The cold comfort of economic
collapse By The Mogambo Guru
Total Fed Credit was up $2.4 billion last
week as the Fed continues to pump excess money and
credit into the economy, as if the resultant 11%
inflation in consumer prices is not inflicting
enough damage and making my family whine for more
money, all the time wanting more and more money,
which is more than enough reason to rise up as an
angry mob and storm the Federal Reserve in
Washington DC to throw these incompetent preening
weenies out into the street and into the hands of
the people who are suffering the horrors of price
inflation (me) and economic death
(us)
because of the actions of the Fed, and I will
volunteer to personally "take care of" the
monstrous Alan Greenspan, the actual demon from
hell who did this to us, and Ben Bernanke, who
continues the tradition.
And let's not
forget to persecute Bob Woodward, the laughable
idiot who penned the ridiculous, fawning
hagiography about Alan Greenspan titled "Maestro",
or the idiot British government which actually
awarded Greenspan a knighthood! Hahaha! Morons!
And it isn't just the Federal Reserve or
all the world's central bankers and governments
that are acting like morons, but everyone, as I
prove with Bloomberg.com's "Credit derivatives
market grows by nearly half in six months". My
blood actually congealed into a mass of icy goo at
the news that the Bank for International
Settlements said, "The market for derivatives grew
at the fastest pace in at least nine years to $516
trillion in the first half of 2007" and that,
"Credit-default swaps, contracts designed to
protect investors against default and used to
speculate on credit quality, led the increase,
expanding 49% to cover a notional $43 trillion of
debt in the six months ended June 30." Yow!
Expanded by half? In half a year? This is freaking
insane!
It seems to me, being
math-illiterate as I am, that since there are so
many "halves" in there, that if I multiply things
by two, I will get the "whole" of some things, and
unless I miss my guess, there is going to be a
"whole" lot of screaming in raw panic around here
if I accidentally sober up and let the sheer
enormity of the situation sink into my Tiny
Mogambo Brain (TMB).
And all this
derivatives activity may have something to do with
the Bloomberg News Service report that "Pimco, a
unit of Munich-based insurer Allianz SE, expects
the Fed to lower borrowing costs to around 3%,
from 4.5%." My God! Reducing interest rates by a
third! When inflation in prices is running at 11%!
But there are lots of reasons for a lot of
people to be Very, Very Desperate (VVD), like when
I was cruising the Asia Times Online site, when I
ran across an essay titled "Subprime mortgages,
subprime currency" by John Lee, who is portfolio
manager at Mau Capital Management. It was
initially very interesting to me because "Subprime
mortgages, subprime currency" was such a clever
turn of phrase, which always delights me and makes
me clap my hands together in girlish glee, and
then I get jealous because I can't be clever, too,
for which I try to compensate by being a great
lover, and then getting angry and frustrated at
being a Huge Freaking Failure (HFF) at that, too,
as my wife likes to constantly complain about, for
some reason.
So it was not long before I
was laughing my butt off when he writes, "Bernanke
told Congress that estimates that set the total
losses from subprime mortgages at about $150
billion were probably 'in the ballpark'."
I snorted in contempt at such a thing, and
I am sorry I did because I was taking a sip of
coffee at the time, it spewed into my lap, and now
it looks like I peed on myself. Again. Damn!
So I was in a pretty sour mood at my
appearance when Mr Lee confirms my belief that
things are worse than advertised, and proves it by
saying, "Given that the Fed and European Central
Bank have already injected well over $150 billion
since August, Bernanke obviously lied about his
ballpark figure." Actually, the total I heard
bandied about was that the central banks injected
over a trillion dollars into the world's banking
system in the last few months! A trillion!
Naturally, being a hateful and vindictive
kind of guy, I figure that being a stinking, lying
bastard was enough to indict Bernanke and send him
to a horrible prison for a long stretch, but Mr
Lee is not interested in revenge, and is more
interested in other things, like, "Just how big is
this subprime mess?"
I knew that he was
not asking me, as I am really clueless about most
things, and thus have no freaking idea at all. But
he hints at it when he says that "subprime
mortgages are changing hands at 25 cents on the
dollar", and this means that the subprime loss
alone "is not $150 billion, but more like $1.6
trillion", and "if all AAA and Alt-A mortgage
portfolios were to be marked to market, the loss
would amount to another $2 trillion." Yikes!
Now we are talking about $3.6 trillion in
losses! My God! The entire gross domestic product
of the United States, which is the sum total of
all the goods and services produced in a year, is
only about $14 trillion! So we are talking about
losing, at a stroke, the equivalent of 26% of
everything we make in an entire year? Yow!
I am, of course, stunned and catatonic,
but with just enough movement left in my trigger
finger to give me a fighting chance, in case this
whole thing collapses like I figure it will. Cold
comfort, perhaps, but better than just taking the
whack!
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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