Inflation attacks the
newsstand By The Mogambo Guru
Total Fed Credit (TFC) was down another
$1.7 billion last week, continuing on its trend
that I rudely characterize as, "a worrying lack of
growth in money and credit if you are going to
keep inflation going up and up and up forever
until we are all destroyed by such monetary
idiocy!"
TFC, of course, is the source of
magic that produces out-of-nowhere credit in the
banks, which the banks lend, which
increases the money supply,
which increases the prices of whatever in the hell
it was that was bought with the damned borrowed
money, and after a few iterations of the system
increases the prices of everything else, like
food, as the money sloshes around hither and yon,
and the next thing you know I am screaming at the
stupid little cashier at the grocery store because
she thinks I am freaking MADE out of money or
something!
This week what set me off was,
of course, inflation. And not just inflation in
general, as in the joke used by Adrian Ash at
BullionVault.com in his essay "USD R.I.P" that was
told by comedian Max Kauffman in the '50s; "Among
the things that money can't buy is everything it
used to." Hahaha! Very clever!
But even Mr
Ash sees the futility of attempting levity, as he
notes, "But US consumers have since lost their
sense of humor. The dollar has dropped another 86%
of its purchasing power since then."
No,
the particular thing that set me off in a rage was
that she said Barron's rose in price from $4 an
issue to $5! A 25% jump! Overnight! Naturally I
assumed that the stupid cashier deliberately
overcharged me, the little vicious brat, who is
probably a willing participant in some FBI plot
against me or another. Like for instance, the way
government agents snuck into my kitchen sometime
last week and sabotaged my blender! After 16 years
of working perfectly, all of a sudden the blender
just stops working? Just like that? For no reason?
Ha! Government sabotage, I tells ya!
Naturally, the cashier allying with the
FBI and trying to cheat me makes the famous
Mogambo Reflexes Of Lightning (MROL) take over,
and I drop into a defensive crouch behind the
bagboy, using him as both a victim and human
shield, and I snarl, "Overcharge me by 25%, will
you? Inflation is not so bad that I don't suffer
enough already, but now you want me to suffer even
more by cheating me out of an extra dollar? As ye
sow misery, so shall ye reap!" With that, I
tighten my grip around the neck of that stupid
bagboy to show him what suffering is, and suddenly
the cashier is yelling, "No! Stop! You weren't
being cheated! That's the new price! Look at the
cover of the magazine! See? It says $5 right here
at the top! See? The new price is $5! It is the
new price they are charging!"
I am
suddenly thinking to myself, "Oops!" I let go of
the bagboy's neck, which is good because I think
he had an accident in his pants (the little wimp!)
and I certainly did not want him bumping up
against me.
So I look, and sure enough,
she is right! The new price for Barron's is $5 an
issue! A 25% increase in price! As a long-time
reader, I know that Barron's has the official
stance that refined and educated people like us do
not sully ourselves by wallowing in such nastiness
as grubby inflation in prices or the greasy
corruption of Federal Reserve policy, because the
only thing that counts in life is that a) stocks
are rising and b) bond prices are rising (which
means interest rates are falling and bond owners
are showing capital gains), which they always do,
and if they don't, then they soon will, because
the Federal Reserve is always "on the case!", and
when the Fed slashes interest rates or
convincingly tells another series of lies with
doctored statistics (or both) that everybody
swallows without a whimper (including Barron's),
everything will be perfect again!
And
speaking of Barron's, I was jarred to note that
they report the Monetary Base as having contracted
almost $9 billion last week, dropping to $820.5
billion from $829.4 billion! Wow! This is such a
huge move that it looks like a typo!
Anyway, like I said, TFC was down $1.7
billion last week, which is not much, but which is
still utterly, completely inconsistent with a
Federal Reserve that history proves wants two
things in life: firstly, to never take my calls
("Let me speak to that butthead Bernanke!" and the
receptionist sweetly says, "Let me put you on hold
for the rest of your Nasty Mogambo Life (NML)!
Thank you!"), and secondly, to keep creating more
money and credit, to produce more inflation in
prices, particularly asset prices like stocks,
bonds and housing, and more inflation in consumer
prices, which they will lie about, so it doesn't
count.
Incredibly, the action in the stock
and bond markets shows that investors believe that
incredible monetary inflation engineered by the
Federal Reserve will, again, produce healthy
inflation in the prices of stocks, inflation in
the prices of bonds, inflation in the prices of
houses and inflation in the size of government,
and everybody is out buying lots of each, creating
the very inflation that they saw coming!
I
think that the original Latin expression is
"Biggus stupiditus cerebrum fiat currency happy
days are here again excelsior cogitum ad infinitum
crapola", which, of course, translates into
English as, "Only a brain of big stupidity could
possibly believe that excessive creation of fiat
currency and credit would always produce wonderful
benefits without unintended inflationary
consequences, because to imagine such folly is a
load of excrement."
If you don't believe
me, then read, "It's Different This Time, I Swear"
by Charles Zentay of thinkinvestblogspot.com. He
explains, "Ben Bernanke has a plan. Bernanke, a
long-time student of the Great Depression,
believes that the cause of the Depression was that
the Fed first overlent and then underlent,
whipsawing the economy into catastrophe. The
solution to prevent a future crisis is to flood
the banking system with liquidity during times of
instability."
My blood freezes in horror.
And then people wonder why I am so paranoid and
hateful, when it is so obvious "why" that they
could just ask this Zentay guy, who doesn't even
know me!
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.
Republished with permission from
The Daily Reckoning.
Copyright 2007, The Daily Reckoning.
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Office: Unit B, 16/F, Li Dong Building, No. 9 Li Yuen Street East,
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