Why You Should Be Buying Gold
Last Friday is now known, around here anyway,
as The Day The Mogambo Finally Lost It Completely. That was
the day I found out about the latest horrific happenings at
the Federal Reserve. I don't remember much about it, but I
do remember that my eyes felt like they exploded from their
sockets, as if in an Itchy and Scratchy cartoon, when I read
that Total Fed Credit went up by an astonishing $6.2 billion
last week. This is literally the "money and credit from
thin air" of fabled story and song, and I am sure that
as good little Mogambo Scouts (MS) you have joyfully sung
many, many of the campfire tunes from the Official Mogambo
Scout Songbook (OMSS), such as the popular "Give control
of our money to the Fed and pretty soon it's dead, cha cha
cha", or that old favorite "The Fed killed my money
and now it’s killing me" which is, of course, sung
as a dirge. In fact, ALL the songs in the OMSS are dirges.
And the reason for that is that the consequences of creating
so much credit, which becomes both a new debt and new money,
is that prices will rise as all that money, that luscious,
luscious money, money that I'll never have because I am lazy
and stupid and have a family that tries to fill a void in
their pathetic, miserable lives caused by having a distant
and hateful husband or father (that they blame for everything)
by buying stuff, will all seep into the prices of things,
as there is (as my voice rises to a fever pitch) nothing else
that can be done with money except increase demand for something
by spending it on buying something!
That is why I nervously laugh the laugh of The
Mogambo in full panic mode (LOTMIFPM) to glom a headline in
last Friday's Wall Street Journal that read "Nikkei,
Gold Hit Milestones; Dow Nears One". At first glance,
it seems like such pleasant news. You think to yourself, "Ahh!
People have more money! How nice for the economy!" But
suddenly your blood turns cold when you read the sub-head
that said "Japan's strengthening economy and market overhauls
propel stock Index to close above 15,000." What? Hey!
Bonehead! I just told you in the previous paragraph, and so
it should be still fresh in your young grasshopper mind, that
all this money that the Fed is creating, and all the money
that foreign banks are creating in response and emulation,
has to be spent by the government on something! If not, then
why in the hell is someone borrowing the damned money in the
first place? And it has to, eventually, percolate through
the economy and wind up in someone's pocket, and they have
to put lots of it into stocks and bonds because there is just
so damned much of it!
But this is not about how mysterious strangers
are borrowing so much money, or how mysterious strangers are
tapping my phone or lurking outside my house, but let me merely
go out there with an AK-47 assault rifle and "hose down"
a clump of suspicious bushes, and they will twist it all around
so it is ME that gets in trouble for it! But the point is,
instead, that the Japanese stock market went up for the same
reason that the US market is going up, and that is because
the governments are borrowing and spending enormous amounts
of cash, and the Federal Reserve is creating enormous amounts
of cash to buy the enormous amounts of new government debt
being created. And then this money eventually seeps into pockets,
and then what do you do with it? Well, what other market is
so big, so huge, so complicated, so diffuse, so liquid, so
secretive, so willingly compliant, that can absorb so freaking
much money EXCEPT the stock market and the bond market?
And speaking of humongous mountains of money,
the national debt exploded again, jumping $11 billion IN ONE
FREAKING DAY on December 2. In one day! And then people want
to know why I am so freaked out that I cannot eat, and I cannot
sleep, and I keep screaming and shooting that damned pistol
of mine at anything that moves all night long, and one of
these days someone is going to get hurt and blah blah blah.
But even so, this is one hell of a lot of money
being created! I mean, jeez, the $6.2 billion in increased
Total Fed Credit last week alone, when translated through
the reserve multiplier inherent in fractional reserve banking,
means an almost infinite multiplication of that credit into
an amount of credit available at the banks! The banks can
now loan out lots and lots of, essentially, free money! And
what can they buy with those hundreds and hundreds of billions
of dollars of newly-borrowed money except stocks and bonds?
And THAT is why the Japanese stock market went up! That's
why the American stock market is going up and the bond market
is not collapsing. Keep putting enough money into anything
and it will go up! Nobody has EVER disputed this.
