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| My Reason to Live Long and Prosper |
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- I was surprised to see that Total Fed Credit
was not exploding last week. I was even more surprised to
see that Foreign Holdings of U.S. Debt held at the Fed was
actually down by $8 billion last week, too. Even the banks
were not making fools of themselves, as is their wont, by
gobbling up huge fistfuls of government debt. It was, in a
word, quiet. In the movies, when somebody remarks how quiet
it is, the hero says "Too quiet!" and the next thing
you know there are arrows and/or bullets flying all over the
damned place.
So I nervously remark that it is, indeed, the
proverbial "too quiet", because I know that there
are enemies out there. For one thing, crude oil prices are
up to around $66 a barrel, although to think that oil exporters
would NOT factor in an increasing devaluation of the dollar
into the price of oil, in the face of enormous American trade
deficits, monstrous American budget deficits and stupefying
rises in American business and household debt levels, is to
insult their intelligence. And in that regard I will note,
with a snide Mogambo sneer (SMS), that they were smart enough
to grab the global real estate that had most of the oil, while
we took the part that is next to Mexico and South America,
places so corrupt and stupid that economic refugees are flooding
into the USA to get away from there!
And for another thing, bonds are rising in yield,
meaning that bonds are falling in price, meaning that all
those billions of people around the world who own US bonds
lost some money and are getting ready to lose some more as
interest rates keep rising. Beyond that, two other noteworthy
things happened last week: The Federal Reserve has now officially
stopped reporting M-3, the broadest measure of the money supply,
and we have the new Treasury Statutory Debt Limit of $8.965
trillion, up by the $781 billion approved last week by Congress
at the last minute. Potent stuff!
I hear a rustling in the bushes off to my right,
and my trigger finger spasms. This is the economic enemy of
loans/leases at the banks increasing to a record $5,569 billion,
and savings deposits also soaring to a record of $5,238 billion,
yet Required Reserves in the banks fell to a microscopic $40
billion. Hahaha! The record low was in 2001, when Required
Reserves sank to $38 billion, which was the "insurance"
against losses in their much, much, MUCH smaller books of
loans/leases and deposits. You wanted fractional-reserve banking
carried to ludicrous extremes? Well, brother, you've got it
now!
Off to my left I see figures furtively sneaking
around, and it is the action in the Treasury Department. These
guys have borrowed, in the first 24 days of March alone, almost
$100 billion dollars! In three weeks! My eyes have a glassy
look in them, and I am gurgling incoherently as my puny little
Mogambo brain (PLMB) refuses to accept the fact that the government
is borrowing money at a rate that equals, on an annual basis,
10% of GDP! Gaahhh!
All of this ties in with Ben Bernanke, the new
chairman of the Federal Reserve, the evil place from which
too much money (TMM) is magically created, which pushes prices
up, which destroys economies and countries, which is the Iron-Clad
Lesson Of History (ICLOH). But this is not about how the Federal
Reserve has destroyed America by creating so much money and
credit, but about Ben Bernanke. On Money.cnn.com I read where
Ben Bernanke said that the "global saving glut helps
to explain both the increase in the U.S. current account deficit
and the relatively low level of long-term real interest rates
in the world today."
I see reporters suddenly bolting for the doors
and cowering under the seats, because they all think that
The Mogambo is going to go freaking Mogambo ballistic (FMB)
over this "savings glut" remark by Ben Bernanke.
But, you will be surprised to learn, I am NOT one of those
pooh-poohing this "savings glut" thing, as he is
exactly right; there actually IS a "savings glut"!
And it IS responsible for the "relatively low level of
long-term interest rates in the world today." Parsimonious
foreigners are saving their money instead of spending it all,
like their insane American and British counterparts.
But, hell, in comparison to America, even The
Mogambo has a "savings glut" just because they threw
me out before I could spend my last dime buying another round
of tequila shooters for me and my hoodlum friends at the Hot
Mama Jamma Bar, whose charming motto is "Cheap women,
cheap thrills and cheap liquor for cheap scumbags like you!
No cover charge!"
But this is not about how funny I looked as
the bouncers tossed me into the parking lot, or how everybody
laughed when they called me a "stinking pervert",
but about how the big freaking question (TBFQ) is "Where
did these foreigners get all this glut of money to save?"
Instantly, the lightning reflexes of the Mogambo (LROTM) spring
into action, and I hit the answer button! The buzzer sounds,
and I triumphantly shout out the answer "Ultimately,
from the Federal Reserve, Alex! Hahaha! The damned Federal
Reserve has created so damned much money and credit over the
last couple of decades that it spawned a huge stock market
boom, plus a gigantic bond market boom, plus an explosive
size-of-government boom, and a monstrous housing boom! All
this money piled up overseas, thanks to the trade deficit!
