A potent inflationary
cocktail By The Mogambo Guru
Finally, the Federal Reserve showed its
true inflationary colors, and Total Fed Credit
went up by $6.6 billion last week. The
significance of this is that when you take another
$6.6 billion in bank credit and multiply it by the
current fractional-reserve multiplier (infinity),
this calculates out to (according to my rough
calculations) exactly 6.6 jillion gazillion
umpty-ump quintillion dollars that can be created
by the banks, which is just about enough money to
bail out everybody in the Whole Freaking World
(WFW), which (according to the bizarre current
economic theory
and
practice) is the new purpose of a central bank;
create a bubble by creating too much money and
credit (which finances the bubble) and then bail
everybody out of the ensuing bust by creating
another bubble by creating too much money and
credit again and again! Hahahaha!
This is
the "genius" of Alan Greenspan? Hahaha! What a
moron! Hahaha! I laugh in Utter, Utter Mogambo
Contempt (UUMT), which unfortunately sounds like a
sick raccoon retching and coughing, and which
probably explains why, as John Hoefle at Executive
Intelligence Review says in his essay, "The
Bankers Know: Something Catastrophic This Way
Comes", that, "By now, most people are aware that
former Federal Reserve chairman Alan Greenspan is
on a 'not my fault' tour, proclaiming to everyone
who will listen that he is not to blame for the
collapse of the financial system. By saying he
'didn't really get it,' Sir Alan is choosing to
cloak himself in the mantle of incompetence, in
the hope that he won't go down in history as the
worst central banker of all time."
But
incompetence and inflation is what a central bank
is all about! According to the Inflation
Calculator, it takes $21 in 2007 dollars to buy
the same stuff that $1 would have bought in 1913
when the monstrous Federal Reserve was created!
And even using these biased statistics, the dollar
has lost half its value since 1984! That's 14%
inflation per year since just before Alan
Greenspan took over the Federal Reserve! 14%!
And we are getting ready to create more
money and more inflation, as the US Senate
approved a bill to raise the national debt limit
by another $850 billion, taking the National Debt
to a stunning $9.815 trillion dollars, which the
government will dutifully spend as soon as they
can. As Anthony Cherniawski at the Practical
Investor newsletter noted in astonishment, "What
is intriguing is that none of the US news services
are covering this event." Indeed!
And it
is not that the world needs more money or the
inflation it causes, as we learn from the front
page of Tuesday's Wall Street Journal about a rare
Puer tea, which went from
$5 a cake last April to $35 in China recently.
"Puer's popularity," the Journal explains,
"reflects how China, awash with cash and slim on
investment outlets, is primed for speculation."
In short, too much money looking for
somewhere to go! No wonder stock markets are going
up, despite the utter idiocy of it!
And
now add to this potent inflationary monetary
cocktail the news that Chinese workers' wages rose
by 21% YOY in the first quarter, and are even
higher now, and how that is going to add to a
Chinese wage-price spiral of monetary-inflation,
price-inflation, monetary-inflation,
price-inflation that they already have, and how
that means that the prices of stuff are going to
freaking go to the moon for them and everybody
else, and how I am going to lead off the Mogambo
Evening News (MEN) with this horror tonight, and
maybe deserve a Pulitzer Prize for it, that I will
not win, again, because 1) I have no talent, and
2) Everyone is against me.
Now add in the
news from Tony Sagami of MoneyandMarkets.com about
"The Official Launch of the China Investment
Corporation". He reports, "The China Investment
Corporation (CIC) is the new $200-billion
sovereign investment arm of the Chinese
government." $200 billion! Wow! The government is
going to invest $200 billion sometime soon!
Along with now allowing Chinese citizens
to invest in foreign countries, "All this new
money is going to add even more fuel to the
already red-hot China markets." And world markets,
too!
And if that is not enough, on the
same page was a headline that said the same thing,
namely that all of this money being created
willy-nilly means that "Global Scramble for Goods
Gives Corporate Buyers a Lift".
In short,
grossly excessive amounts of money and credit are
constantly being created and spent with
unbelievable abandon, and that means inflation in
consumer prices heretofore found only in
nightmares, history books and old newsreels is
(standing up with a groan and looking out of the
window) just over the horizon over there, and is
here today in the form of stock markets setting
insane records and bond markets setting insane
records.
It's going to get really weird,
and really ugly, really soon.
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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