And speaking of things going up, actual Currency
in Circulation, the kind where the kid says "Dad, may
I have five dollars, please?" and you say "Hell
no, you greedy little brat! Why don’t you get a job?
Then I can borrow money from you, you worthless parasite!"
but your spouse gives her the five bucks anyway, and now there
is something ELSE to yell about, was up by $3.6 billion all
by itself! That's $36 more actual money for everybody that
has a non-government job in America! In one week! No wonder
she had five bucks to loan the damned kid! But let me ask
her, you know, since she has all this extra cash and all,
how about a little taste, you know, for The Mogambo? And then
she lies to my face, and says "Money? I don't have any
extra money, you stupid little creep!"
(In this paragraph, notice the extensive use
of exclamation points to indicate emphasis. This means that
it WILL be on the mid-term exam, young grasshopper!) So, in
total, tons and tons of money are coming into the economy
from government spending, which is completely off the charts
in terms of historical precedence! Off the freaking charts,
I tells ya! Do you really, really, REALLY believe that things
are going to get better because of this? If you do, then I
laugh- Ha! -in your face! Now I will insult your kids! And
your parents! And then I will heap scorn on your spouse or
significant other, and generally be very unpleasant, because
that is the Way Of The Mogambo (WOTM) when I run across someone
who is soooOOOooo stupid (audience yells out "How stupid,
Mogambo?") that they could actually think that increasing
government spending to the level of insanity would NOT end
very, very badly! If it didn't end badly, then everybody would
do it, you stupid blockhead! But they don't! So I know that
it will end badly (EB)!
But nobody listens to the poor old Mogambo,
sitting there on that cold bench in the police station, as
I calmly and gently explain to the nice policemen (according
to flimsy videotape evidence and only a few dozen eyewitnesses
lying their stupid heads off on the witness stand) about the
economic Armageddon that awaits us: "Let me go, you stupid,
ignorant fascists! I am telling you that your money is being
destroyed by the banking system! And when the purchasing power
of your money is destroyed, YOU are destroyed! Can't your
understand that, you morons? You should arrest everybody at
the Federal Reserve! But you don't, do you? No! Don’t
listen to The Mogambo! No! Go ahead; ignore The Mogambo! Don't
even save yourselves, you stupid pig cop Gestapo fascist goons!"
What they DON'T show, because the tape was "accidentally"
erased and burned and then thrown away, was when they asked
me if I knew what it means for them to tell me to shut the
hell up or they were going to come over here and shut me up?
And I said I did, and I was real quiet from then on, too.
But that doesn't change the facts about this money thing!
I even tried to lighten the mood with a joke
from Irwin W. that is about this girl, see, who can't balance
her checkbook, and so he says "If she can't balance her
check book, she knows all there is to know about fiat currencies!"
Hahahaha! I love it! But they did not laugh, and it turns
out they cannot see the joke, and so I called them a stupid
bunch of humorless monkeys, and that made everything worse,
in case you were wondering.
So don't listen to me. Nobody else does, either.
But maybe you will listen to the highly literate and entertaining
Bill Bonner, of DailyReckoning.com fame, who, writing about
gold, humbly said "We know nothing of the future, and
very little of the past. But what we do know is that every
other time mankind has tried to replace gold with paper, people
ended up craving gold more than ever. We see no reason why
the present experiment should produce a different result."
I jump to my feet and say "It won't, dude!"
I started running like hell when he exploded "That's
the last time you call me 'dude', you damned idiot Mogambo!"
and leapt after me, and he probably would have caught me,
too, if someone hadn't asked him "And why did they come
to crave gold?" Well, I was hightailing it pretty good
out of there, so I did not hear him as he stopped to answer,
but I thought to myself (as I ran like the scared little coward
that I am), "It's simple, you dimwitted clot! Because
their paper currencies always end up just like ours is ending
up; worthless! And now our economy is going to end up like
all those other ones, too, and for the same damned simple
reason; when you give the government the power to create as
much money as it wants, it always creates too, too much, and
the buying power of the money is destroyed!"