And, since we are talking about the horrible things that the
Federal Reserve has done by creating so much damned money,
it also created the 'savings glut'!"
Out of the corner of my eye I can see the cameraman
trying not to laugh, and Alex Trebek sneers at me and says,
"Wrong! Sorry, Mogambo, but Jeopardy rules require that
your answer must be in the form of a question", and the
sound-effects guy makes a rude "awwwk!" sound, and
then the whole Jeopardy audience and the other two contestants
are laughing at me. My face stinging with shame as their hooting
derision rings in my ears, I am thinking to myself "Go
ahead and laugh, you stupid bastards! Just wait until this
whole Federal Reserve/fiat money economic piece of crap explodes,
and gold and silver and commodities soar! I'll be so rich
that Mister Big Shot Alex 'Jeopardy' Trebek himself will be
begging me, on bended knee, for some gold or silver, and I'll
laugh with scorn (LWS) and say "Wrong! Sorry, Alex, but
the Mogambo rules say that your plea must be in the form of
beautiful naked ladies!" And then I'll bend down until
my nose is almost touching his, and I'll scream that horrible
sound at him, "Awwwk!" And then I will laugh- Hahaha!
-and slam the door in his face!
But this is not about how I was cruelly cheated
out of my chance to make some big money on Jeopardy because
Alex Trebek acted like a real butthead about his precious
"rules", but, rather, about the glut of savings
in foreign hands. In that regard, my answer was perfect: Thanks
to Alan Greenspan's 18 years at the Federal Reserve, money
has been pouring out of the Federal Reserve and out of the
government's checkbook into (mostly) the economy of the USA,
and, by virtue of the trade deficit, the money pours right
back out and into foreign countries, and into the hands of
people who make the stuff we are buying with that trade deficit,
who then save the damned money. Thus, the Federal Reserve
created the "savings glut"! Hahaha!
And speaking of Ben Bernanke, George Ure of
UrbanSurvival.com, commenting on Ben Bernanke's first speech,
noted that Bernanke cited himself as an authoritative source!
And not just once or twice, either! Mr. Ure says that Bernanke
"included himself in 4 out of 7 notes - a remarkable
57% of the time." Hahaha! What arrogance!
But I love this novel approach, and I can’t
wait to use it myself! "I call, for my first witness,
me!" Then I will testify how I, as an expert, pronounce
me sane, sane, sane, and the only insane people around here
are my family and neighbors who are trying to get me locked
up! And I will also testify, as an expert, that if they are
NOT being driven crazy by all of these central banks creating
outrageous amounts of credit and money, then THEY are either
crazy or too stupid to have an opinion about anything! And,
therefore, they probably knocked over their own stupid birdbaths
and spray-painted their own houses with the words "Our
money is being destroyed by the freaking Federal Reserve!"
And if that is not enough evidence for the judge and jury,
then I will call myself to the witness stand again, time after
time, citing even MORE of my expert testimony!
But if the "savings glut" starts disappearing,
then I know where the money is going to go. Notice how I astutely
surmised this from Steve Sjuggerud's commentary at DailyWealth.com,
where he said his buddy Jeff Clark told him that "About
10 weeks from today - maybe sooner - Federal Ban 18 will be
lifted from Chinese Law. On that day, Chinese companies listed
on American exchanges will be allowed to return home - and
sell shares for the first time in history on the local markets
of Shanghai and Shenzhen. And for the first time in history,"
he says, "Chinese citizens will be allowed to buy them.
That’s when the REAL China Boom begins."
- An article by Patrick Barta in the Wall Street
Journal quotes a Macquarie Bank report that suggested that
after looking at the data for the last 100 years, "All
commodity prices tend to move in tandem. So when oil, gas
and metals prices surge, agricultural commodities eventually
should follow." Now, they figure, with the current prices
of food being so low, we "could be at the start of sustained
rally" in agricultural commodities, too!
And let's be sure we differentiate between his
"rally", by which investors get rich by investing
in commodities, and "inflation in food prices",
by which we working poor proletariat slobs get poorer by buying
commodities, mostly because food costs so much, but arrogant
Social Services workers won't let you put your stupid kids
on subsistence rations, but instead want YOU to play less
golf and use the money to buy them food!
And if you want another way that inflation destroys
the economy, I found out that the Sonny's Barbeque restaurants
in Orlando have now fired their cashiers, and are simply making
the waitresses take care of the money, too. Unemployment and
heavier workloads DO result from inflation!
Steve Saville, writing the essay "The Non-Stop
Inflation" at SafeHaven.com, notes that "The correct
definition of inflation is an increase in the supply of money
that CAUSES a decrease in the purchasing power of money, but
we usually define it as simply an increase in the supply of
money." I say the same thing, but leave it at that. But
Mr. Saville actually does real work, and goes to the hassle
of looking at the total US money supply, as measured by M-3,
from 1959 through to January of 2006, a period of 47 years.
