Having the government and the Federal
Reserve in cahoots with each other reminds me of a
humorous classroom exercise where the teacher had
the students complete some well-known phrase. For
the phrase fragment, "When the blind lead the
blind …", one insightful young student completed
the sentence as "get out of the way" - which is
perfectly correct, and damned good advice!
However, if the teacher had asked the kid
to complete the phrase, "When the Congress leads
the Federal Reserve to create more
and
more money so that Congress can borrow and then
spend more and more money to 'fix' more and more
problems of more and more people …", he would have
been correct if he had finished the phrase by
saying, "Then The Mogambo is right! We are
freaking doomed!"
And so while even little
kids know the terrible price we will pay for our
stupidity and greed, there is salvation! Adrian
Ash at bullionvault.com writes, "the last time
America's credit rating came into crisis - during
the late '70s - inflation ate both equity and
fixed-income investors alive", but "Gold, on the
other hand, rose by 510% for dollar-based buyers."
Gold! Just like I have been yelling about!
See? I'm not as stupid as you thought!
He
also notes that it wasn't just us clever Yanks
that made a bundle, but, "The metal rose five
times over against the British pound (GBP) too,
and spot gold prices gained more than 370% for
German investors. Japanese gold buyers made four
times their money inside three years."
On
the other hand, let's not forget silver, and to
that end SilverMiners.com featured a mineweb.com
essay that reported, "The latest figures from the
Commodity Futures Trading Commission show that the
net speculative long position on COMEX stood, at
the end of August, at just 4,196 tonnes. Silver
was trading, at that point, at between $11.80 and
$12.00."
I furtively looked around the
room to see if anybody else was as confused about
this information as I was, as it meant absolutely
nothing to me. Hell, I wasn't even sure the guy
was speaking English, for crying out loud! I was
hoping there would be a lot of other people
scratching their heads and looking puzzled so I
could rise to my feet and say "Of course, I
understand exactly what you are saying, but there
might be some people in the audience who do NOT
have the encyclopedic knowledge and high IQ
necessary to fully understand it all, like you and
I do, and you had better explain it to them,
because you gotta admit that most of these people
sure look pretty stupid!"
At that, the
crowd got even more hostile towards me for trying
to help them out! Fortunately, Mineweb immediately
diverted their attention by explaining what it
meant; "This net speculative position is at its
lowest level since the end of April 2003, when
silver was about to embark on its four-year bull
run." A four-year bull run? Wow!
Suddenly,
my heart jumped into overdrive, and I felt a cold
chill that could only mean that I did not have
enough silver stashed away, and leapt up to go out
and get some more. And perhaps it was my sudden,
rapid exit that prompted him to ask, as I ran down
the hall, "So does this mean that prices are
poised to move higher?" I thought to myself, "It
sure as hell does, if I can get enough money!"
And other prices are poised to move
higher, too, and one of them is oil. And why oil?
Well, that is the conclusion that I reached after
reading Jim Puplava's interview of Matt Simmons,
who is chairman of Simmons International and
author of the book Twilight in the Desert,
at the Financial Sense Newshour.
As
regards peak oil, Mr Puplava ominously says, "All
the canaries have stopped singing", a reference to
the fact that the mining industry used to stick a
canary down in a mine to see if the air was
poisonous by noting whether or not the bird died,
a callousness towards canaries that reminds me of
the Federal Reserve policy of constantly creating
the poison of too much money and credit, and then
watching their indicators to see how many people
die a financial death.
How does miners
killing canaries remind me of the Fed? The
difference being that when the canary dies, they
don't then stuff the mine full of more canaries,
but the Federal Reserve will drop interest rates
to increase borrowing, to increase debt, to
increase the money supply, to increase demand and
spending, to increase inflation in prices, to
increase the rate of people eventually dying a
financial death. Weird!
Mr Puplava
apparently thinks I am making too much of this
canary thing, maybe because he is not a "bird
person", or maybe because the topic was supposed
to be about oil, not canaries.
So perhaps
that is why he stays focused on oil, saying, "I
think the BP Statistical Review talked about a
refinery capacity at about 17.5 million barrels
today; and yet our consumption is 21 million
barrels a day."
Naturally I raise my hand
and ask, "How can we consume more petroleum
products than we refine from crude oil? It doesn't
make sense to me! How can you use more than you
make? It's impossible! Is this one of those rare
times when it is YOU that made a mistake, and it's
ME that is correct for once in my whole,
miserable, rotten life?"
Imagine my
embarrassment when he brushes me off by easily
explaining that "it's not just the fact that we're
importing oil, it's the fact that we have to
import the refined products of oil", too.
Well, why is that? Well, for one thing, we
haven't built an oil refinery in the United States
in more than 20 years, and Mr Simmons said that
now the "core units" of domestic refineries
"basically on average are about 85 years old."
Hahaha!
So this is how you develop "energy
independence"? Hahaha! I was right! We're freaking
doomed!
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.
Head
Office: Unit B, 16/F, Li Dong Building, No. 9 Li Yuen Street East,
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