Squeeze along as inflation bites
By The Mogambo Guru
I was idly going through the pile of mail where I put miscellaneous overdue
bills, anything containing the words "Last Notice", random death threats and
print copies of economic things I want to put in the MoGu newsletter, usually
to be hateful and hypercritical for no reason other than it pleases me greatly
to mete out ridicule to people who so richly deserve it because they are
ignorant, stupid, greedy, or corrupt, or all four at once.
This is one of those rare moments, a time when I serendipitously run across one
of these economic pieces and wonder, "Why in the hell did I cut this out? Is
there a picture of a naked chick on
the back or something?" After quickly examining the other side of the piece of
paper and, as usual, being greatly disappointed, I am forced to read the damn
thing until I come to the part that I thought important for some reason.
Quickly I found it; The Wall Street Journal, in an editorial on Friday, January
25, 2008, laughably and ridiculously wrote concerning the "tax rebate" checks
that the government is going to send out: "The money to pay for these rebates
has to come from somewhere, which means from other taxpayers or from bond
holders who lend money to the Treasury," which is true enough, but that,
"Either way, Congress and the White House are taking money from someone to pass
out to someone else." Hahaha! Wrong, moron!
This is where I rejoice in the fact that I get to call the editors of The Wall
Street Journal a bunch of ignorant wankers who have no business commenting on
economics, as I gratuitously throw in a lot of vicious innuendo and outright
lies about rumored incest in their families and resultant mutant children who
drool and write editorials for the Journal, which is the kind of all-out
frontal attack without mercy that actually defines the Ultimate Mogambo Way
(UMW) of critique.
I sum up with: "That may be the way it USED to be, fella, back in the dinosaur
days and then up until the 1980s; but in the last 28 years things have changed
a LOT, and one would think you would have noticed it sometime along the way,
but these days the way it works is that the Federal Reserve creates credit in
the banks, somebody borrows money from the banks (and thus turns the credit
into new money and new debt), with which the borrower buys the new government
debt. No muss! No fuss!"
Then I say, (using the word "salubrious" to show them that I know what the word
"salubrious" means and am therefore worthy of respect): "The apparently
salubrious result is that the money is created out of thin air, and nobody has
so much as a dime taken away from them, dorkface! In fact, everybody involved
has the same or more money!"
Okay, I got away from myself there, but their rebuttal would doubtlessly be
that if I had any professional courtesy at all, I would have called them up to
ask about getting some clarification as to exactly what the writer meant. A
good point, but then I would have to admit that I am not a professional, and so
I don't have any idea what in the hell "professionalism" means.
And anyway, I don't even care because, like the various government goon squads
all around us, I have a badge - in fact, a Junior Mogambo Ranger (JMR) badge -
and then they would say they don't believe me, and while I am fumbling with my
wallet to get my badge to show them, my Concealed Weapons Permit would
"accidentally" fly out of my wallet and into their lap, and then I would laugh
and laugh and laugh when their eyes opened wide in gradual comprehension of why
I wear this huge coat all the time, and why I seem to clank when I walk.
But they could counterattack by explaining that what they really, really,
REALLY meant was that the resultant inflation in consumer prices, as a result
of all of this monetary inflation, would (as they said), make the statement
true that, "Congress and the White House are taking money from someone to pass
out to someone else", because it means that inflation hurts everyone (inflation
equals "taking money from someone"), even while they are giving out actual
money to the guys who loaned money to the government!
In short, the rich get richer, because they end up with the extra money, and
the poor get poorer, as the extra money pushed up prices, making them pay extra
money for everything, making them more angry than usual. I want to laugh,
"Hahahaha!" at such a ludicrous idea as a way to run an economy, but my heart
isn't in it. Ugh.
The Mogambo sez: If you have ever been caught in a short squeeze and got your
financial legs broken off, and you swore bloody revenge for weeks afterwards,
and even now, after all this time, you are still angry about it, then you will
certainly appreciate the chance to be on the long side, the money-making side,
the ruthlessly squeezing side, for a change, laughing mercilessly as the shorts
are frantically buying to cover their short positions, increasing the price,
worsening their losses, making even more frantic people buy to cover, making
you rich at their expense as is implied by John Embry of Sprott Asset
Management, who says: "It is worth noting that the BIS triennial survey on gold
derivatives highlighted a near tripling in the notional value to over US$1
trillion (roughly 50,000 tonnes, or about one-third of all the gold ever
mined), in the past three years."
Wow! The derivatives alone represent claims on a third of all the gold ever
freaking mined? Wow! Beyond wow! Talk about a huge, huge, monstrously huge
short position!
Mr Sprott says that such a ridiculous scheme "will inevitably fail due to an
acute shortage of physical gold stemming from exploding investment demand,
shrinking mine supply and diminishing Western central-bank reserves", and that,
"As a result, somebody is going to take a terrible hosing on the short side of
the market. The antidote to the upcoming financial debacle is to own as much
physical gold as you can procure."
I couldn't have said it better myself! And if you are, indeed, buying gold,
then I could not have done that better myself, either!
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 2008, The Daily Reckoning.
Head
Office: Unit B, 16/F, Li Dong Building, No. 9 Li Yuen Street East,
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