In conclusion, he says "apart from a very brief and shallow
dip below zero during the first half of 1993, the year-over-year
change in M3 has been positive throughout this entire period.
The point is that inflation is a constant."
Inflation is a constant? At this terrifying
news I started whimpering in fear, and my pitiful sobbing
grew to a scream of mortal dread when he went on to say "The
things that change are the rate of inflation and the parts
of the economy that are the main beneficiaries of the inflation."
This is the worst news I have ever heard! Taking
the coward's way out, I am putting the barrel of a pistol
in my mouth, when it suddenly occurs to me that maybe I have
a reason to live after all! Maybe I can make some money on
this! How? Sadly, I discover that I have no freaking idea,
so I put the barrel back in my mouth, and just as I was pulling
the trigger, Mr. Saville reveals how! He says "When confidence
in governments and the money they make legal tender is in
a long-term decline -- as is the case right now -- then the
inflation will boost commodity prices relative to equity prices
and boost gold prices relative to commodity prices."
Ah! Making a fortune in gold! My reason to live long and prosper,
just like Mister Spock told us to! Thank you, gold!
And in case you plan on living a long time
and survive the coming economic cataclysm, then you will want
to know when to get back into equities and bonds. He says
"when confidence is rising, the inflation will boost
financial assets (stocks and bonds) relative to hard assets
(gold and commodities)."
And for another look at how inflation in housing
is affecting the economy, thanks to the housing boom which
has driven the cost of housing to ludicrous extremes, companies
and schools all over the place are complaining that they can't
attract employees because the cost of housing is so high!
The Washington Post reports that "Police departments
around the country are contending with a shortage of officers
and are trying to lure new applicants with signing bonuses,
eased standards, house down payments and extra vacation time."
Signing bonuses, house down payments and extra vacation time
all mean higher costs and higher taxes, as does lowering the
"standards" in the hiring process, which were put
there to curtail a previous problem with unqualified, expensive,
dangerous people being cops. Hahaha! Welcome to the world
of inflation, chumps!
And there is (to show you that the misery of
inflation never stops and that is why it is important not
to let the damned Federal Reserve create so damned much money
in the first damned place) also a tragically-irresponsible
push to again increase the federal minimum wage, meaning employers
will have to pay higher wages, and then employers will have
to charge higher prices to recover their higher labor costs.
And the higher labor costs of their suppliers, too, means
that supplies will cost more, too, which means that the employer
has to charge even higher prices to recover his higher materials
AND labor costs!
And why do they want a higher minimum wage?
To offset higher prices! But if they get higher wages, then
prices will go yet higher! Now, if it stopped there, then
I would have no problem with it at all, but it does NOT stop
there. In fact, the overwhelming majority of the people in
this country don’t have jobs, and so they are NOT going
to get higher wages. The young, the old, the sick, the handicapped,
the unemployed, and the criminals are CERTAINLY not going
to get higher wages to offset higher prices! It just makes
them worse off! Worse off and angrier!
Well, there has already been a lot of suffering,
thanks to inflation in prices, thanks to inflation in the
money supply, and now the idiot people think that mandating
higher wages will "make it all better"! Hahaha!
Idiots! Prices are too high, but making prices rise higher
will "make it better!" Hahaha! America is a nation
of first-class morons, and that is why we richly deserve the
misery we will be getting!
- In the March 25 issue of Economist magazine
we have a photograph of Ben Bernanke that accompanies the
article "Bernanke Ponders His Course." If you look
closely at Bernanke's face, you can clearly tell by looking
at his eyes that he is thinking "Oh, my God! That Mogambo
idiot was right! We ARE freaking doomed!"
But the real news was the following article,
entitled "The Issing link", which takes a look at
the "huge divide in monetary policy thinking between
Europe and America" such as any emphasis on money and
the money supply. The article says "Yet, the odd thing
is that the standard academic models used by most economists
ignore money altogether. Inflation instead depends simply
on the amount of spare capacity in the economy. Nor does the
money supply play any role in monetary policy in most countries,
notably America." The good news is that mainstream economic
opinion is swinging back around to, again, keeping a lid on
the money supply.
Of course, America and "most countries"
are wrong, wrong, wrong, and a handy 30-year/40 countries
chart of the inflationary effects of increasing the money
supply, included in the article so there is no mistaking it,
shows an almost 1-to-1 correlation! Therefore, increase the
money supply by ten percent, and you will get ten percent
price inflation!
