said, make a big
ol' huge profit for themselves. How clever! And how embarrassing
that we would let them get away with it!
- Disobeying doctor's orders, I watched Alan "See No
Evil" Greenspan as he testified before the Congressional
joint economic committee, and of course I was straining mightily
against the straps of the straightjacket I am now forced to
wear, but I could still swear and spit at the television screen
every time I disagreed something that this horrible little
man said, which meant that by the time it was over the TV
and the floor all around it was gooey and sticky, which only
proves that I need more practice in spitting for accuracy
(SFA).
The whole thing these days is "containing
inflationary expectations." The point that we obviously
HAVE price inflation is never discussed, and now the only
thing that matters is that the Fed, somehow, control people's
expectations! Hahahaha! Where is this written in the charter
of the Fed? Hahahaha! This stupid bit of nonsense is so preposterous
that I cannot even fathom anybody but the morons on CNBC falling
for it.
And fall for it they did. CNBC had three dimwits,
including Steve Liesman (the resident "economist"
at CNBC), Rick Santelli (cub reporter), and some talking-head
from some bank (guest doofus) all talking excitedly about
this "inflation expectations" thing, never once
mentioning 1) that price inflation is a fact and rising inflation
is a fact, 2) that the damnable Federal Reserve is still pumping
out money and credit at record speeds (monetary inflation),
which means that price inflation is going to get worse and
worse and worse, or 3) the effect that this would have on
The Mogambo, or how local television stations are already
setting up cameras outside my house because THEY know that
pretty soon I am going to go freaking berserk in a blaze of
self-righteous outrage.
To show you what a lying nitwit this Greenspan
is, he said, "Thus, although spending continued to rise
rapidly last year, the deficit in the unified budget dropped
to $319 billion, nearly $100 billion less than the figure
for fiscal year 2004 and a much smaller figure than many had
anticipated earlier in the year." Hahaha! Just in new
federal debt alone, the deficit was over $500 billion! And
yet some cockamamie "unified" budget, a concoction
of lies, distortions and "off-budget" expenditures,
shows a deficit of only $319 billion? Hahahaha! And this deceitful
jackass is the chairman of the Federal Reserve? Hahaha! No
wonder people are trying to kill us; we're morons with nuclear
weapons!
Greenspan also said "Inflation expectations
have decreased, and accordingly, the inflation premiums embodied
in long-term interest rates around the world have come down."
Huh? Bond prices are falling, interest rates are rising, and
yet this blowhard jerk thinks that inflation premiums have
come down? Hahahaha! Then what in the hell went up that made
rates go up? Hahahaha! What a moron!
He did, in an odd instance of candid honesty,
say "Nevertheless, the suppression of cost growth and
world inflation, at some point, will begin to abate and, with
the completion of this level adjustment, gradually end."
So he admits they are suppressing cost growth and world inflation?
And he admits that the ruse must end? And then what happens?
I'll tell you what happens next: We die a horrible economic
death!
But this "managing inflation expectations"
is completely lost on Stuart Thomson, who is a fixed-income
strategist at Charles Stanley Sutherlands in Scotland. Since
we are dealing with a Scotchman, or Scotchperson, or whatever
in the hell they call themselves these days, I was slugging
single-malt Scotch and trying to peek up his kilt to see if
he had underwear on, and thus finally put that mystery ("What
does a Scot wear under his kilt?") to rest, when suddenly
he said something that answered that timeless riddle; his
underwear was obviously too tight . What he said was that
he thinks that T-bonds are a good deal because Treasury 10-year
yields ended last week at the highest yield since the Federal
Reserve started raising interest rates in June 2004, and that
this means that, for bonds, "it's a good buying opportunity.
The market has been seduced by the Fed's aggressive commentary.''
Hahaha! As the market-commentator Half-Monty explains, "What
are rising interest rates, after all, but a measure of money
leaving the bond market?"
Apparently Mr. Thomson doesn't agree me, Half-Monty
or the Economist magazine, either, which, in the November
5 issue, said that the "price of ten-year American Treasury
bonds fell," and that "Bonds elsewhere are also
losing their appeal."
To see why, all one has to do, since we are
already looking at the Economist magazine, is take a look
at the money supply figures, and one is stunned to see that
money is being created at double-digit rates all over the
place. This monetary inflation means that future price inflation
is already written in stone. Bonds always react negatively
to rising price inflation (although they seem oblivious to
monetary inflation. Weird!) . And a negative reaction to rising
inflation is always bad news for the prices of bonds. Unless
your underwear is too tight, it seems.