Pretty soon I was home, hiding behind the couch,
panting from the run, and there was no sign of Mr. Bonner
in pursuit. After awhile I finally settled down, and that
was when I realized that the part that drives me absolutely
freaking crazy is that the only perfect way to absolutely
prevent this destruction of the money from happening is already
in the Constitution! It is supposed to be the inviolable law
of the land, because it was written in the Constitution, that
money shall only be made of gold and silver! It says so, literally,
in the actual Constitution! But in case you are young and
still have a childish faith in the Supreme Court, let me inform
you that the Supreme Court, in a despicable act of treason
in 1933, said that FDR was right when he argued that the Constitution
does NOT say what it clearly says. Money does NOT have to
be of gold and silver, even though the Constitution says it
must! And no subsequent Supreme Court or any Congress ever
raised the issue, making them guilty of treason by aiding
and abetting. The result is that now we are paying the price
for letting so much credit and money be created, just like
the Founding Fathers knew it would, and just like every theory
of economics in history said it would. Well, that is, every
theory of economics until we come to the blathering idiots
of today, who preach and practice the most stupid theory of
economics that has EVER been advanced outside of a lunatic
We are idiots! We ought to put it on our money!
"America; a Nation of Morons!" It is inconceivable
to me that every Congress since 1933 could be so inept, so
ignorant, so brain-dead, so impossibly corrupt as to let these
central bank jackasses get away with this! Right in front
of our eyes, too! We are doing The One Wrong Thing (TOWT)
that is so wrong, so horrifically wrong, so tragically wrong,
that the Founding Fathers created the Constitution to try
and prevent it!
And what is the awful result of TOWT? Inflation!
All this money has to show up in prices. And when people start
suffering from the higher prices, it is bad, so bad, so tragically
bad, so nightmarishly bad that all civilized people and all
intelligent governments go to great lengths to prevent inflation.
But yet, here we are, in 2005, with Ben "Blasphemy"
Bernanke helping Alan "Easy Al" Greenspan at the
controls, declaring that he is going to commit TOWT just like
Greenspan alone did for at least a decade, and which we have
been doing since the 60's!
In short, we are a nation of complete and utter
morons to even CONTEMPLATE letting the banks get away with
this crap! And yet they ARE doing it! And right in front of
our eyes, too!
So, the theory says, since stock prices can
now grow infinitely higher to the sky, and house prices can
now grow infinitely higher, too, then, in a certain manner
of speaking, so can bonds! You can keep interest rates low
forever! All it takes is, appropriating a delicious phrase
of Dave Barry's, "More money than the human mind can
comprehend." While he was humorously talking about the
cost of home improvements, I am nervously listening to Bernanke
talking about the destruction of the economic system of the
USA and the world, and, by extension, the economic AND financial
destruction of my neighbors and family, for whom a financial
tragedy will entail them all coming over here, one by one,
tears in their eyes, begging "Please help us Mogambo!
We heeded thee not, and thy wise words counseled us to 'Buy
gold, you stupid freaking morons!', but the seeds of Mogambo
wisdom (SOMW) fell on barren ground in our feeble minds, and
now we suffer for our foolishness! Help us, Mogambo! Please
help us!" and I, being as polite as I can in the face
of their staggering, stupefying stupidity and their loathsome
willing ignorance that has destroyed the America I love, have
been looking for a reason to hunt them down like the diseased
vermin they are.
But Messrs Bill Bonner and Addison Wiggin have
taken a different, much more non-lethal approach, and have
graciously sent a copy of their book, "Empire of Debt",
to every member of Congress, with an attached note asking
them to read the book, or at least the introduction. The idea,
see, is that the Congresspersons will recognize the profound
error of their ways, clap their hands to their foreheads,
("Oh my goodness! What have I done?"), heroically
reverse course (sound of tires screeching) and bring us back
from the edge of the precipice of the economic abyss that
they have heretofore led us to. Whew!