Now let's turn to the tables in the back of
the Economist magazine, and take a gander at the changes in
the money supplies of those countries of the Anglo-Saxon persuasion,
and we are looking at some with 2% growth in their money supply,
and some with 6%, and some with 8%, and some with 12% and
one in the 26% range, too. Bad news!
And it's not just me, either! Jim Puplava at
FinancialSense.com writes "If you look at global money
flows around the globe there isn’t one central bank
that isn’t re-inflating at rates 2 or 3 times or 5 times
their economic rates. So, what is happening now for the first
time is you’re seeing currencies depreciate around the
globe against the real standard of money which is gold. I
think what you’re going to see first is stagflation,
and eventually leading to hyperinflation. There’s no
way with $51 trillion of unfunded Medicare, Medicaid, and
Social Security liabilities that we’re going to go on
some austerity program in this country. It’s just not
going to happen."
And if you think that houses are going to be
your salvation, then think again, as we learn from Rob Peebles
and his Random Walk column at PrudentBear.com. He writes that
Robert Shiller, a Yale professor, "looked at housing
data from 1890 to 2004. After looking at it, he and his calculator
concluded that the average annual price increase over that
period, adjusted for inflation, was a paltry 0.4%." Hahahaha!
Owning a house provides, investment-wise, a long-term 0.4%
gain? Hahaha! It's so low that it is in the range of statistic
error caused by rounding!
As bad as this is, Mr. Peebles goes on to say
that "The return would be even more pathetic if housing
had not taken the baton from the withering stock market in
the Great Asset Inflation Race."The same thing was reported
from the history of houses on the Herengracht, a famous Dutch
canal, that have been very popular ("location, location,
location") since 1628. It short, it was boom and bust,
cycle after cycle, resulting in a long-term gain of "just
0.2% a year adjusted for inflation." Hahaha! As if there
could be any other result!
- For a daily dose of Mogambo screaming about
silver (MSAS), I offer this interesting PR Newswire bit of
news. "Experts maintain that about 40 billion ounces
of silver has been mined throughout all of human history,
and that about 90% of that has been irretrievably consumed
by industry, jewelry, and photography."
I stop the tape, and caution you to write in
your notes that they said that 40 billion ounces have been
mined in all of history. Secondly, they note that 36 billion
of those 40 billion ounces of silver have been consumed and
are now irretrievably lost.
I re-start the tape. "Most of the approximately
3-5 billion ounces of silver left is in the form of jewelry,
mostly held in India." I don't know where you live, but
around here the news that most of the silver is in India is
like saying it is on the moon. The question on everyone's
minds is "So how much silver is available for me to buy,
so I can get in on the coming silver bonanza?"
While obviously deploring my raw greed, they
nonetheless answer by saying "Silver that is in the form
of above-ground, refined, deliverable, identifiable silver
is about 150 million ounces, mostly held at COMEX." I
am always surprised by this statistic, as the proposed Barclays
silver ETF, alone, is supposed to suck up about 130 million
ounces of silver! And there are other silver ETFs in the works
around the world, too, and they could suck up hundreds of
millions of ounces more!
As perspective, they write "The U.S. government
once held up to 6 billion ounces of silver, but around 2002,
the U.S. ran out, and had to buy silver on the open market
for its Silver Eagle coin program. The COMEX once had up to
1.5 billion ounces of silver about 10-15 years ago, but today
has less than 1/10th of that: 117 million ounces. Conclusion?
If there really remains less than 150 million ounces of silver
in above ground refined form, then there is about half of
an ounce of silver per person in the U.S., which means that
if you have a single ounce of silver, the SUA might say that
you have 'more than your fair share.' "
- If you want your investment advice mixed with
the dreary recurring history of the world, era after era,
then the guys at DailyWealth.com are just the guys you are
looking for. They write "As the world’s developing
economies like India, Brazil, and China get richer and more
developed," they say, they will probably "still
have the desire to blow each other up. We wish it were not
so, but the producers of guns, missiles, tanks, bullets, and
fighter jets are doing a brisk business." As evidence
of that, they note that "With America leading the way
with a proposed $440 billion defense budget in 2007, defense
contractors like Northrop Grumman (NOC), Lockheed Martin (LMT),
and General Dynamics (GD) are enjoying a bull market in the
$1 trillion global arms industry… driving the benchmark
Spade Defense Index to new highs."
This may have something to do with George Ure of UrbanSurvival.com
reporting that, suddenly, ammunition is very, very scarce.
Ugh.
****Mogambo sez: The unusual action of silver
and gold here lately is the result of lots and lots of guys,
businesses and banks on the hook for billions and billions
of dollars in short sales, year after year after year. The
rise in the prices of gold and silver means financial death
for them. So buy them with confidence, perhaps even with a
little malice against those creeps, as they can't keep it
up for much longer, and the prices of gold and silver will
shoot to the moon when they finally give up.
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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