Total Fed Credit was up only $1.7 billion
last week, and foreigners bought up only $311
million in US government and agency securities,
which seems odd because interest rates mostly
fell, and the rate on 3-month Treasury bills
dropped to 3.6%, almost a full percentage point
below the Fed Funds rate.
And the link at
321Gold.com showed $43 billion in repos last
Thursday. A new record for the slimy banking
system!
And it is not just us moron
Americans who are acting like corrupt
scumbags, but the European
Central Bank (ECB) is just as shallow, as we learn
from Jose Manuel Gonzalez-Paramo, the ECB's
"market operations" top dog. According to the
Financial Times headline, he says that the ECB is
"ready to take emergency action 'for as long as
needed'".
Apparently, my scathing email
message ("What in the hell is 'for as long as is
needed' supposed to mean?") got through, because
later in the article he "clarifies" things by
explaining that "To the extent that money markets
remain subject to tension, we will stay there as
long as necessary."
Tension? What the hell
is "tension"? Naturally, I became angry at this
continual evasion, and I was not surprised that my
next email did not go through, seeing that it was
just one long, rude, obscene, angry, threatening
and vaguely homicidal message from the Very Dark
Side Of The Mogambo (VDSOTM).
Part of the
problem that necessitates such meddling in the
markets may be found in the essay "Is Another
Dot-Com Bust Imminent?" by Robert Morley and
Richard Palmer, and forwarded to me by Junior
Mogambo Ranger (JMR) Terry L. The question and
concern is plain: are stocks high enough to crash
and take the economy with it? They explain, "If
you try hard enough, any number of reasons can be
found to justify paying high prices for stocks
with little earnings (and sometimes there may be a
good reason). But the question is, why would so
many choose to when the economy is flashing clear
warning indicators of trouble ahead?"
I
thought he was asking a question, and I was
already rising to my feet to helpfully explain
that a lot of really stupid people have been taken
advantage of by unscrupulous people, and these
unscrupulous people still have mortgages to pay,
and children to send to college, and bills to pay,
and us stupid people have to continue to be
fleeced so that the unscrupulous amongst us can
continue to pay their bills, and how I blame the
Federal Reserve for creating all the excess money
and credit, and how I blame the Congress for
allowing them to create all that excess money and
credit, and how I mostly blame the Supreme Court
because they are the corrupt, lying, thieving
buttheads who always ruled that the constitution
does not say what it clearly says about what money
is, and what it is to be made of, and how it is to
be valued, and now we are stuck with a fiat
currency in the hands of a corrupt central bank
being used to grow the size and debt of the
government, which is the opposite of what was
intended in the constitution.
Since this
is one of my favorite harangues, you can imagine
the look of horror on their faces as they see me
licking my chops in anticipation. They quickly
head me off and hurriedly interject the
invitation, "Let's recap."
And then, in a
sudden avalanche, they recite the long litany of
problems, starting off with, "The housing market
is collapsing and the bottom is still nowhere in
sight. Foreclosures have doubled over the past
year. Subprime borrowing, which used to be over
10% of the total market, has virtually dried up.
Home inventories are rising while home prices are
falling like rocks across most of the country.
People are no longer able to use their homes like
ATM machines every time they refinance their
mortgages."
By this time I am reeling, but
they unrelentingly go on, "Consumer spending is
almost sure to take a hit. The home construction
industry is seizing up, with thousands being laid
off. The banking industry is being walloped by a
credit crunch that Federal Reserve chief Ben
Bernanke considers so serious that he almost
immediately cut interest rates. The banking sector
is hemorrhaging. The biggest bank in the United
States reported a 57% drop in third-quarter
earnings. Bank of America, the second-largest US
bank, reported a 32% drop in earnings. The leading
US savings and loan, Washington Mutual, says it
expects a 75% drop in profits, while Merrill Lynch
had to write down $5.5 billion in bad subprime and
leveraged-loan losses for June to September.
Thousands of people in the real-estate, mortgage
lending and banking sectors are being laid off."
And to show that this not entirely news to
anyone, they note that, as you would expect, "In
August, investments totaling a record-breaking
$163 billion fled the US, according to the latest
Treasury Department figures. For the first time
since 1998, foreigners on balance sold US
government Treasuries. The dollar is at its lowest
level ever. The Canadian loonie is now worth more
than the US dollar. The euro continues to rise
against the dollar."
Then they stab me
right in the heart with the thing that I fear
most: inflation in prices. "Prices of commodities
including wheat, corn, milk, oil, gold and silver
are all soaring - also not good news for consumer
spending or the economy. And, amazingly - in the
face of all this bad news - investors continue to
buy US stocks that could well be significantly
overvalued."
And notice that he does not
mention how bonds are so grossly overvalued, and
how the system of overlapping/incestuous/expensive
governments is grotesquely overgrown, too, all of
which is because so damned much money has been
created by the central bank to finance all this
additional government debt, and all of these
oceans of money had to end up somewhere, and there
is nothing else that CAN literally spend or absorb
that enormously much money! So naturally
everything is overpriced!
In short, things
are starting to get really weird out there.
Perhaps Mike Whitney of
InformationClearingHouse.info sums it up best when
he says "The news is all bad. The nation's
economic foundation is in shambles. US credibility
is shot. Bush and Greenspan have put us on the
road to ruin. Now their work is done. We're flat
broke."
Flat broke? Yikes! I remember the
first time I told the family that we were flat
broke, which was bad enough what with all their
whining and yelling, but made all the worse by
having to admit it was because of my own indolence
and stupidity, and then made even worse than that
by having to repeat the same thing week after
week, until I finally had a bellyful of their
whining and complaining, and I finally got up off
of the couch, took a shower, and went out and got
a damned job, which at least shut them up for
awhile.
So it is surprising to me as I
look out of the periscope of the good ol' Mogambo
Bunker Of Ultimate Refuge (MBOUR) that the world
is not actually in flames, and the idiots
collectively known as "the American public" are
not out rioting in the streets.
Then I
remember the old adage that "ignorance is bliss",
and then perhaps it all makes sense again. Then I
remember that I am pretty ignorant about a lot of
things, too, like interpersonal skills, compassion
and ordinary civility. Then I wonder why I am not
blissful. I figure it is a plot by the CIA. Or my
hateful neighbors. Probably Bob.
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,
Central, Hong Kong Thailand Bureau:
11/13 Petchkasem Road, Hua Hin, Prachuab Kirikhan, Thailand 77110