I admire their boundless optimism, and I wish
them the best of luck, and suggest that we all participate
in this grand experiment, and contact our Congresspersons
and ask them to read it, because there is just that little
chance, that tiny glimmer of hope, that it will work! And
then, in worshipful gratitude, our children will make a movie
out of it, and we will be Hollywood heroes! A stirring story
of how brave Americans saved America! Americans saved America
by reading the Bonner and Wiggin book, and forcing the Congress
to read it, too, and when things didn't change, the voters
threw them all out of office at the very next election, and
elect people who DID read the book and learned the lesson
contained therein! And then everything was terrific from then
on, and we look good in the history books AND on the silver
screen until the end of time! But am I hopeful? Nah. But if
it DOES work, I get dibs on having Brad Pitt play the role
- David C. sent me the Merrill Lynch Morning
Call Notes by David Rosenberg, who writes "Housing starts,
new home sales, mortgage applications and building permits
are all negative on a year-over-year basis, and this last
happened in tandem in July 2000." This is the set-up.
Now he gives you the punch-line: "So we think it's pretty
safe to say that the housing boom is over." Hahahaha!
Who says economics can't be fun? Haha!
Anyway, he follows this dry humor with "mortgage
refinancing activity is down 43% in the past four months,
so something tells us that the home equity cash-out effect
on spending is beginning to dry up." Hahaha! I love it
the way he says it with such a straight face! Funny! But notice
the way the smile is frozen on my face. The reason I am abruptly
semi-catatonic is that, as he explains, "Last year this
re-financing produced over $700 billion in increased consumer
spending, and I am wondering what will happen if consumer
spending went down by $700 billion, which is 6.4% of GDP!"
I notice that YOUR eyes suddenly look a little vacant and
glassy, which shows that you are in shock, because you have
a deep understanding of the full, terrifying ramifications
of this gigantic drop in consumer spending! Well, that's the
way it hit me.
Bill Bonner notices Mr. Rosenberg slapping me
to try and bring me out of my sudden coma, and pretty soon
they are BOTH slapping me, and Mr. Bonner is saying that this
borrowing against home equity is actually bad news beyond
the debt thing, because things are really distorted. "Normally,
when consumers earn extra money it comes from the businesses
they work for. It is a cost to the business, reducing profits.
But this new revenue comes to corporate America (when it is
spent in America) without offsetting labor costs. U.S. businesses
didn’t have to pay anyone a salary in order to increase
consumer spending. Instead, the money came as though from
heaven, and fell directly into profit margins."
Hahaha! Good one, Bill! I mean, good one, MISTER
Bonner, sir! But whether or not I am allowed to call him by
his first name when he is around to hear me, the fact remains,
"How long do you think that we can keep THAT silly home-equity
withdrawal crap up?" Hahaha!
George Ure notes that if we are talking about
houses, then we should listen to this! "The median price
of a home was up to $231,300, up a scant 0.9% from year ago
levels. The problem is that with inflation running 4% for
the year to date, that means that in purchasing power terms,
home prices have dipped about 3% year on year." Exactly!
Additionally, Mr. Rosenberg goes on to report
that a lack of demand has pushed "unsold new housing
inventory to almost five month's supply, which is at a nine-year
high and the trend is clearly up." Well, if all of this
is not enough to convince you that there is something amiss
with the housing bubble, then perhaps you will be convinced
when he says "The number of newly built homes that have
yet to sell is up 20% year-on-year, the biggest increase in
And in speaking to some real estate people I
know, they say that business is down about 50%, too. But I
dunno if they were lying to me or not, but they were suspiciously
calm about it, whereas I know that if MY income was down by
50% I would be frantic and REAL tired of my wife screaming
at me to wake up and get my big, fat Mogambo butt (BFMB) out
of bed and go out find a damned job, or rob a store or something,
to get some damned money into this house!
He probably figures that a LOT of people are lazy and worthless
like me, and with such lackluster performance in the housing
market, he also surmises that retailers are so worried about
a lack of consumer spending that "they had to rely on
unprecedented discounting on Black Friday to lure consumers
into the malls." In case you don't know, the day after
Thanksgiving is known as Black Friday because it is the start
of the Christmas shopping season, the time when the stores
finally make enough profits for the year that they are now
profitable (in the black), instead of making losses (in the
And it is not just houses that are peaking, as Jim Puplava
of FinancialSense.com explains when he writes "There
are a number of indicators that have been sort of a warning
that we were heading to a profit peak. One thing that you’re
going to see that is common to all these cycles is every one
of them was preceded by a sharp spike in oil prices."