Someone in the front row raises his hand and
asks "So how much more money is being created around
the world?" Good question! As I dutifully start adding
it up on my fingers and taking off my shoes to continue this
exercise in addition, Richard Russell, of the Dow Theory Letters,
either gets tired of waiting, or is aghast at the thought
of me taking off my stinking shoes and exposing my stinking
feet to his sensitive nose, and hurries to supply the answer:
Australia 9.8%, Britain 11.2%, Canada 9.8%, Denmark 16.3%,
Sweden 5.6%, Switzerland 6.3%., United States 6.6%, and the
Euro area 8.5%!
And all of this money is owed to the banks,
as only banks can create money out of thin air. So you may
be asking yourself "Well, if the banks are owed all of
this money, and people cannot pay their debts, what does this
mean for the shares of banks and money centers?" I was
ready to give you some vague, noncommittal answer to conceal
the fact that I have no idea, when up comes Jim Willie CB,
he of the Hat Trick Letter, who saves my bacon and says that
the "battle of the titans is shaping up. The BKX bank
index is in the process of breaking down. It represents some
of the largest and most powerful money center banks in the
United States. Just two weeks ago, a warning was given that
the BKX was in danger of breaking below critical support at
95. That level was broken last week."
Well, I can see that he is stealing the show,
but before I could get a word in, here comes Robert Prechter,
of Elliott Wave fame, who says "Banks are leveraged so
greatly that the slightest retrenchment in property prices
will precipitate an unprecedented downward spiral of evictions
and property sales, and then will come the bank failures."
But property prices are dependent on interest
rates. So, can the Fed stop hiking rates? Hmmm! Another good
question! If inflation is starting to surge everywhere, and
now other countries are already raising their interest rates
in response, then NOT simultaneously raising American interest
rates would make the dollar tend to fall, would it not? And
doesn't money tend to exit a country where the value of the
currency is falling? If so, then Greenspan must raise rates,
too! Right?
And here comes Martin Weiss again, whose sneer
insinuates that I am a big stupid idiot, because OF COURSE
interest rates are going to rise! But instead of yelling at
me and calling me ugly names for belaboring the obvious ("It's
the Mogambo Way!" I retort), instead he merely says,
"We have a bulging budget deficit, a sinking trade balance,
and wild, debt-driven speculation among banks, consumers,
and even governments. We have some of the biggest bull markets
of all time in commodities such as oil, gas, copper and many
more. And, as you just saw this week, we also have the biggest
monthly jump in prices in a quarter-century! All of these
forces are pressuring interest rates higher. And all are coming
together at the same time. But right now, interest rates are
still not far from their 45-year lows!"
And these rising rates are starting to affect the housing
bubble, and in that regard Steve Sjuggerud reports that "Bill
Gross is confident that a major change in the U.S. economy
is just around the corner." And he uses the words "almost
inevitable." What's "almost inevitable?" According
to Bill Gross, it's 1) a housing bust followed by 2) a weakening
U.S. economy. I knew you were not going to believe me, so
I am going to actually quote Mr. Gross directly when he says
"Let me state categorically that [this] sequence is barely
questionable, almost inevitable, 99% unavoidable, and in modern
parlance - a 'slam-dunk.' "
Why is it a "slam-dunk"? Well, Mr.
Gross writes that "The Fed found that housing booms peak,
on average, four-to- six quarters after that country's Federal
Reserve first starts to raise interest rates. Subsequently
[after the peak], real house prices fall for about five years,
on average, and their previous run-up is largely reversed."
And how much did the house prices fall? About 15% over the
five years after the peak. And that was BEFORE we had the
enormous run-up in housing prices! So look for a much bigger
fall than some piddly 15%!
- From Reuters we read that "U.S. consumer credit unexpectedly
dipped by $59.4 million in September in its first monthly
decline since November 2004." The guys who estimate these
kinds of things expected a rise of $6 billion. What makes
this so remarkable is that "September's decline is only
the fourth monthly decline since September 1998, according
to Fed records." Whether or not this has anything to
do with the new bankruptcy laws is anybody's guess, and it
is academic anyway, as the fact that less money was spent
speaks for itself.
