Drunk With Absolute Purchasing Power
As usual, I got completely sloshed before I found the nerve to look at Total Fed Credit last week, as those Federal Reserve weenies have apparently made it their mission to destroy the United States by destroying the dollar by continually creating more and more money and credit, which produces an increase in debt and the money supply, which makes more dollars chase a relatively static (in the short run) supply of goods and services in the auction process that is the essence of a free market, which bids up prices, which makes everybody really grumpy because things cost more, and then the wife and kids come whining about how they don't have enough money to buy all the things they want, and I tell them "Welcome to the club, morons!" which, for some unexplained reason, they deem an insufficient response.
So holding one bloodshot, bleary eye open with an oddly-benumbed finger, I see that TFC was actually down last week, but only by a piddly $253 million, which is mostly a rounding error as far as I can see.
This may be, as Rick Ackerman of Rick's Picks reports, because demand for loans is going down, so there is no need for the Fed to create more money. But the important thing is that more money was NOT created out of thin air last week by the despicable Federal Reserve, which predictably makes me aghast and fearful, just as I thought it would, because no matter what the Fed does now, it is too, too little and too, too late.
But foreign central banks, staffed as they are with idiots, too, are still busily buying up federal government and agency debt through their "custody" account at the Fed, and last week they bought up another $11 billion to add to the $17 billion they bought the week before that, which makes me howl - aaaooooooOOOOOooow! - in outrage.
And speaking of $17 billion, that is slightly less than the inverse of the amount of non-borrowed reserves at the banks! Hahaha! A negative $17.2 billion! Hahaha! Negative reserves! Hahahaha! Idiot banks!
In short, by destroying our money we are transforming ourselves and our children into slaves of foreigners, who are all evil, which you already know if you have ever watched any movies in the "Us Versus Them Action Flick" genre, such as any of the exciting escapades of Bond, James Bond, or something involving creatures from outer space landing here and killing us with ray guns, tentacles and/or mutant spores.
The fact that they are evil is the reason why they want our children to be indebted to them; and in the meantime the debt is also a hefty club to beat us into submission about a whole range of issues, like maybe how the Air Force wants to buy some airplanes from Airbus, a European aircraft manufacturer (and is therefore riddled with foreigners, all of whom are, of course, necessarily evil), all to the chagrin of Boeing, which wanted the contract, and which says that it will "appeal" that decision.
I can see where Boeing would want to appeal, as it shows a remarkable outbreak of common sense and sanity in military procurement. But if Boeing wants to win the contract, then they simply have to redesign their airplane to give the customer what was wanted, and slash everybody's overly-generous wages by half or more to get the price down. Simple!
But this is not about airplanes, but about money, because all the money that the Federal Reserve creates day, after day, after day ends up, mostly, in the hands of foreigners, either through the trade deficit that is running at an unbelievable $815 billion a year, or as mere interest payments on the money that foreigners have loaned to us, which (since I was talking about it) totals $2.141 trillion in government debt in this one foreign central bank account at the Fed alone!
Now, paying an average of 5% interest on this one stinking account, this means that we are forking over $107 billion a year to these foreign central banks already. And when interest rates finally rise to the point where the yield of bonds offsets inflation because bond holders finally realize to their horror that they invested a whole 14-inch pizza and now have an asset that is only worth a 12 inch pizza, plus this little, tiny little 5% sliver of pizza (the interest they made), they will say, "That Disgusting Mogambo Moron (DMM) was right! I can't believe such a raving lunatic could be right about anything, but inflation is killing us in general and me in particular! The purchasing power of my money is constantly being eroded by the Federal Reserve creating so much more money and credit, and so it makes things cost more, and more, and more! Oh, woe is me! What shall I do to extricate myself from this stinking quagmire of fiat currency and unlimited fractional-reserve banking along with monstrous government spending that measures almost 25% of GDP that produces inflation in prices until I am standing here, looking like an idiot, going bankrupt while extolling someone as loathsome as The Mogambo?"
I straighten my necktie to hopefully lessen my loathsomeness before answering the question as to an alternative investment, namely gold and silver, as history proves that everyone always runs to precious metals at the end of the boom and the beginning of the bust, which I can prove with a terrific visual aid of Fred Flintstone atop a dinosaur rigged up as a crane, and he is mining gold! Gold! This is proof that gold has always been valuable!
But I was having a difficult time getting the damned display out of my satchel, as a stupid stray cord was twisted around the neck of a toy dinosaur, which was jammed under the little miniskirt of Wilma Flintstone, which I cleverly made out of Barbie doll to complete my little stone-age tableaux. But her little plastic feet were shaped for high-heel shoes, and when I put them on her, she started looking pretty good, especially after I added the miniskirt, a lot of cheap makeup and lipstick. I was sure it would be a hit with men, but it turned out not to be such a big hit with either schoolchildren ("That looks like my older sister!") or their horrified teachers ("That looks like my daughter!"), so I only carry her now out of nostalgia.
So there was an awkward silence as I cursed and struggled with the tangled display items, which was thankfully filled when James Turk of GoldMoney.com said that the problems of "disappearing purchasing power" can be solved with gold, which he proves by showing that, for instance, "When viewed in terms of gold, the price of crude oil is essentially unchanged throughout the (last) six decades. It is the dollar that is volatile, not gold."
So if people could buy oil with gold, the price would have been unchanged for 60 years! Wow! Now you see the beauty of gold as money; prices never change! Your purchasing power is absolute!
By this time everybody is applauding Mr. Turk for his terrific suggestion, and I am sitting there looking like a chump. Just me and Wilma. At least we have each other.
The MOGAMBO GURU, e-economic newsletter,
by Richard Daughty, the angriest guy in economics.
Editor's Note: Richard Daughty is general partner and COO for Smith Consultant Group, serving the financial and medical communities, and the editor of The Mogambo Guru economic newsletter - an avocational exercise to heap disrespect on those who desperately deserve it.
The Mogambo Guru is quoted frequently in Barron's, The Daily Reckoning and other fine publications.