Even worse, Mr. Puplava reports that "There
are calls now in Congress for increasing the minimum wage.
If you start increasing the minimum wage labor contracts start
going up. That is a cost factor. If you look at this overall,
we’ve got rising energy costs, rising headline inflation,
and rising interest rates, which means it’s going to
be more expensive to borrow. All of these things are taking
place right now. "
With my red editor's pencil, I write on his
otherwise great essay, "Dear Mr. Puplava, Thank you for
your recent submission. We agree with you completely, but
feel your manuscript is unusable in its current form. We suggest
that you be more forceful in your conclusion. To that end,
please rewrite your excellent submission with more punch.
Perhaps we could suggest, as a starting place, ending the
work with the expanded sentence 'these things are taking place
right freaking now, and if you were not such a stupid jerkface
halfwit moron you would be running like hell back to your
mommy, cowering in fear, about what is going to happen to
you and everyone you love because The Mogambo was right! We're
freaking doomed!' "
- To show you a living, breathing beautiful
benefit of having silver as money, Bernard NotHaus of the
Liberty Dollar organization announces that, because silver
has gone up so high in price, the base has doubled. In essence,
if you had a Liberty Dollar silver ounce with "$10"
on it, representing a suggested buying power of ten bucks,
the very next day you would have, instead, a silver Liberty
Dollar with "$20" engraved on it! You doubled your
buying power when conducting business in Liberty Dollars!
He also said "But wait! I contend we do
not have inflation." He sees me rising up in my seat
to come up there and slap his face for saying something so
stupid, so he hurriedly goes on to laughingly explain "I
can remember over 50 years ago that I could buy four gallons
of gasoline for a dollar. At that time the dollar was backed
by silver. And that same amount of silver will still buy four
gallons of gas today! That just proves silver money holds
its value." Hahaha! Exactly right! Now I feel foolish
for doubting him!
Speaking of precious metals, something weird, I mean really
weird, is happening, as a reader of George Ure's UrbanSurvival.com
site notes when he writes "Just a quick note for you
and your peoples. Last night the COMEX gods gave a small notice
of margins being raised in our precious metals. Margins as
of tonight will be 33% higher in gold, from $1,350 to $2,025.
Silver will be raised to $2,363 from $2,025. "
For an explanation of what in the hell this could mean, I
have no idea, and am petrified that someone would ask me what
this means. Just in time, the reader saves my bacon and explains
"Whenever this happens, the markets for the precious
metals correct (go down). For the conspiracy theorist (me
& you), it's the only way the big boys can slow down the
demand. I know you don't give advice, but being a stock and
commodities broker for 15 years, this little tidbit is a money
saver. Get ready to buy physical gold and silver at discount
prices from today's price."
And speaking of weird, the chart of gold lease
rates is REALLY weird and dramatic!
And the best part, and this is why you should
be buying gold, is that the price of gold is being held down
by governments because it reflects so bad on them, giving
you a bargain, as Alex Wallenwein explains in his "Euro
Vs. Dollar Currency War Monitor". He writes "Gold
is 'manipulated' for sure, but that's a very broad term. The
US would generally like to keep it down. Europe wants it to
rise, but slowly, very, very slowly. The Chinese like it cheap
- and so do the Arabs. It allows them to buy more of it for
"In the end, what is really happening?
Europe and the US are wasting their precious resources and
general confidence-capital to try and keep its price under
wraps, somewhat at least - and the Chinese and Arabs are the
"Those two blocs just love gold manipulation
- and they have no interest in ending it. The Arabs have benefitted
from it for the longest. They've been using expensive dollars
to buy cheap gold for decades now. Then come the other Asians.
They still have a cultural affinity for it that has not quite
been bred out of them - yet. But during the 1990s Asian Contagion
currency crisis they all dutifully sold their gold to their
governments and bought US treasuries instead except for the
mainland Chinese. They were anecdotally reported to be buying
it wherever anyone was willing to sell it: In Africa, in Europe,
in the Middle East, you name it, they were there, crawling
all over the place, hungry for that yellow stuff."