One reason for this may be explained by Stephanie Pomboy,
at MacroMavens, who says ''Food and energy outlays have accounted
for 42% of growth in spending over the past year," and
that "90% of the growth in consumer spending over the
last quarter has come from food and energy. So it would seem
that we should be fretting the fact that food and energy are
now crowding out discretionary spending to a degree that has
always been associated with recession.''
Or perhaps this slowdown in the rise of consumer debt can
be explained by Peter Schiff of Euro Pacific Capital, who
explains one of the fundamentals of debt: "Current consumption
financed by debt, ultimately leads to far less future consumption.
Ironically, it is savings, the deliberate act of under-consumption,
that maximize lifetime consumption, as savers, rather than
struggling to repay debts, enjoy the extra consumption financed
by compound interest." So if you borrow more, you consume
less, but if you lend more, you consume more! So, since this
is obviously true, maybe we are in the future, and now we
have, as he explained, "far less future consumption"
because we are, as we just found out, in the future! Weird,
huh?
- The famous Dr. Kurt Richebächer says
that he has discovered that "For many years, we have
waited for Mr. Greenspan to ever mention the word 'credit'
in his speeches and congressional testimonies. Though hard
to believe, in all his 18 years at the helm of the Federal
Reserve, this word has never come over his lips."
For the record, the name Mogambo did not come
over Greenspan's lips, either, although you can bet your sweet
butt that the name Alan Greenspan came over MY lips a lot,
mostly with some rude adjectives attached, e.g. mutant moron
jackass from Hell that is killing our money and killing our
country by creating so much damned money and credit all the
freaking time, and that is why I am so scared that I am holed
up here under the couch cradling an AK-47 in my arms and sobbing
gently. Okay, so I got a little carried away, and I'm sorry.
But you will soon know why I am acting that
way, and if you want to know what happens when so much money
and credit have been created and that leads to inflation,
then take a look at the riots in France, where things cost
so much compared to what the poor and unemployed get in state
assistance that it keeps 40% of that sub-population below
the poverty line! Exacerbated by a 20% unemployment rate among
that population, of course. But it all comes down to, as it
always does, the buying power of money, and how the lack of
it causes hardship
And pay attention, too, because these kinds
of rioting things are just getting started all over the place,
and they will be here in America before you know it. And why
do I say something so dramatic? As a kind of multi-sensory
lesson, I hit the "Play" button on the video machine,
and instantly the screen is filled with Dr. Richebächer
saying "During the second quarter of 2005, after 11 rate
hikes, total credit in the United States has surged by $2,937.8
billion at annual rate. This compares with a simultaneous
annualized increase in nominal GDP by $716.8 billion as the
broadest proxy for spending growth. According to these two
figures, debt grew four times as fast as GDP. For perspective:
During the three postwar decades until the early 1980s, this
debt-to-GDP ratio was 1.4:1."
Debt has been growing at four times the growth
in GDP? Which means that the Federal Reserve has created huge
amounts of money, gigantic amounts of money, obscenely overwhelming
amounts of money, four times as much money as the entire growth
in entire country's GDP? Wow! See? See why am I running to
the Mogambo Bunker in fear and panic? I slam the door in your
face before I could explain further, but Dr. Richebächer
fills in the gaps; "Credit expansion in the United States
has grossly run out of reasonable proportions to economic
activity. Putting it bluntly: It is completely out of control."
And when that happens, pretty soon the people
get out of control, too!
- Alert reader Robert A. M. writes "One
item of interest is that real estate prices have been falling
here in Lima." So you say to yourself, "Lima, Ohio?
Who the hell cares about real estate in Lima, Ohio, unless
you own property in Lima, or were planning to move there for
reasons that normal people cannot even fathom, except maybe
to escape the cops, or your hateful little family who thinks
that some stupid judge can make me give money to them every
freaking month like I am made out of money or something?"
Well, I have no idea what it is like to be normal, either
in OR out of Lima, Ohio, but it turns out he was talking about
Lima, Peru.
So he was querying some of the locals, and "I
asked my sis-in-law about whether you could buy gold freely
here. She told me 'How the hell do I know? Nobody here has
money to buy gold!' So, even though things are very different
here (worse, mainly), nobody here thinks about gold. I guess
people think about survival first, then investments."
Maybe that's why stock markets don't perform well in depressions!
So why in the hell is he in Peru in the first place? "Like
I told my smarty-pants Wall Street type brother-in-law in
Baltimore, I am so paranoid that I look for eggs in not only
different baskets, but different countries, investments, and
even different dimensions if possible." This may be the
best unsolicited advice you ever got.
- To prove that not all central Bank governors are complete
morons, Alan Bollard of the New Zealand central bank recently
"took the extraordinary step of calling an urgent briefing
on Friday to warn new home owners to start saving now and
beware of huge mortgages."
Mr. Bollard said that in New Zealand, unlike
America, they obey the laws of physics and economics, and
that the economy can't handle the continuing rise in house
prices. Furthermore, he warned the government that a spending
spree will just make things worse! Well said, dude!
Which brings up something my buddy Phil S. sent
me, who is in the habit of periodically sending me things
that he thinks will interest me or help me, mostly in the
work-ethic vein (e.g. "Sober up, you stupid little bastard!")
or the personal habits vein ("Take a bath, you stupid
little bastard!") But he sent me one here recently that
shows why we are screwed. The quote is from Milton Friedman,
who opines that “The government solution to a problem
is usually as bad as the problem.” In fact, he was being
nice. A government solution is almost ALWAYS as bad as the
problem, something that is known, as we now know, as far away
as New Zealand!
- To those who keep calling me up on the phone and either
wanting me to pay back the money I owe (no), or explaining
to me that if I would just stop being such a jerk that I would
recognize that inflation cannot exist unless wages rise, I
now respond in typical Mogambo fashion (TMF); "Screw
you."
But I have to admit that it makes sense that
if things cost more, but you don’t make more, then sales
will slump, and producers will cut prices, and thus price
inflation will not be sustained. Well, to these people I suggest
that they put Martin Weiss, of the Money Report, on speed-dial,
as he reports that "U.S. hourly wages have just registered
their biggest year-over-year surge since July of 2003, and
their biggest month-to-month surge since February of 2003!
In other words, the cost of labor in America — the last
missing ingredient to fuel a classic inflationary spiral —
is now beginning to jump."
Talking about rising wages prompts Hans H. Kahn
and Daniel Tessler, of the Au Capital Letter, to chime in
with "The most significant fact in the economic world
today,' they said, "is that countless millions of workers
have entered the cash economies of their developing countries
in the past twenty years or so and now compete in world markets
for the first time. Behind them are hundreds of millions more.
They are competent, motivated, and increasingly well-trained,
well-managed, and well-equipped. Their threat is that their
rising incomes will come to represent virtually all the growth
in world demand and that they likely will be able to meet
virtually all of their own demand internally." So to
those nay-sayers, including that arch-bonehead Wayne Angell,
who is actually a former Fed big shot of some type, who say
that inflation is not happening and cannot happen unless American
wages are increasing, I now say, in TMF, "Screw you,
boneheads! Wages ARE increasing like gangbusters all over
the damn place, you stupid little twerps! And even if American
wages fall, the wages of those foreign devils will keep rising
in relation to a dollar that keeps falling in value! So if
you think that inflation will not rise unless American wages
rise, then step over here a little close to me so that I can
slap your stupid faces for you until you smarten up! Morons!"
Messrs Kahn and Tessler are horrified at my outburst, which
I have edited extensively to remove the obscenities and vague
death threats, which always causes the FBI and the CIA and
the Homeland Security people to heighten their surveillance
of the Mogambo Fortress Of Impregnable Solitude (MFOIS). But
I know that Kahn and Tessler will always have a warm spot
in my mighty Mogambo heart (WSIMMMH) because they said "Alan
Greenspan will be seen eventually to have been our most profligate
and intellectually corrupt central banker ever."
Richard Russell says that he also has opinion of Alan Greenspan.
"It makes me angry when I see supposedly intelligent
analysts and economists stating that the Greenspan Fed has
done 'a great job' in containing inflation. What in God's
name are they talking about? In the 18 years that Greenspan
has reigned on the Fed, the purchasing power of the dollar
has been cut in half. That's right -- in half."
- Ambrose Evans-Pritchard on the Telegraph.co.uk
site wrote an interesting essay entitled "Soaring Price
of Gold Predicts Bout of Carnage in Bond Markets" in
which he reports that "A new study by H.C. Wainwright
& Co looked at gold as a predictor of inflation. After
reviewing data back to 1951, it found that gold is an uncannily
accurate predictor of inflation one year ahead -- and a crystal
ball for future interest rates and bond prices. If so, there
may be carnage in the bond markets in 2006, since gold is
now screaming inflation."