Now, this looks like somebody, and I am not
saying who, but somebody is gearing up to declare their money
to be on a gold standard, so that their currency would have
instant, permanent value. And how do you say "How can
I serve you, master?" in Chinese? Well, alert reader
Ford C. says it is, phonetically, "Lei yiu mut yeh low
see." The way things are going, our children and our
grandchildren may find that phrase very handy.
But we are not here to bandy Chinese supplications about,
but to listen to me run my big fat mouth about gold being
suppressed. Ands how much is the price of gold being held
down? Steve Sjuggerud writes that adjusted for inflation,
gold was above $1,400 an ounce in 1980. But notice that gold
is still only selling at about a third of that! “We're
in a bull market in gold," he writes. "It's a secular
bull market, which is just a fancy way of saying the general
uptrend will stay in place for many years. And we're only
near the beginning.”
Well, what about silver, for which I have been
pounding the table as the freaking Buy of the Mogambo Century
(BOTMC)? Well, Jason Hommel of the SilverStockReport.com writes
"About 95% of the gold ever mined in human history still
exists in above ground, refined form. In contrast, about 95%
of the silver ever mined has been consumed by electronics
and jewelry. A silver ring or silver necklace, for example,
costs about $50/oz. to $100/oz., and thus, the silver is not
recoverable nor recyclable at a profit to the silver jewelry
buyer until we exceed those prices. So, gold is going to skyrocket
in price, due to the central banking change from selling to
buying, (but) silver is going to skyrocket in price much more
than gold, due to the silver shortage."
And it is not just eastern nations and foreign nationals that
are buying gold. Robert M. went to Boca Raton and reports
that the herding behavior has started showing up in precious
metals, and the coin shop he visited was sold out of Platinum
Eagles. The lady running the coin shop says "There has
been riproaring business there in Palm Beach County. Those
rich guys have been coming in and BUYING physical precious
- Tom Griess, proprietor of the TheChartstore.com, made an
appearance at FinancialSense.com by posting his essay, "Gold
vs. U.S. Dollar Index," which clearly shows that the
dollar has completely divorced itself from gold. His chart
shows that whenever the dollar got out of line with gold,
it was the dollar that corrected, not gold. In short, my bet,
based on this chart alone, is that the dollar is going to
take a big, big dive pretty soon, which is only appropriate
for a currency as worthless as the US dollar.
And in case you were absent from class the day they went over
this, if the dollar goes down, then either the price of gold
must rise, or everybody else on the planet must agree that
the price of gold should be down for them, too. It's a mathematical
imperative. And word to the wise; not everyone in the world
is as stupid as we Americans.
He finished his essay with exactly what I have
been saying, namely "History wants to tell you a story."
Speaking of stories, there is a lot of interest
in the idea that the government will confiscate people's gold
again, just like the horrid DR did in 1933. But let me tell
you that that day is a long, long, long way off, if ever.
Hell, the gold holdings of the Federal Reserve itself, the
biggest holder of them all, is only about $130 billion! Chump
change! And that is assuming that all the gold is all still
there, and we still own it, which I doubt very, VERY seriously,
because that would assume that bankers and governments are
NOT lying thieving murderous scumbag sociopaths, and to THAT
I can only laugh the nervous laugh of the fearful Mogambo
in fear (NOLTFM).
But this is NOT about how the CIA is out to
get me and shoots invisible thought-control rays into my wife's
head so that she hears "voices" commanding her to
"erase my disk drive", whatever in the hell THAT
is supposed to mean. But this is, instead, about the idea
of the government confiscating your gold, and I say you can
relax. When gold gets to be around $500,000 an ounce, or a
million dollars an ounce, then maybe they will start thinking
about it. But at $500? Hahaha! For what? A few dozens of billions?
And where in the hell are they going to get
the money to pay us for the gold? Hahaha! They are going to
accept that much inflation in the money supply so that they
can get some inconvenient physical bullion, which they are
already selling on the open market to get rid of it? Hahaha!
Don't make me laugh!
So set your heart and mind at ease, young grasshoppers.
You may safely buy precious metals until you are blue in the
face from arguing with your spouse and your relatives and
your neighbors and your own bratty children (and their snotty
little Child Welfare Workers with their precious "court
orders") about the relative merits of spending dollars
on food (which doesn't have lasting value) versus getting
more gold and silver (which do).
- If you like the appeal of the theory of Americans
running financial platforms, where we do all the mental jobs
and under-paid slave labor in other countries does everything
else, including all the work, then you will be sorely tested
when you read an essay on Financial Sense.com entitled "Cauldron
of Anxiety", by a guy who goes by the name Joe Average.
He says "Signs are that China is already beginning to
move up the food chain and away from being merely a source
of cheap manufacturing labour. Motorola, which once contracted
out manufacturing to companies like The Ningbo Bird Company,
soon found this former supplier had become a serious rival
in the Chinese handset market."
Hey! What the hell is going on here? Didn't
anybody tell the damned Ningbo company that we're Americans
and they are just stupid foreigners who must bend to our will
and accept subsistence-level wages so that we can live in
relative splendor? Did we just forgot to explain that to them?
Well, the NEXT time somebody thinks about "platform
companies" perhaps they will pause just long enough to
read an explanation penned by my pal, Phil S., which he performs
for us today as a marvel of brevity. "The economy in
24 words," he writes. "East makes. West takes. East
lends. West spends. East saves. West consumes. East creates
deflation. West creates inflation. East buys gold. West sells
In an odd happenstance, Rick Ackerman of Rick's
Picks has an idea about how Phil could be right to say that
the "east buys gold." He innocently asks, "What
could account for gold’s amazing strength over the last
month? One story making the rounds is that the Saudis and
some of the other oil producers have been moving into gold
in a big way. That sounds superficially plausible, except
for one detail: If oil revenues really were moving into gold
in a big way, the rally would be far more powerful than the
one we’ve seen. Crude oil constitutes a huge global
market, gold a microscopically small one, and my unscientific
guess is that even if just 10% of the oil producers’
revenues in a given month were to be shifted into gold, bullion
quotes would reach $1,000 in a trice."
In case you are not familiar with measuring
time in trices, it is the short length of time it takes for
somebody to call my wife and tell her I am at the bowling
alley, making googly eyes at the one I call Darla, which is
my adorable Mogambo way (AMW) of shortening "my darling
cocktail waitress" to an intimate nickname. She calls
me, in her funny and charming way, "Old Barf Bag"
because, she says, I make her want to puke.
But this is not about my exciting social life, but about gold.
For that, let us return to Mr. Ackerman as he says "If
the story about the Saudis is true – and it probably
is – quite a bit of OPEC flight capital could find its
way into gold, pushing quotes significantly higher while the
global financial system is still relatively strong and liquid.
That is what I believe we are seeing now, even if it’s
just a trickle so far. One robust piece of evidence that supports
this thesis is the relative sluggishness of mining shares.
You can be sure that if the princes of Saudi Arabia and Qatar
are acting to hedge their dollar exposure, they are piling
up every ingot they can get their hands on, not scaling in
shares of Durban Roodeport, Coeur d’Alene et al. Physical
metal is, and will remain, far more desirable for their purposes
-- and let the rest of us scramble months or years down the
road for that part of the supply that must still be gotten
out of the ground." I sit, stunned and speechless. Finally,
I say "Wow!"
- Russell Randall, on his AustrianEnginomics.com
site, lists 19 reasons why the stock market will go down 30%
in 2006 (before the "traditional" end-of-year rally,
he says). After reading these 19 reasons, and agreeing with
all of them, I marvel that that the market will only be down
by that little. But even that will be plenty enough to cause
a lot of money to disappear, and Ben Bernanke's dreaded deflation
will be here. Ugh.
****Mogambo sez: Things are getting more
and more scary every day, and that is why you should be accumulating
more gold and silver and oil stocks every day, too. That's
what the intelligent people in the past all did when things
got like this, and it worked out really well for them, too.
Things worked out pretty badly for those who didn't, however.
Richard Daughty, the angriest guy in economics
9241 54th Street North
Pinellas Park, FL 33782
727 546 5568