The study, released by the World Gold Council,
found that gold is a much better forecaster of inflation than
oil, which indicates what will happen to prices next month,
but not next year. But they say "Gold provides a much
earlier warning. The optimal correlation (0.73) between changes
in the price of gold and changes in 10-year T-bond yields
is about 12 months." Using that interesting fact to advantage,
you can, theoretically, time the bond market, as "Gold
is a powerful predictor of nominal interest rates, both long
and short. It is free from many of the errors of measurement
that bedevil the official indices of inflation."
This years-long telltale rise in gold is being
desperately offset by central bank sales, and this same H.
C. Wainwright & Co. reports that "Three European
central banks may have played a role in the latest dip, selling
398m ounces in the last week of October, according to the
ECB in Frankfurt." They are getting desperate, folk!
- I see by the clock on the wall that it is time for me to
pound the table for silver, because it is the most under-priced
asset on the freaking planet. And beyond that, the startling
fundamentals are screaming "Buy silver! Buy silver!"
And we also have Ron Rosen, of the Ron Rosen Precious Metals
Timing Letter, figuring that "Silver bottomed on January
26, 1976." Why is this significant? They explain: "The
30-year cycle in silver is repeating." So silver is at
the bottom, and will rise for the next 15 years! Whee! See
what I mean? What an investment!
- Since I am always talking about inflation or thinking about
inflation or screaming about inflation or predicting the End
Of The World As We Know It because of inflation, things will
get worse, as we realize when George Ure of UrbanSurvival.com
reports a "19 - 30% increase in farm inputs (seed, fertilizer,
soil prep, sprays, front end labor)." This is a shocking
number. A reader of his, a farmer, wrote to say "What
we are getting for wheat presently (less than $3 a bushel)
is the same price or a little lower than what we received
back in 1975. Expenses have gone up 50% or more just in 2005."
- If you have celebrated the recent fall in
gasoline prices, then I suggest that you take off that stupid-looking
party hat, sober up, walk over to the telephone and buy oil
and oil stocks, because James Howard Kunstler, in his Commentary
on the Flux of Events, writes, "Since the hurricanes
shredded our Gulf of Mexico oil and gas capacity, Europe has
been sending us 2 million barrels of crude oil and 'refined
product' a day from its collective strategic petroleum reserve.
Now, the important part of all this is that last week the
International Energy Agency (IEA), Europe's energy security
watchdog, declared that it would now end the 2 million barrel
a day shipments to the US."
He doesn't even mention the part about how our
government opened the taps of the Strategic Petroleum Reserve
to flood the market with oil, or the fact that the government
is going to have to, soon, buy more oil to replace what was
released from the SPR.
And speaking of the IEA, they also calculate
that global oil demand will increase by 1.75 million barrels
per day in 2006, mostly due to increased demand from China
and India. This is an increase in demand of approximately
2%, while supply is expected to increase by a smaller amount
than that. It doesn't take a PhD in economics to realize that
demand rising faster than supply means higher prices. In fact,
it takes no education at all, as all you have to do is stand
within earshot of me, and you can hear me yelling "Buy
oil and oil stocks!" And if you stand not only within
earshot, but also downwind of me, you can smell me, too, but
that doesn't say anything about oil, but only why I am so
lonely. And blue. Lonely and blue. And angry. Very, very angry
all the freaking time, because our money and our economy are
being destroyed all the freaking time.
In short, says Mr. Kunstler, "We can look
forward to watching the price of gasoline, heating oil, diesel
and aviation fuel kick back up through Thanksgiving and on
into the heart of the Christmas shopping season. At the same
time, homeowners will be getting their first substantial heating
bills of the season." Ugh.
****Mogambo sez: If I was ever bullish on gold and silver
and oil, then those are the "good old days" when
I was not hyperactive, because I am now so addled with anger
that I am leaning out of the windows, throwing rocks at people
to get their damned attention and yelling that everyone should
be buying some of all of them, but they are ignoring me, and
that makes me even MORE bullish, because I know that the longer
they wait to get their nasty little butts in gear, the bigger
will be the rush when they wake up out of whatever catatonic
stupor they are in, and try to get in on the gold rush, and
the silver rush, and the oil rush after the trains have left
the station. Idiots!
Richard Daughty, the angriest guy in economics
9241 54th Street North
Pinellas Park, FL 33782
727 546 5568
e-mail: scgcjs@gte.net
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